Give Your Grain Marketing a Jolt, Analyst Says
From roughly 2005 to 2014, big volatility was the main feature in commodity markets, particularly corn and soybeans. Since then, prices have been mostly sideways, with a little opportunity appearing at times.
Monthly charts would suggest the trend for corn and soybeans is sideways, and not ready to break out any time soon. Markets can move at a whim and, when least expected, make big moves. However, with ample world inventories, expectations are that supplies will continue to dampen rally potential. Good demand will continue to provide underlying support. We can only expect more of the same, unless there is a significant event that generates volatility – an event that drastically changes the supply or demand pictures.
From a marketing perspective, what can you do? Perhaps it is time to give your marketing a jolt. This implies that you may have to become more aggressive in looking at strategy than in the past few years. While it may make sense to wait for price rallies when prices are at the low end of the trading range, it’s important to be more aggressive when prices are at the high end of the range. In addition, look at other marketing tools that can bring value. This all means stepping up and taking a more offensive approach.
Take some time this winter to learn strategies such as a fence, straddle, and strangle. These can add value and shift risk. As with any tool, know your risk and reward potential. Also, know your risk and reward potential of doing nothing, or waiting. Be a student of other market alternatives such as a forward contract into carry, hedge-to-arrive contracts, and even some of the more exotic contracts that elevators may offer.
It is our experience that farmers often shy away from advanced strategies because they really do not understand them. Take a deep dive and take time to learn. Ask the right people the right questions. Put the math behind the strategy and compare this with other alternatives, including the most popular strategy, which is to store and see what happens. A resource available to you is titled “Inventory Management.” This paper reveals multiple marketing strategies encompassing cash, futures, and options strategies incorporated into a balanced approach.
If you have questions, comments, or if you would like an electronic copy of "Inventory Management," contact Bryan Doherty at 800/334-9779, ext. 129.
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