Could 2022 offer the same profitable opportunities as 2021? The outlook for corn and soybeans is optimistic thanks to strong demand and potential production shortfalls in South America. Yet headwinds are present. We asked eight analysts to provide their best estimates on price direction and market strategies you can put to use in 2022.
Naomi Blohm, Total Farm Marketing
For corn, I’m watching corn use for ethanol as margins for ethanol plants continue to be attractive. In addition, demand for fuel is strong as U.S. consumers are traveling again. USDA might increase corn used for ethanol to 5.5 billion bushels, which is near 2017’s level of 5.605 billion bushels. Higher demand from ethanol would help keep ending stocks tighter, and thus support old-crop corn prices.
For soybeans, I’m watching use and demand for the crush. Argentina is the world’s top exporter of soybean meal and soybean oil. When they have production issues due to drought, the U.S. has been the beneficiary of an increase in demand for soybean meal and soybean oil.
For grain prices to climb higher this year, many stars need to perfectly align: a lower U.S. dollar, continued hot and dry weather in South America during February and March, friendly USDA reports in January and February and poor weather in the U.S. this spring and summer.
For many, soybean prices are at profitable levels. Plan to be 50% sold on new crop (or more if you are comforta-ble with your crop insurance coverage) by summer.
For new-crop corn, know your cost of production. Place orders at the elevator at realistic, profitable points to be 50% sold by summer.
With the volatility that could unfold this year, be well versed in future and option strategies. Consider bear put spreads to manage risk on unpriced bushels.
It might be prudent to understand various call option strategies that provide upside gain potential should the U.S. drought continue, soaring prices do indeed cause farmers to use less fertilizer or yields are low. A smaller- than-expected crop would boost prices.
Read More
Bill Biederman: A Dichotomy of Possibilities
Brian Basting: Market Tools That Turn Uncertainty Into Opportunity
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.
