Selling seasonal rallies during the peak of the growing season in June and July when crops are most vulnerable to weather is a staple of most growers’ marketing plans. And it’s true that on average futures prices over the past five decades peaked at this time.

But averages sometimes are misleading. And when it comes to marketing your crops, counting on averages can also be risky. Price trends in 2018 and our long-term study of marketing strategies for corn and soybeans show sometimes the early bird does indeed get the worm. Spreading out sales in different windows, as well as using a variety of tools, are prudent ways to avoid an all-or-nothing marketing plan.

Our study looks at results back to 1985 at key Midwest locations, using reported prices for futures, options and cash markets. It’s a study – based on hypothetical transactions, not actual trades – but as close to the real deal as possible.

Results are based on three windows: the second week of April, third week of May and fourth week of June. Average daily prices from January through August and March to August are also included, mimicking results from cash contracts offered at many elevators and marketing services. Total revenues per acre from strategies made during these windows are compared to results achieved if crops were just marketed off the combine at harvest with no forward pricing. Average prices per harvested bushel are also figured.

Results of the study confirmed the advantage of selling weather rallies. But that doesn’t mean it’s the best tactic for all producers. Our research shows how strategies and tools must be adapted to meet the ability of each farm to withstand the impact when the plan doesn’t work out.

Selling corn and soybeans in late June with futures or hedge-to-arrive contracts produced the highest average selling prices, with the advantage over harvest running 17.4 cents for corn and 41.7 cents a bushel for soybeans. But this method also produced the most uneven results. Last year was a case in point. November soybeans and December corn futures both topped out around our mid-May window. Those late June fireworks ahead of Independence Day turned out to be duds. Prices were still higher than at harvest, but not by much.

Early sales may be especially warranted in corn. With the crop’s fate hinging on a weather during a a couple weeks of pollination, corn’s chances for rallies are like that star freshman basketball player – one and done. Soybeans get more kicks at the can. They can rally on gains in corn, then later in the summer during their own reproductive period, and even on dry weather when planting approaches in South America. 

So, while late June corn prices produced the highest average, April sales actually beat the harvest price more often, with a success rate of 76%.

Late June hedges in soybeans had the best odds of success among traditional hedging strategies, beating the harvest price 68% of the time. But so did average price contracts, though their average price during the study period was lower than just using futures or HTAs.

Those so-called decision rule contracts share a short-coming with futures and HTA sales. While they produce the best average prices over time, when they lose in years with big rallies they really lose, and losses can be compounded by lower yields. In the wake of the 2012 drought straight hedges with corn split between the three windows lost more than $3 a bushel, even more than the $2.25 hit suffered by soybeans.

Options can help mitigate this risk though that insurance comes with a cost. Buying put options that convey the right to sell futures, or buying calls to cover hedges limit loses. On average buying an at-the-money corn put during the three seasonal windows carried a maximum loss of $73 an acre – compared to the $343 suffered in 2012. But puts can be expensive – the strategy beat the harvest price only 56% of the time as a result.

One way to improve options success is by paying less for the insurance. Covering sales with out-of-the-money calls purchased during periods of seasonal weakness before hedges were made improved success rates and average prices compared to puts. The first call buying window opens at the end of February, a time markets sometimes are weak.

Here are year-by-year results for the strategies at different locations around the growing region, along with summaries for both the 2018 marketing year and the entire study period from 1985 to 2018. Results are provided on both a per bush and per acre basis.

Click on the download button below to see the entire study.