It’s important for U.S. producers to defend against presumably large South American crops in the months ahead using options, says Brian Basting, Advance Trading.
“Defend against that higher production level. We could see up to a 35% to 40% increase in Brazil corn production this year,” Basting tells host Tyne Morgan on the “AgDay” Agribusiness Update segment for Tuesday, Nov. 22, 2016. “Defend, defend, defend but give yourself an opportunity to participate if a market rally occurs because of a weather issue, whether it be wet weather at planting or late drought.”
Options for 2017 are at historically low volatility, Basting adds, which means farmers will pay less than in a high-volatility environment. Protecting bushels should be top of mind.
“You look at the November 2017 soybean contract, for example. It’s still just a little bit below $10 a bushel. And the December 2017 corn contract is still around $3.80 to $3.85 a bushel,” Basting says. “What we’re encouraging producers to think about is if you don’t have any protection on, but for example you’ve bought seed or you’ve established your anhydrous in the fall for corn, you’ve already put down one leg. It’s very important that you lock down that leg of price. But here’s the key: Be flexible. Get a floor in place, but leave the upside open.”