Market Analysts: Defend Your Balance Sheet

October 14, 2017 05:00 AM
Harvesting corn on the Weihmeir farm.

Corn and soybean markets ended on a positive note this week. Despite the U.S. Department of Agriculture (USDA) raising the corn yield, corn prices are finding a way to still make gains.  November soybeans finished 26 cents higher on Thursday after USDA slightly trimmed its national soybean yield forecast.  

While analysts on U.S. Farm Report didn’t view the report as bullish, the U.S. corn crop continues to get bigger. That’s why Brian Basting of Advance Trading urges producers to take action.

“Defend your balance sheet as a producer,” said Basting. “By that I mean get control of your inventory.”

As Basting combs through yield reports, he continues to hear about farmers seeing yields that are larger than what they expected, including in areas of Illinois where farmers had issues getting the crop planted this spring. Basting suggests producers defend their balance sheet.

“Get control of the bushels by putting a floor in the market for your 2017 crop,” said Basting. “Leave the upside open, but always maintain flexibility, because something can happen in South America that would impact these markets.”

Basting points out options like puts are affordable right now.

“The volatility is historically low, so historically cheap on put options right now,” said Basting. “As a buyer, it is an attractive time to buy options.”

Naomi Blohm of Stewart-Peterson knows it’s difficult during harvest to focus on factors other than crop yields, but says it’s a time of year to keep an eye on the outside markets.

“You’ll want to keep an eye on the stock market -- if it looks like it's sending some topping signals any time soon, that's money that could come in for funds,” she said. “Keep an eye on crude oil prices, keep an eye on the dollar - because those outside market influence in addition to South America will direct prices.”


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