Every pass across a field must pay for itself. Recreational tillage and other low-benefit passes have been eliminated or soon will be as you strive to be as efficient as possible.
There’s no doubt that concept can be applied to your risk-management strategies.
Information drives risk-management decisions. There are exceptions, but most often growers evaluate the information available to determine how aggressive they will be in moving bushels to the market.
But, information on the internet and on social media has burrowed countless unhelpful rabbit holes. Spend enough time and you will find a counter to each and every point you thought made sense.
That is not an efficient way to collect and process information — it’s likely to leave you dazed, confused and unable to even make a decision. Here is my advice:
Stick with meaningful information sources that help you make the right decisions. It takes evaluation and conversations with peers to find the right mix of information sources that will give you the confidence you need to be a successful risk manager.
Work with a risk-management adviser. Make sure they understand your goals and objectives and are willing to customize a strategy to meet your needs. Use your adviser as a sounding board to evaluate potential strategies, as an alert system that a strategy should be initiated, and as a counselor to have the discipline to stick with a plan.
Have an insurance policy. Even after taking all the necessary steps, you must have that insurance policy to make sure you simply aren’t missing key factors and opportunities.
The concept of getting the most of each pass might lead some marketers to think making fewer, larger sales is the way to go. It might be, but that all depends on the year, and the marketing plan you established.
Market conditions will determine if you make two or 20 marketing decisions on a crop. Your goal is to be efficient in the process that leads up to making the decision.
MORE QUESTIONS THAN ANSWERS
As January closed, it was clear corn and soybean markets had more questions than answers. It was similar to mar-ket conditions of 12 months ago. South American corn and soybean crop estimates were losing bushels, but the po-tential of Brazil’s safrinha corn crop was far from established.
The uncertainty of global supplies demand flexibility in marketing strategies. Prices on 2022 corn and soybeans of-fered positive returns (even with elevated input costs), but the risk of higher prices later if Brazil’s safrinha corn crop “fails” again is too great to sell and forget.
Use strategies to establish a price floor while maintaining a chance to participate in a rally ahead of our 2022 plant-ing season.
THE MISSING PIECE
What’s missing is last year’s export demand for corn and soybeans. Corn exports last year topped 2.75 billion bushels and are expected to drop about 12% to “just” 2.425 billion bushels in 2021/22. If that decline happens, carryover of just over 1.54 billion bushels would be just enough supply-side cushion to cap 2022 corn price potential to the $6 level.
Soybean exports last year hit 2.265 billion bushels and are projected down 9.5% to “just” 2.05 billion bushels. If that decline happens, bean carryover of 350 million bushels likely caps new-crop bean price potential at $13.50.
While export expectations are lower than a year ago, the 2021/22 projections are still strong – strong enough to support $6-corn and $13-plus-soybeans.
Do the work in advance to prepare a marketing plan. Find the right partner to help you implement the plan, and maintain flexibility as you lay off risk by metering bushels to the market as prices rise to upside targets. FJ
As Farm Journal Economist and host of the “AgriTalk” radio program, Chip Flory helps farmers understand the markets and seize opportunities.
