As 2017 finishes up, farmers will be looking ahead to 2018 and making plans for what they intend to plant in the Spring.
Farmers have no problems in preparing a plan to plant, but how many have an actual written marketing plan to help protect the price? Most of you realize the importance of a marketing plan, but few actually write one. Unfortunately, many of those with a written plan don’t execute it. So the first and most important step in avoiding bankruptcy next year is to have a marketing plan and execute it.
If American farmers plant another 180 million acres of corn and beans, and there is good weather, there is no telling how huge carryouts could get next year. Where will corn prices go with a potential 3 billion bushel carryout? Where will soybean prices go with a 600 million bushel carryout?
With that in mind, here are a few other suggestions to keep solvent next year.
- Buy put options to protect new crop prices
- Avoid trading futures contracts
- Don’t sell call options to pay for put options
- Quit listening to any guru’s opinion of the market, manage the risk that’s in front of you.
- Avoid market strategies offered by commercial elevators that you don’t fully understand.
- Do not use delayed pricing contracts (DP)
- Use basis contracts, hedge-to arrive contracts, cash and cash forward contracts.
- Look for rallies in the spring and summer to market grain
- Be willing to “pull the trigger” on cash sales.
- Execute your plan
In my opinion, if you keep these suggestions in mind, and take the emotions out of the marketing you can thrive in a bull market, and protect yourself if Mother Nature provides American farmers with another bumper crop.
THIS MATERIAL IS CONVEYED AS A SOLICITATION FOR ENTERING INTO A DERIVATIVES TRANSACTION. THIS MATERIAL HAS BEEN PREPARED BY A TOP THIRD BROKER WHO PROVIDES RESEARCH MARKET COMMENTARY AND TRADE RECOMMENDATIONS AS PART OF HIS OR HER SOLICITATION FOR ACCOUNTS AND SOLICITATION FOR TRADES; HOWEVER, TOP THIRD DOES NOT MAINTAIN A RESEARCH DEPARTMENT AS DEFINED IN CFTC RULE 1.71. TOP THIRD, ITS PRINCIPALS, BROKERS AND EMPLOYEES MAY TRADE IN DERIVATIVES FOR THEIR OWN ACCOUNTS OR FOR THE ACCOUNTS OF OTHERS. DUE TO VARIOUS FACTORS (SUCH AS RISK TOLERANCE, MARGIN REQUIREMENTS, TRADING OBJECTIVES, SHORT TERM VS. LONG TERM STRATEGIES, TECHNICAL VS. FUNDAMENTAL MARKET ANALYSIS, AND OTHER FACTORS) SUCH TRADING MAY RESULT IN THE INITIATION OR
LIQUIDATION OF POSITIONS THAT ARE DIFFERENT FROM OR CONTRARY TO THE OPINIONS AND RECOMMENDATIONS CONTAINED THEREIN.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE. THE RISK OF LOSS IN TRADING FUTURES CONTRACTS OR COMMODITY OPTIONS CAN BE SUBSTANTIAL, AND THEREFORE INVESTORS SHOULD UNDERSTAND THE RISKS INVOLVED IN TAKING LEVERAGED POSITIONS AND MUST ASSUME RESPONSIBILITY FOR THE RISKS ASSOCIATED WITH SUCH INVESTMENTS AND FOR THEIR RESULTS