Analyst on Corn: ‘Don’t Let These Prices Get Away’

May 24, 2018 05:54 PM
 
Take advantage of contract highs in corn.

Thursday’s markets drove December 2018 corn futures up to touch the contract high of $4.295 per bushel. While it settled 7 cents lower than the high, Chris Robinson of Top Third Ag Marketing, and writer of the Robinson Review, advises farmers to take advantage of these prices while they can.

“So ya, you missed the high by seven cents. I'm not gonna cry about that and if it is the double top than the market is giving you a chance to make some cash sales or to set some hedges on,” he told AgriTalk After The Bell host Chip Flory.

According to Flory the market is due to face quite a bit of uncertainty over the next several months. While trade and weather will be the major drivers of volatility in the coming weeks, Robinson said it’s not unusual for corn to find its market high in June, July or August.

“I would not let these prices get away,” he said advising farmers not to cap the upside either.

How can you do that? Robinson recommends two simple strategies.

  1. Re-own your cash sales. “If you if you make the cash sale, you can re-own it on the board,” he said. “But the problem with that is if you buy it, and then it breaks 20, 30 cents. Then you've done two things if you expose yourself to margin calls, so you got to talk to your banker. And the second thing is you've turned a good cash sale and not such a good cash sale.”

 

  1. An option. An option lets you have a specific amount of risk, especially if you just get long the option, Robinson said. “Where you get in trouble is if you by a call and sell puts against it, something like that. That opens you up to problems if the market moves against you,” he explained. “But on a 50 cent rally, you know, why not make the cash sale and hold back maybe 8, 10, 12 cents, you can re-own those bushels all the way through the end of summer.” If the market does pull back you’ve made a good cash sale and if it does go higher you will be able to add to an already good cash sale, he explained.  “So it lets you participate if prices continue to go higher and you're also limiting your risk,” he said.

Farmers don’t need to be speculators.

“Where guys get into trouble, they’re so busy running the farm, doing things, and raising your family, you don't need to turn yourself into a you know a speculator too because generally you know that it's just eats into your time,” he said. “Just keep yourself in the game and that way come September, October, November you’re not kicking yourself.”

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