The rare occurrence of a downtrend in supply and an uptrend in demand put the grain markets on an upward trend to close out 2020. For 2021, be prepared for a good old-fashioned acreage battle. In response, create a disciplined marketing game plan. We asked eight analysts to provide their best estimates on price direction and market strategies you can employ in 2021. Here is one of eight.
Bob Utterback, Utterback Marketing Services
All the major variables were hit in 2020. A decline in demand due to the pandemic, strong counter-seasonal export buying by China and a late summer dry weather event all merged to make an active pricing year.
Unless the new administration does something to slow trade with China, the projected 862 million metric tons (MMT) increase in corn exports and the 524 MMT increase in soybean exports are the backbone of the bulls’ argument. On the supply side, any type of weather event in a major grain production area suggests a severe price rationing impact to keep the pipeline full.
Soybeans. All 2021 production should be held for November 2021 and out contracts, not nearby contracts. Sell the first 50% of expected soybean production via cash sales when a net $11 bid can be hit. Look at upside call protection on any February to March seasonal lows to cover expected sales. Sales on the other half depend on production and yield.
Corn. If prices reach $4.40 for the December 2021 contract, use a “sell and defend” strategy [sell no more than 50% of expected production via forward cash, leave basis open and defend with a vertical call]. Hold the other half for a late summer reaction to weather. If we don’t hit those prices, store it and sell in the spring of 2022.
Read More
Alan Brugler: Compute 12-Month Price Targets
Mark Gold: 3 Grain Market Factors to Watch
Richard Brock: Use the Right Tools to Make Grain Marketing Fun
Bill Biedermann: Grain Demand Curves Have Shifted
Brian Basting: Lock in A Floor, Maintain Flexibility
Naomi Blohm: Watch Global Energy Policies
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Disclaimer: This material has been prepared by a sales or trading employee or agent of these analysts and is, or is in the nature of, a solicitation. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions and agree that you are not, and will not, rely solely on this communication in making trading decisions. The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that these analysts believe are reliable. Such information is not guaranteed to be accurate or complete, and it should not be relied upon as such. Trading advice reflects good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice provided will result in profitable trades.
