Market Analyst Stresses Importance of Planning Ahead

As the critical weather season unfolds for this year’s crop production, make sure you are fully engaged in a strategic approach. Expect anything to occur this year.  

We believe this year’s crops are off to a decent start, though not necessarily an ideal start. The stage is set: Less-than-ideal weather throughout the country and growing season could send prices significantly higher. Drawdowns in South American corn and bean production have been a stepping stone to heightened price sensitivity as the market tries to determine an equilibrium price between anticipated supply and demand.  

Price discovery will fluctuate greatly as weather dictates. On one hand, near-ideal weather could drive corn prices down toward $3.00 per bushel and soybeans well under $9.00. On the other hand, detrimental weather could drive beans between $12.00 and $14.00 and corn well over $5.00 per bushel. Be ready, and be prepared. A balanced approach is highly suggested before anticipated market moves. Accomplish this through the use of forward contracting, buying puts against expected production that won’t be forward sold or hedged, and buy calls to cover forward sales. By mid-June, you want to be positioned so that, regardless of whether the market moves higher or lower, you are able to participate in shifting risk or capturing opportunity.  

In recent days, we’ve heard from producers who now want to protect soymeal prices. Soybean meal has moved up over $100.00 a ton, an increase of more than 50%. Now is not the time to protect meal. The time to protect meal was two months ago when prices were stagnant and quiet. Most people don’t make action plans until it is required and unfortunately, often too late. Don’t fall into this camp. Watch the markets, visit with your adviser, and empower yourself by taking action when prices are favorable.   

If you have questions or comments, or if you'd like a balanced strategy for your operation, contact Top Farmer Intelligence 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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