How to Deal with USDA Reports (sponsored)

September 18, 2017 10:20 AM
 

 

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By Mark Gold

I recently spent several days in Nebraska at Husker Harvest Days. During this trip, the USDA released their September production report. Most farmers and analysts were dismayed that the report showed increased yield estimates for corn and beans. The big question being, how can the yields be moving higher when the weekly crop reports are showing less than stellar conditions? While I agree the USDA may have overestimated the bean yield; on the other hand, the corn yield is most likely a reasonable estimate. Farmers in the North have underestimated the huge crops in the South.

The bottom line is, the reports are the reports; it’s what we have to deal with. As a risk manager, we try to work with clients to protect them BEFORE a report is issued. Many times it’s too late to try and manage the risk AFTER a report. We can all pontificate on the reliability of the reports, but it’s what traders react to, right or wrong.

As a producer, you just can’t hope the numbers are bullish. You have to manage the risk. Buying a put option before a report, can give you the protection you need for a reasonable premium. If the report is bearish, you have protection against lower prices. If the reports are bullish and the markets trade higher, you will lose the premium, but you can improve your bottom line with higher prices for your cash commodities.

THIS MATERIAL IS CONVEYED AS A SOLICITATION FOR ENTERING INTO A DERIVATIVES TRANSACTION.

You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources.  You should read the "Risk Disclosure" accessed by the link below.  Top Third Ag Marketing is not affiliated with nor does it endorse any trading system, newsletter or other similar service.  Top Third Ag Marketing does not guarantee or verify any performance claims made by such systems or services.

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