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It's All About Mid-Summer Weather for Grain Markets

Each year, Mother Nature has her say.

For the better part of a year, grain analysts spend their time assigning weight to variables that could affect things such as planted acres, production, carryout, and ultimately the price of commodities.

Through the winter months, farmers attend meetings digesting this information in an effort to make informed and smart decisions regarding crop marketing. Everyone is looking for an edge. Yet, weather is the most dominant factor that affects price. On the one hand it seems simple: Let Mother Nature take her course, and this will determine price. You live with the consequences at harvest.

On the other hand: You take action by analyzing and using the best marketing tools at your disposal in order to create a balanced approach to marketing.
 
In most years, it often boils down to midsummer weather either making or breaking the crop. This year, the midsummer forecast looks hot and dry.

Crops could be in trouble in a hurry if timely rains do not occur. If rainfall doesn’t happen soon for farmers in the Dakotas, Nebraska, and other parts of the western half of the Midwest, crop potential could begin to decline with little or no chance of recovery. The fear of tightening inventory is already reflected through sharp gains in recent sessions. Yet, one flip of the switch with a change in the forecast, or more-than-expected rain, and prices are vulnerable to a significant sell-off.
 
For many, the anxiety of selling into rally is more troublesome than when prices move lower. Misery loves company, so if you didn’t sell and neither did your neighbor, then both of you are in the same boat.

Selling when prices are trending higher is going against the grain of price trend. If you are wrong and prices continue upward, you may be down on yourself, even though you knew it was the right thing to do. You are not sure what to do next. You may feel isolated, as if you were on an island. Selling more could compound the issue, or be the right thing to do.

Stay steadfast and disciplined with marketing. Sell rallies, yet have a global view of all your expected crop. That is, sell into rallies using a percentage of the whole crop that makes sense for you.

Buy call options to cover these initial sales. If prices do move higher, not only can you add to your sale price, you will also have confidence to sell more. Purchase fixed-risk put options to protect downside prices and create the last step to a balanced approach.
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If you have questions or comments contact Top Farmer at 1-800-TOPFARM, 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.
 
Carol Tillmann Front Desk Administrative Assistant | Stewart-Peterson Office: 800.334.9779 | Fax: 262.334.6225 ctillmann@stewart-peterson.com
www.stewart-peterson.com
 
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Hypothetical performance results have many inherent limitations. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. No representation is being made that scenario planning, strategy or discipline will guarantee success or profits. The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Reproduction of this information without prior written permission is prohibited. This material has been prepared by a sales or trading employee or agent of Stewart-Peterson and is, or is in the nature of, a solicitation. Any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to Stewart-Peterson. Stewart-Peterson refers to Stewart-Peterson Group Inc. and Stewart-Peterson Inc. Stewart-Peterson Group Inc. is registered with the Commodity Futures Trading Commission (CFTC) as an introducing broker and is a member of National Futures Association. Stewart-Peterson Inc. is a publishing company. A customer may have relationships with both companies. Accordingly this email is sent on behalf of the company or companies providing the services discussed in the email.

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