Ask an Analyst: Kevin McNew

November 16, 2017 05:48 AM
 
Analyst Chart

Kevin McNew
Commodity Broker and Manager, Grain Hedge | kevin@grainhedge.com

What is your commodity marketing philosophy?

The markets are pretty efficient. Farmers should look to the futures markets for hedging purposes. They should look to their cash markets for opportunities and basis. We spend our time helping producers find those cash-market opportunities. In this market, you don’t get much movement in the futures market, but you can find facilities that will pop 10¢ to 15¢ in certain areas.

What distinguishes your consulting firm from others?

We give farmers the portal to execute their own trades, set their own limit prices and wait for a market report or some other factor to see a lot of volatility. A lot of times, farmers say, “I’ll wait and see what happens,” and by the time they do that, the opportunity has already gone. Set some objective prices that work for you and get those triggered right away. The market’s so fast-moving these days.

What’s one action every producer should take to manage marketing risk?

We’re talking to producers about capturing storage opportunities. Basis is very weak around the country because of the big crop not only this year but last year. Look for 10¢ to 20¢ gains above storage costs. Long-term, big crops will cure the problem. Eventually, we’ll start to see some upside potential. Look for wheat to move to the upside first because acres for that crop get beat down first.

What percentage sold should farmers be on their crops?

We don’t give those kinds of recommendations. We try to work with farmers where they’re at. In general, farmers are not as sold as they would have liked to have been in either corn or soybeans. The crops are bigger than what they thought they would be. Farmers have to be realistic about marketing that excess over the next six months or so.

Which marketing tool is most underappreciated?

Use technology to stay connected to the markets. In times of low volatility and weak prices, farmers tend to ignore the bad news. They shouldn’t lose that sense of vigilance and should set realistic marketing goals. Ten-cent to 20¢ moves in basis or futures should enable them to start to market some of that crop as opposed to four years ago, where 40¢ to 50¢ moves were the benchmark.

How has harvest progressed so far this year, in your view?

USDA’s crop progress report at the end of October showed harvest pace advanced in line with market expectations. U.S. corn harvest advanced to 54% complete, up from 38% complete a week earlier. Soybean harvest stood at 83% complete, up from 70% the previous week. Soybean harvest remained right on pace with the average of the past five years, but corn harvest was behind the average pace of 72% complete. 

What about wheat planting?

Winter wheat planting progress advanced to 84% complete as of press time, up from 75% the previous week. Traders are concerned the difficult planting weather combined with the low wheat prices are encouraging farmers to switch acres out of wheat.

Who is one expert in our industry whose business advice you respect greatly?

I’ve followed Richard Brock for 30 years. He’s got some good wisdom on longer-term perspectives on the market. Markets are extremely cyclical. I can remember the 1980s really well. It seemed like the depression of commodity prices would never come to an end. But eventually it does.

What activities do you enjoy?

I enjoy spending time with my family. Commodity markets are extremely stressful, so a long run every morning keeps me sane. 

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