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Strategies for Your In-the-Bin Corn

November 22, 2013
By: Ed Clark, Top Producer Business and Issues Editor
grain bin truck
  

You can still achieve decent prices for just-harvested crops, but you’ll have to work at it. Here's some advice.

The word across farm country is that most corn left the field and went straight to the bin. Marketing experts agree that you need a plan for that grain.

These comments are experts from a recent Top Producer article that features analysis and commentary from 15 ag market analysts. Read the full article: They Say It’s a Bear Market
 


Jeff Beal, Gulke Group

For just-harvested corn, farmers should focus on selling for the carry and padding their income by selling call options. Soybeans also face lower price pressure, but demand from China might continue to provide price support, at least in the near term. The inverted soybean market says farmers should sell now.

Without an unforeseen demand catalyst, we’ll have to rely on a weather-induced supply shock somewhere to get back to $6 corn and $15 soybeans. 


Naomi Blohm, Stewart-Peterson

Global ending stocks for corn arethe highest in 10 years, and this keeps prices on the defensive, allowing futures to test $4 per bushel. When we’re in a doom and gloom scenario, typically fundamental news emerges and turns the market around.

At this time, farmers should view any rally as a selling opportunity. Prepare for both bullish and bearish scenarios. Make incremental sales as prices go to the high end of ranges. If prices break through technical resistance, plan to re-own the crop. Finally, establish price levels for making cash sales.


Richard Brock, Brock Associates

Commodity prices are cyclical, and the current downside price cycle is not yet complete. It will likely run through January. Once a bottom is discovered, both corn and soybeans will enter a base-building phase that could take anywhere from a few months to three years to achieve.

For corn, we have been heavily priced in short futures for months and will be looking to take profits soon. To price remaining corn, we will look for basis improvements between now and March. Soybeans will feel negative price pressure from sharp production increases in South America.


Alan Brugler, Brugler Marketing

Huge ending stocks for corn will cap rallies, but most producers are well financed and can wait for those rallies.

When price targets are hit, farmers should scale up sales. Options spreads and cash market equivalents are probably the sanest way to ride out market volatility. There will be decent returns to on-farm corn storage, but you have to set a price to earn the carry. Simultaneous gains in both basis and price are rare, making cash-grain-only marketing difficult to do well.


Mark Gold, Top Third Ag Marketing

Since 1983 corn has not made lows in October, and it is more likely to make the lows in November or December. The government shutdown delayed USDA’s crop production estimates and opened the door for a bearish report.

I suggest selling the bushels above your average production history and maintaining corn put options for any unsold grain. If you are trying to capture the carry, you must sell the deferred contract to lock it in. With no carry in the market, farmers should sell soybeans at harvest and re-own the crop with call options when technical indicators turn friendly. 


Dustin Johnson, EHedger

In order to prevent a 2.5 billion bushel carry-out, the price of corn needs to drop to boost demand. Additionally, crop insurance has incentivized growers to hold off on marketing their crop. This has created a record amount of unpriced grain, but the market will keep prices on the defensive.

Cash corn will likely hit $3.50 in the first half of 2014, barring major weather or geopolitical concerns. The biggest mistake growers can make is to store grain without price protection. One way to protect yourself is to be 100% sold and re-own grain with call options. 


Randy Martinson, Progressive Ag

Corn has been trading close to major support due to strong yields and poor demand, but it might be near its bottom. Farmers should look at selling the carry and lock in basis levels when they become attractive. If a post-harvest rally materializes, consider setting a floor with put options. 


Mike North, First Capital Ag

Producers are heavily exposed with less grain forward sold and will rely on access to storage and strong working capital to carry them. Come late winter/early spring, producers will need cash, adding pressure to the market.

Don’t get caught in this trap. Storage should only be used on bushels forward sold. Capture the carry and move on. Buyers will have little motivation to chase markets. Corn in 2014 should be sold on coming rallies, with put options used on unsold bushels. This combines downside protection with upside opportunity.  


Bob Utterback, Utterback Marketing

Production costs are set to remain high for all of 2014. Unless Mother Nature causes a drought in a major global production area, I expect prices next fall well below break-even.

My solution calls for a strategy of selling the carry in the market and managing spreads. Farmers should consider selling out-of-the-money puts to raise the net selling price and roll short futures into long puts next spring if there are any solid signs of a major yield reduction event. I would rather try this approach than take out loans, put your money in the ground, raise and store the crops and hope to get back to profitability by the spring of 2015.

 

These comments are experts from a recent Top Producer article that features analysis and commentary from 15 ag market analysts. Read the full article: They Say It’s a Bear Market

For More Information
The editors at AgWeb.com are taking a look at experts’ projections for a variety of commodities in 2014 to help you succeed and be profitable in the coming year. Read 2014 Marketing Outlooks
 

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This material has been prepared by company employees and is in the nature of a solicitation. The information is not a research report. By accepting it, you agree that you are an experienced user of futures, capable of making independent trading decisions and that you will not rely solely on this communication in making trading decisions. Distribution in some jurisdictions might be prohibited. Persons in possession of this communication indirectly should inform themselves about and observe any such prohibitions and restrictions. To the extent that you have received this communication indirectly and solicitations are prohibited in your jurisdiction without registration, this communication should not be considered a solicitation. The risk of loss in trading futures and/or options is substantial, and each investor and/or trader must consider whether this is a suitable investment. Past performance is not indicative of future results. Trading advice is based on sources believed to be reliable. The information is not guaranteed to be accurate or complete, and it should not be relied upon as such. Trading advice reflects good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice will result in profitable trades.

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RELATED TOPICS: Corn, Soybeans, Marketing

 
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