Is Your Marketing Plan Ready For The Prospective Plantings Report?

Is Your Marketing Plan Ready For The Prospective Plantings Report?

Just as farmers prepare their fields and equipment for spring planting, growers also need to make sure their marketing is ready for the upcoming Prospective Plantings report on March 31.

“I think it’s imperative you should do some kind of risk management, because for right now, it looks like the market, particularly with the strong currencies, demand is going to slow and supplies are going to be a lot larger,” said Don Roose of U.S. Commodities on U.S. Farm Report on Saturday.

Of course, that can be hard to do in March, when so much is up in the air. “We don’t know the acreage situation for this coming year. We have no idea what the weather may bring, so the new crop production situation is a big, big question mark,” noted Joe Vaclavik of Standard Grain. “What I will say is there’s not a whole lot of incentive to do a whole lot of new crop pricing right now, but if we do have good weather, we do have big enough acreage that there’s plenty of downside risk in these markets.”

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Like Roose, Vaclavik said farmers need to take a strategic approach to their spring marketing approach.   

“Rather than pushing the panic button and making new crop sales at prices you don’t like, implement some sort of risk management strategy [and] leave the upside open,” Vaclavik advised. “Leave yourself open to the some profitability this year. …. Right now, it’s really not looking so good, but leave yourself open to the potential for a weather issue or something along those lines” that could cause grain prices to jump.

How might you do that? Roose had some thoughts. “Make sure you have some window contracts. We like buying these $4.20 December corn puts on the $3.50 puts, and selling the $5.10 calls. It gives you a big range and you’re doing something,” he said, advising the same thing for soybeans. “Buy $9.80 November puts [on soybeans], sell $8.80 puts, and sell $11.40 calls. Those are premium contracts to the upside.”

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