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249798

Manage Capital With Options, Not Market Guesses

New year, new grain market opportunity.

As 2017 approaches, it's time to prepare. Yes, there is plenty of time to get ready to plant your crop. Now it's time to prepare marketing strategies for 2017. Markets often make big moves when least expected, and opportunities (as evident the last two years) come quickly, and can go even more quickly.
 
The key for 2017 will be a balanced approach. As prices recover (and we believe they will), there will be more reason to believe they should continue to move higher. This may be a time to turn bullish in outlook, yet not a time to abandon a well thought-out, prepared strategy.

Purchasing call options now could mean you will have them in place during a window when (suggested by historical data) prices have the highest probability to move higher. For corn, history suggests that December futures could reach between $4.15 and $4.35. A move above $4.50 would fall into a category of less than 50% chance of occurring.

When purchasing calls, you risk losing the premium paid. If weather becomes a factor, especially if acreage decreases and yields decline, it won't take long for the market to move substantially higher.

In this environment, investment money will likely flow into commodities, aiding further upside price potential. This could send corn futures well above the recent year’s highs and possibly back into the $5.00 or even $6.00 range. The purchased calls will gain in value, helping to add value to corn already forward sold.
 
The same can be said for soybeans. Expect November bean futures to likely trade between $10.00 and $11.00. This is where sales should be populated. Again, it’s important to purchase call options early in the season so that, when prices hit predetermined levels, you are selling without question.

We believe it is easier to manage the capital in an option than it is to try and outguess prices, especially with the bulk of your crop, and if you’re not selling at intended areas (good intentions are often abandoned). Selling becomes more difficult (for many) as prices rally and headlines begin to suggest all the reasons prices could continue to rally. It is important to remain disciplined.
 
The bottom line may simply be to assume prices will move in a seasonal pattern (lower in fall and higher in late winter/early spring). Also, be prepared for the unexpected. Another way to term this is a balanced approach. Make sure that you are balanced (whichever way the market goes) with the majority of the crop sold in a downtrend and majority owned in an uptrend. 2017 will offer new opportunities, and now is the time to plan for them. Being strategic could be the one variable that will separate good farmers from great farmers.
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If you have questions or comments, or would like help in creating a balanced strategy for your operation, contact Bryan at Top Farmer Intelligence (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.
 
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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