Is It Time to Sell Grains?

October 28, 2016 12:00 PM

Grain markets have rallied the past couple of days due to a number of factors, including strong export sales. Producers should be less worried about why the markets are rallying and more focused on taking advantage of them. Mike North of Commodity Risk Management says depending on individual storage capacity and the outlook for basis in a given area, it might be time to sell grains.

“The reality is this [rally] is an opportunity, and we welcome it,” he says. “And now we have to start figuring out how to take advantage of it.”

Out of bin space? That might require taking grain to town for storage. However, storage is tight everywhere now, so it’s a relatively expensive prospect. North says if farmers don’t expect their basis to see a lot of improvement, it’s actually in their best interest to look at getting the grain sold.

“Get it moved,” he says. “Don’t pay the commercial storage, and then get out into spring and buy a call.”

North says considering the low volatility in the options market, farmers can manage this opportunity more effectively and less expensively using a call, rather than putting grain in somebody else’s bin and paying a premium.

Should you be locking in grain sales for 2017?

It’s always good to take advantage of opportunities that present themselves, North says.

“The reality is at near $4 corn and $10 soybeans we need to be proactive,” he says. “If farmers could go back in time and say would you have liked to sell $4 and $10 corn and soybean on the bushels you still have right now, they would have jumped at it.”

As for markets next year, they should be looked at through the same lens.

“Supplies have gotten bigger and pressure is going to be greater,” North says. “When opportunities are there, you’ve got to look at getting sales made.”

He also encourages producers to consider marketing tools while they are inexpensive.

“Volatility is low. Buy the options, start getting some price floors in place,” he says. “Be out there shopping when things are on sale.”

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