It has certainly been a challenging year for all of those in the Archer Financial Services Inc. Ag Hedge Program. As the growing season began, the pace of planting led to growing fears of new crop corn values slipping toward the $4 to $4.50 per bushel range. The result was a steady sales pace of both corn and soybeans in April and early May by most all of the advisers.
However, as dry conditions and 90°-plus temperatures developed, the brakes were put on aggressive marketing. From mid-May to mid-June, few cash sales were initiated, and activity shifted to the more flexible futures contracts. When the bull market rally began on June 18, very little old crop inventory remained.
This placed the focus on the new crop inventory. Aggressive sales returned in the last week of June, ahead of the stocks and acreage reports. The July activity centered on exiting short hedge coverage in futures and making small incremental cash sales as the weather market built in momentum. In addition, several services initiated long futures and option positions to offset previous cash sales.
As of Aug. 1, new crop sales for the advisers stand at 40% in corn and 43% for soybeans, both figures reduced by 8% from levels of two months ago. With the exception of just one of the advisers in the program, very little hedging has been recommended beyond the 2012 crop year.
It is suspected that once advisers become more comfortable with the size of this year’s crops, they will take a closer look at the potentially sizable returns from a multiyear marketing program.
- September 2012