Take Advantage Of Current Market Opportunities, Lock In Basis

April 18, 2019 03:55 PM
 
 

As farmers look to slam the 2019 crop into the ground, many are crossing t’s and dotting i’s on marketing plans. Brian Split of AgMarket.net says farmers should not only look ahead to next year’s crop marketing opportunities but should also consider locking in basis for the crop they are about to plant. 

 

“There’s not a lot of opportunity on the nearby contracts,” he told AgDay TV host Clinton Griffiths on Markets Now. “We've got old crop corn near contract lows, we've got December 19, which is the crop that's being planted right now, getting near contract lows. But if you're looking for some marketing opportunity, look ahead to December of 2020. That's going to be the crop that you're going to plant next year.”

 

The market is near a four-month high for December 2020 futures, trading at highs not seen since December, Split said.

 

“Frankly, the highs this week are only about seven cents off of the contract high, so when we're trading your $4.15 a bushel, I think that's opportunity,” he said. “If you think about the Dec. 19 contract and go back a year, we were around $4.15. That was the last time you had the opportunity to sell that price.”

 

Depending on carry this fall, that could present $4.45 July futures, he added, which would result in cash north of $4 per bushel for many people.

 

“There's a lot of strong basis opportunity out there right now. I think for producer at the very least, we should be looking at locking in basis,” he said. “There's an awful lot of grain in the producer hand right now. I think as you get closer to the onset of the new crop and getting closer to harvest, there's going to be a lot of grain that's going to be coming to market all at one time.”

 

He recommends locking in basis or selling the grain for cash and then re-owning it on paper, if the producer is comfortable with that.  

 

“At that point, you're going to get the cash in-hand. You're not gonna be paying interest on that money anymore,” he said. “Or just by a call, have a known set risk up front and then see what we get here over the next few months.”

 

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