USDA delays, trade rumors, and volatile prices make this fall tricky. Discover proactive grain marketing strategies to manage risk and protect profits.
What Happened in the Market
Markets and harvest were humming along when the government shut down, halting USDA news traders use to make decisions. We are left with tweets from the president and harvest rumors. The trade is hopeful the government will open near November 1, when government health insurance premiums are scheduled to go up. However, nothing has been decided at the time of this writing.
A dry fall is helping the harvest pace. When it comes to yields, however, disease and lack of late summer rains have many assuming yields are not what USDA had pegged in its last report. This has kept a floor under Dec. corn futures near the $4-$4.10 area, while resistance stands at the gap left in July near $4.32.
Beans have been a bit more volatile, hinging on when trade talks with China will occur and the results of those talks. Nov. beans have rallied nearly 70 cents from the start of the month on hopes that talks will take place this week, and that China will buy U.S. beans before South America’s harvest. Resistance for January beans is in the $10.80 area.
From a Marketing Perspective
Farmers have been reluctant sellers of grain this fall due to low prices, hopes for beneficial trade agreements, and the potential issuing of government checks before the end of the year. As a result, basis for beans has tightened as domestic crush remains strong.
From a marketing perspective, you may want to sell beans and re-own with a bull call spread. It could be a “buy the rumor, sell the fact” response from trade should a China bean deal come through. Basis is also at risk of widening should producers add to their sales on any kind of rally.
As for corn, prices seem rangebound between $4 and $4.50 as we await final yield data. Demand remains strong, but it may take a yield below 180 to bolster prices beyond the $4.30 area.
Prepare Yourself
By now, many of you made your storage plans for the year. There is a lot of hope for trade deals in the coming days, but uncertainty remains with the Russia/Ukraine War and China. Defensive strategies for stored grain may be prudent.
In our business, we say that hope is not a strategy, and when you put grain in storage you are hoping prices will rally and give you a chance to sell later. This means you are asking the market to not only rally up to a level you were hoping for, but also enough to cover cost of that storage. Investing in puts to protect that investment may help you manage some of the risk.
If you have a sell target in mind, consider putting an offer out at your elevator to secure that price. Market volatility can provide prices one minute and be gone just as quickly. Also, looking ahead, don’t forget to start thinking of marketing next year’s crop with Dec. 26 futures over $4.60 and Nov. 26 bean prices near $11.
If you have questions, you can email Cathy or visit TotalFarmMarketing.com for more information.
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