Prepare Now for Future Marketing Opportunities
It is mid-January and temperatures are at their coldest point for the season. What are farmers thinking about? Spring! You’re probably already preparing for this year’s fieldwork and planning your crops. There are many unknowns for the crop year ahead. Spring could be the right time to shift your risk and forward sell. In 2018, prices peaked at the end of May.
Marketing your crop is how you get paid, and it never takes a day off. Preparing for the future is paramount, even when prices are not moving. If prices follow a seasonal pattern, you’re most likely to see strength when there is uncertainty. For row crops, this is typically just prior to the planting season. Discipline is a very important key to successful marketing. Establishing targeted sell points and staying the course when prices rally (not cancelling orders) are crucial steps to successful marketing. When prices rally, there are often good reasons why they could continue to move higher. Don’t cancel orders. Rather, factor that possibility into your marketing. Implement strategies that allow you to take advantage of higher prices. Focus on discipline in 2019.
Discipline (selling rallies without hesitation) may be enhanced by purchasing call options. The buyer of call options has the right (not obligation) to be long futures. Buying calls will help cover the risk of selling too soon. Knowing your sales are covered (reowned) provides confidence in making sales and leaves no reason to cancel predetermined sell orders. Factor in the possibility that corn prices could rally $1.00 or $2.00 on a weather scare. With the low-volatility environment we currently have, consider purchasing call options soon, while prices are low. If volatility increases, call options will become more expensive. Now is the time to prepare for future marketing opportunities.
If you have questions or comments, contact Top Farmer at 800/334-9779, 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.