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Winter Doldrums, Uneventful Markets Create Nonchalant Attitudes
The year of 2017 was very rewarding in many aspects for row-crop producers.
For many, it was just as disappointing, as opportunities to sell at profitable levels were far and few between, or nonexistent. 2017 is now in the books and behind you.
High yields should again encourage producers to feel confident about future production capability. The last two years have been particularly stellar production years. The last five years in total have been a historical anomaly, as yield and production have consistently improved. Good farmers and farming practices have produced plentiful supplies.
The winter doldrums and uneventful markets are, for many, creating a nonchalant attitude toward farming, as well as marketing. This is not surprising considering it’s the dead of winter, temperatures are frigidly cold, and the market isn’t offering much hope. That being said, be prepared for change and volatility in the year ahead.
When indexed to history, studies show good potential for corn prices to recover. Indexing is taking percentage changes in past years and then relating those changes to this year. What history tells us, through indexing, is that a price recovery is very likely in 2018, and that chances are good that December corn futures will trade into the low-$4.00 range.
The key for producers is to be ready. When prices do move, mind-sets have a tendency to change. It becomes easy to rationalize prices continuing to move upward because prices are moving higher for a reason. However, rallies often end abruptly, and opportunities to sell evaporate, sometimes quickly.
We suggest purchasing call options now, so that if prices do rally, you can confidently make sales without emotion creeping in. By retaining ownership before a market rallies, you are in a position to benefit from higher cash corn prices, as well as call option appreciation.
While it is true that purchasing call options may prove unnecessary in most years, as good crops generally lead to lower prices, you have to remember the function of a long call. It should provide you the confidence to set target points at higher price levels and allow these targets, without hesitation, to remain in place. Too many farmers have the best-laid plans to sell rallies, only to change their minds. The calls provide not only the confidence to sell, but also retain ownership so that if you do sell too soon, you are still able to participate in a price rally.
If you have questions, comments, or concerns, contact Top Farmer at 1-800-TOPFARM, 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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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.