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It's not doublespeak: It's reality

Agriculture.com Staff 02/07/2013 @ 11:00pm

By Cathy Ekstrand
Cathy is filling in for regular columnist Naomi Blohm

If you are working with a market advisor it may seem like they have a split personality. One minute they are telling you to protect the downside on un-priced bushels, and then in the same breath they encourage you to buy calls to protect the upside on what you may have sold or plan to sell. It's like market advisor speak with forked tongue.

There is good reason for this. Depending on weather, corn prices could drop to $4 or swing back up over $8, a potential 3 or 4 dollar swing. And with Dec corn near the $6 level, we're smack dab in the middle of that swing.

The key for marketing during a time of uncertainty is to have flexibility and protection. You want to protect this price level because you are profitable here, and if no drought occurs, these are strong prices. Last year December corn fell a dollar into the spring, from the $6 area down to the $5 area, before the concern over a drought started.

On the other hand, you may want to wait to price cash until you feel better about the moisture levels in your area and basis improves.

In your particular situation, February may or may not be the time to get aggressive with cash sales. You still need to be mindful where price levels are and consider hedging to protect your investment. This month, my focus will be on:

  • New crop corn. December corn at the start of the year traded down to 5.70 and then rallied to 5.95, basically a 25- cent gain. The market then retreated to the 5.70 area again. There seems to be significant resistance in the $6 area due to a potential increase in acres this spring, and tempered demand.
  • New crop beans have been a little more dramatic, having traded down to 12.59-2 early in January to recently hitting 13.50 area, a good 90-cent bounce on South American weather concerns. It would appear that resistance comes in at $13.50, while support is seen 50 cents lower at $13.00.  A change in weather pattern for South America, or decline in demand, could erase the recent gains.

What we have to remember is that often times the best pricing opportunities arise when we know the least about our crop prospects. Take right now for example:

  • We don't know for sure that we'll plant close to 100 million acres of corn in the coming year, but the market will assume that, until spring weather dictates otherwise. And should we get confirmation of those acres having been planted, whatever premium the market may have offered due to uncertainty will be erased.
  • We don't know if we could have a trend line yield or not, and there again, the market has to make some assumptions, until given reason not too.

What we also have to realize is that not everyone is dealing with a deficit of moisture. Some areas have received some relief this winter, and some weather experts feel that pattern of increased moisture could continue into the spring and summer months as well.

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