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Begin New Crop Sales, Analyst Says

December corn at $4.15 should be a sell signal.

It’s been an interesting winter for the grain and soybean markets. Prices have been more volatile than they were a year ago and are offering better opportunities to sell both old and new crop. Volatility appears to be returning to commodity markets in general, with row crops participating. Growing demand is the catalyst underpinning renewed buying interest. This is perhaps particularly true as world economies continue to gain strength. Money flow is also more prevalent, indicated by increasing open interest of futures contracts, as well as the number of long contracts by managed money.
 
Still, at times, it is important to look beyond the noise of everyday news and concentrate in two areas: value and preparation. We believe there’s currently a more optimistic view for row-crop commodity prices than existed just a few months ago. In fact, soybean prices have probably exceeded most expectations. Corn and wheat prices are finding strength. Yet, optimism is an emotion. Emotions can change quickly, and so can the markets. All three markets are offering producers value. We’ll define value as the opportunity to sell crops ahead at prices that are profitable, i.e., a good place to start making sales. This week, December corn futures exceeded last year’s high. In 2017, there were corn producers who didn’t get any corn sold prior to harvest and then had regrets they didn’t make the value sale when they had a chance.
 
A balanced marketing approach will have you selling expected production on price rallies, and covering these positions (reowning them) with long call options. Call options provide the owner the right (not the obligation) to be long futures. A balanced approach will also purchase put options to establish a flooring mechanism. Put options provide the owner the right (not the obligation) to sell futures contracts. Puts are designed for the owner to protect against falling prices. A goal for producers is to stay away from sharp price drops. Buy puts when prices rally. If you wait too long and react to falling prices, puts become more expensive.
 
With December corn breaching $4.15, November beans over $10.00, and July Chicago wheat above $5.00, one should view these price recoveries as opportunities to initiate new crop sales. Work with the percentage you are comfortable. Be ready to buy out-of-the-money call options to cover these in case a weather event occurs. If you’re more aggressive, you could purchase the calls now and set targets so that, as prices move upward, you’re selling into these target points with coverage in place.
 
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If you have questions, comments, or would like a strategy for your operation, contact Top Farmer 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.
 
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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