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Better days ahead

“Be a grain producer,” they said. “It’ll be fun,” they said.

All kidding aside, to say this marketing year has been anything but challenging would be a huge understatement. However, we still have a job to do, and working a plan has never been more important. 

No one could have foreseen a plague that would hit the world in the way it has, and that we would shut down the country as we know it. Hopefully, we are on the back side of the worst. Maybe we will be able to start picking up the pieces. 

Now we are focused on planting while still trying to market old-crop grain ahead of river closings and ethanol plant closures. Basis in some places is about the only good news. It has remained tight due to lack of farmer selling. With much of the country shut down, the crude market has fallen to unprecedented levels and dragged ethanol and corn prices along with it. 

If the states start to gradually open back up, and we get people back to work and driving again, perhaps the energy markets will begin to recover. It will take some time to get ethanol plants back online, if ever. I fear some of that market may have been lost. 

We just tested $3 for May futures on the board. December corn is currently trading near $3.40. So, there is for sure at least a 40¢ risk in December corn and likely more than that should the crop season enjoy normal weather. Many traders look at the numbers and assume if producers plant over 96 million acres and produce a trend line yield with USDA’s current demand projections, corn carryout could swell to over 3 billion bushels. These are grim projections for price recovery and put most downside projections for December corn closer to $2.50 come fall.

Soybeans also have projections for large supply numbers. They will likely test the $8 level and could see $7.80 by fall. 

So, what does all this mean for your marketing efforts? First priority should be to sell what you may have in old-crop inventory. Put offers out at your elevators in 10¢ increments to sell. For example, if you have 20,000 bushels left, divide it into four 5,000-bushel increments and sell on any rallies between now and July 1. Use that $3 level nearby futures hit as your last line in the sand. If we close below that level, sell the remaining bushels you have on hand. For beans, the line should be $8.10. 

For new-crop sales, use the same concept of selling on near-term rallies. December futures this year may have a hard time getting above $3.50 until demand returns, or if we have a biblical drought. New-crop beans will find it hard to get above $9. Do not think any technical bounces we see will turn into bull markets. The numbers and fundamentals are just not there right now. Rallies will likely be technical and short-lived. Be aggressive. 

Also, should you have any marketing dollars available, invest in hedges. I know it doesn’t sound fruitful to purchase put options at these levels, but they can still add value to your sales should prices continue to bleed lower. There is still downside risk and more uncertainty ahead. There is a strong likelihood crop size will continue to grow along with an increase in world supply, which will continue to limit rally potential. We need a threat to crop supply or a major resurgence in demand to drive prices back up to profitable levels. 

Do the best you can. Be thankful for your health. Always stay hopeful and true in faith. There will be better days ahead. 

If you have questions, you can reach Cathy at cekstrand@s-pelmwood.com or visit TotalFarmMarketing.com for more information.

Disclaimer: The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Individuals acting on this information are responsible for their own actions. Commodity trading may not be suitable for all recipients of this report. 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. No representation is being made that scenario planning, strategy or discipline will guarantee success or profits. 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 Total Farm Marketing. Total Farm Marketing and TFM refer to Stewart-Peterson Group Inc., Stewart-Peterson Inc., and SP Risk Services LLC. 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. SP Risk Services, LLC is an insurance agency and an equal opportunity provider. Stewart-Peterson Inc. is a publishing company. A customer may have relationships with all three companies. SP Risk Services LLC and Stewart-Peterson Inc. are wholly owned by Stewart-Peterson Group Inc. unless otherwise noted, services referenced are services of Stewart-Peterson Group Inc. Presented for solicitation.

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