As any farmer knows, it's been a tough year in the grain markets. How many times do you want to see that corn prices are below the cost of production? But with 2015 nearly in the books, perhaps we can all learn from the past so we can build a better, more effective marketing plan for 2016, based on the 5 grain market lessons learned in '15.
- The market doesn’t always seem to care about the same weather that growers do. Heavy rains and flooding left fields in Indiana and Illinois in bad enough shape to qualify for federal disaster assistance. But worries about the damage never seemed to stick. After hitting a high in $4.50 territory in July, corn prices slid back below $4.
- Ethanol still matters. While the EPA’s long awaited announcement of renewable fuel levels wasn’t quite as high as some ethanol supporters wanted, the November news finally brought some certainty to the market, both for corn growers and energy producers. Exports of ethanol are also growing, with the U.S. exporting an estimated $57 million worth of ethanol to China in October 2015 alone—which the USDA says is more in one month than “in the previous 10 years combined.”
- Big rallies can happen, but you’ve got to be ready if you want to capture those gains. In late June, lower-than-expected planting numbers caused corn and soybean prices to explode upward in record trading volume. Just a month later, prices had eroded again.
- Holding grain is a double-edged sword that growers must learn how to handle effectively—or risk getting sliced in a falling market. With two years of big crops now in the bin, farmers need a strategy for that stored grain—not just a hope and a prayer for $5.50 corn and $11 beans. That might include taking advantage of basis, buying calls, or looking for other incremental gains. There’s simply too much grain in the world to close the bin doors and ignore the risk of $3 corn.
- The U.S. dollar, be it weak or strong, has an undeniable effect on farmers and agricultural exports. As the dollar strengthened in 2015, it hurt American exports like wheat, corn, and cotton, making them less competitive on the global market.