As farmers sell grain from the bin ahead of harvest 2015, they should buy call options and make plans early, advises Mike North, Commodity Risk Management Group.
“Right now, the estimate is 40% to 45% of last year’s crop is still in the bin on the farm,” North points out in an interview with Clinton Griffiths on the “AgDay” Agribusiness Update segment. “That is the highest number that I can remember at this time of the year. That’s big considering the size of the bushels. The reality of that is they’ve got to come to town because we’ve got another crop coming. [Farmers] don’t like storing corn in the middle of the summer because it becomes a spoilage liability. A lot of bins are going to be moving toward cleanout in the course of the next 60 days.”
To manage the oncoming glut of grain, producers must have an organizational strategy in place.
“If I’m sitting on a bunch of grain that needs to be sold right now, my advice would be to call ahead, book the grain for delivery rather than just showing up with a truck,” North says. “Then go back into the market and buy some calls because what has kept many people from pricing corn is they’ve been holding on just waiting for that rally that everybody kept talking about that never showed up.
“We don’t know what the summer’s going to bring,” he continues. “I think we all respect the fact that the markets can move. Price the corn, minimize your downside exposure by having that sale made and then step back in and accept a little bit of risk in the form of a call option just in case that rally shows up.”