With ag economists and other industry experts predicting 2024 will be remembered for record-low corn and soybean prices, farmers continue to work on managing their financial risks while trying to capture any reward in the marketplace.
Tommy Grisafi, with Advance Trading, and host of ATI – ProMedia, says he would like to see more U.S. farmers use futures and options to manage commodity price ups and downs. But he says many growers are uncomfortable with using those tools.
“What they want you to tell them is there’s no risk in selling $6 futures – if and when we were at $6 – but that’s not true. There’s a huge risk in doing that. There’s also a huge risk in doing nothing,” he told guest host Davis Michaelsen on AgriTalk.
With the potential risks versus rewards in mind for corn and soybean prices, Grisafi offers a couple of takeaways for farmers’ consideration.
With the presidential election just weeks away, consider whether you need to take any action in the short-term. “Folks, if you don’t need to take risks, this next (48) days might be a great time to just lay low and take a little off the table,” Grisafi says.
That’s not to say you should do nothing if a rally occurs. Rather, it’s a matter of being astute about the opportunity and knowing what you would consider a marketing win.
“Keep an eye on Washington and on your bushels” Grisafi advises. “We don’t have a farm bill right now. There are a lot of things that can happen politically that could affect farmers.”
One highly anticipated move is the interest rate cut by the Federal Reserve, expected to happen on Wednesday.
The markets are somewhat torn on whether the Fed will cut interest rates 25 or 50 basis points following its monetary policy meeting on Wednesday, though the highest odds are with a smaller reduction to start, Pro Farmer reports.
Consider the risks associated with a high carry – the cost of storage, insurance and interest.
When economists talk about a large carry, it usually has to do with the use of longer-term storage for a big crop.
The latest WASDE report, released Sept. 12, has pegged domestic corn production at 15.2 billion bushels
Grisafi says there is an “incredible carry” in the market this year. In looking at futures months out into early 2025, they are higher than December 2024. Corn growers wanting to take advantage of carry will need to determine their cost of storage.
“Look at the March and May carry in corn,” he says. “If you need to sell grain off the combine, then do it. But look at that carry. Get to know those carries better. That is better marketing.”
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