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2012 grain marketing

12/16/2011 @ 5:04pm

As 2011 winds down, grain producers are looking ahead and wondering how aggressive they should be selling next year's crop. Over the past year, sales that were made early created disappointment when prices rallied. Many felt they made mistakes. Yet, when bull markets end, they have a tendency to do so quickly, and are sometimes very unforgiving. That has been the case this year. Sales made early serve a key function rewarding value and shifting risk. You should not abandon that approach.

As input prices rise and futures prices slide, anxiety levels creep higher. Many producers are now looking at Dec corn near $5.40 or $5.50, and arguing that’s not good enough. Yet, these same farmers should also bear in mind that corn production over the previous two years has been down and below trendline yield projections. In the year ahead, it could be easy to paint a negative price outlook if world economies continue to struggle and crop production improves. Therefore, while not ideal, you should get started selling if you have not already.

You hope your first sales are your worst sales. If prices rally, recognize and respect bull markets, though also view higher prices as more of a blessing in disguise, providing you opportunity to sell higher and average up. Last year, we saw way too many producers lament about earlier sales that, as of today, look attractive. They concentrated on the negatives of a lower sale which kept them from making more sales as prices rallied. It would be shameful to see corn, with a big production year in 2012, drop all the way down to $4.00 or lower and not have made any sales. You will look back with serious regret that you did not make sales in the $5.00 and $6.00 area. 

Lastly, analyze all marketing tools that are available to you. If you make a 2012 cash commitment, you will want to know how you can retain ownership. Confer with your advisor as to what strategy is best for you and your operation. Now, get moving. 

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If you have questions or comments, or would like help implementing strategy, please contact Bryan Doherty at 1-800-TOP-FARM ext. 129.

Futures trading is not for everyone. The risk of loss in trading is substantial. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Past performance is not necessarily indicative of future results.

 

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