Marketing grain through the next year will be tricky. We’ve summarized advice from a dozen experts in articles from Corn & Soybean Digest, Agweb, Farm Futures, and DTNPF. Some of the experts provide advice, others provide predictions. There’s definitely not a consensus. There’s no magic bullet. All, however, encourage farmers to spend time making a solid marketing strategy. If you’re reading this article, you probably agree. Let’s open that suggestion box.
1. David Kohl and Scott Mickey/Corn & Soybean Digest
Looking at 30 years of data, it appears that marketing corn during the planting period is financially beneficial around 75% of the time. The benefit averaged 19 cents per bushel. But it might not be a good year to look too much at averages. Prices are volatile and margins are tight. Disciplined marketing is essential.
During the last five years, it’s been more beneficial to market corn during planting than opposed to harvest 100% of the time. Don’t get stuck on the idea that good times will return. There may be temporary rallies, but disciplined marketing works.
If a 1,000-acre farm yielding 200 bushels per acre was disciplined in their marketing strategy and received the average benefit of $0.19 per bushel, it would equate to $38,000 of additional annual revenue. Over a 30-year period, this could be $1.14 million of potential earned net worth. In the last five years, the average benefit to marketing during the spring was $0.68 per bushel. Using the same example farm, this would equate to $136,000 of additional annual revenue or more than $4 million over a 30-year period!
These are all or nothing marketing examples, but they’re meant to get you thinking. Spending just five hours a week on a marketing strategy, or 250 hours per year could earn you an extra $38,000. That’s $150 per hour for your efforts.
2. Brian Basting/Advanced Trading
Resolving the trade war with China is very important. If it’s not resolved soon, US soybean carryout will probably grow and expand prices. World corn demand is growing and the market is depending on a rebound of South American production. A recovery output could drive the market lower, whereas a shortfall might support the market.
Time will tell how much China invests in Brazilian agriculture, that could make prices drop. Since it’s really hard to predict prices, marketing flexibility is a must. Use a marketing tool to determine a floor for production, but also be willing to participate in rallies. Consider buying a put option, add cash sales, and long option purchases. Keep an eye on cash basis trends and carry in the futures market. Don’t miss a carry opportunity.
3. Bill Biedermann/Allendale Inc.
It doesn’t matter if one is bullish or bearish- marketing will be tough this year. Complicated world politics will continue to cause volatility. Corn has record tight stocks-to-use ratio, so maintaining ownership will offer the best potential asset gain. If you need the cash, sell and replace it with futures. If that makes you uneasy, go to options. For next year, start when prices hit $4.20 or profit levels. For soybeans, use puts to protect your risk. If basis is improved, sell cash. If world soybean prices are strong, our cash prices are usually good.
4. Naomi Blohm/Stewart-Peterson
For corn, global ending stocks are tight. The US is planning on increased planted corn acres for 2019, which is why it’s stuck in a narrow trading range. If there isn’t an increase in US corn acres next year, then we might see prices go up. Unless a trade deal with China is made, expect to be aggressive in crop marketing.
For soybeans, this is the year to utilize all of your marketing tools. Ending stocks are at record levels. Determine your cost of production, set your 2019 price targets, and get cash orders working at your elevator. Prices might seem low now, but one positive blip in the news could send markets rallying. Know how to take advantage of rallies with cash sales or options, and be willing to “pull the trigger.”
Don’t forget to keep an eye on consumer spending, interest rates, investments and the stock market.
5. Richard Brock/Brock Associates
Some helpful things to remember: don’t store a short crop, but store a record crop. Markets will peak on bullish news and drop on bearish news. Soybeans had a record crop, so following this advice means you should be storing it. Don’t expect 2019 to be at all like last year, and don’t expect it to move much over the next few months.
If prices hit breakeven, don’t be ashamed to sell. But don’t go overboard either. If the market rallies above breakeven prices, it might rally even higher. Right now, it’s advised to sell old crop grain in the cash market and forward contract new grain using futures and options.
6. Alan Brugler/Brugler Marketing & Management
Look to export pace. Because the stocks-to-use ratio is tight with corn, we should see record exports. For soybeans, it depends on how much new markets can make up for Chinese business. If exports aren’t keeping pace, it’s a problem for both soy and corn.
There are several other things to watch. Soybean acres switching to corn. Bad weather or crop losses in South America. The strength of the dollar. New trade deals to open US markets. Consider the “Three Buckets” strategy:
The first, the “Make Me Do It” bucket is when prices are at least 20¢ to 30¢ above cost of production. Those sales can be done up to 18 months in advance. Second bucket sales are made above cost of production during the growing season for harvest or Jan. 1 delivery. In the third bucket, crops are always binned for returns to storage.
7. Mark Gold/Top Third Ag Marketing
The key input for the market right now is demand. Unless a trade agreement with China is reached, it’s unlikely that soybeans will see a long rally. A weather event could tip the market bullish, but without that prices may go lower. The big difference between this year and last is the carryouts.
Breakeven is critical to knowing how efficient your farm operation is when compared to other farmers in your area, but it should not enter into marketing. The market does not care what your breakevens are. Keep in mind: Some of the most bullish markets have started with the biggest carryouts.
For marketing 2019 crops use a long option strategy. Long put options protect the down side, long call options can replace cash sales, and use long options and cash to manage your risk. You will have protected your downside risk, but can still take advantage of rallies. If you’re storing grain, watch the carrying charges and local basis. Use a hedge-to-arrive contract to sell the deferred prices. This keeps basis open to go higher this spring.
8. Ray Grabanski/Progressive Ag
China still needs soybeans just like before- the only change is where they’re getting them. It’s difficult to predict how bad the trade dispute with China will be, as it depends on how well Brazil can supply the soybeans. Any other country wanting to buy soybeans will probably have to buy them from the US.
The question is, how much of the 25 million acres are simply displaced and how much actually are lost?
Soybean farmers should hold on. Only sell what you absolutely need to. It will likely take a lot of time to reach breakeven, and once it does, prices are likely to continue rising. Consider using tools that can separate basis fixing and futures fixing. You want to sell at high basis and future prices, but the two hardly ever happen together. You can store cash grain and lock basis and futures separately and potentially gain 10-20 cents per bushel on net cash prices. If prices remain low, storage hedge might be a good choice.
9. Angie Setzer/Citizens Grain
Because there is so much uncertainty right now, farmers should do what’s worked for them in the past. Pay attention to cash flow. A good first step is to use a sold cash approach for bushels that need to move at harvest time.
Watch three things closely: exports, ethanol demand, and Brazil. Will bean exports react to the larger supply and spread shipments out over the entire year? Corn and ethanol could really benefit as a result of the trade war with China, but ethanol exports need to increase significantly to support grind margins and corn demand. Finally, pay attention to Brazil’s new president, Jair Bolsonero, and his economic policy and relationship with China. There could be bumps in the road there, and it will probably have an impact on market structures.
10. Bob Utterback/Utterback Marketing Services
It takes time for demand to develop. Many growers have unpriced corn in bins, waiting for prices to go up. Unless there is a significant weather event in a corn or soybean growing area, prices are not likely to rally. If there are June or July weather events, use that opportunity to sell 2019 crops at good prices. Plant corn and limited, or no soybeans.
Prices above cost of production can be locked up for many corn producers, but not for soybeans. Be 100% sold if December 2019 corn reaches $4.05 to $4.20. Its imperative producers sell in a form that has flexibility. I like buying deep-in-the-money puts rather than selling futures or making cash sales. Buy deep-in-the-money December 2019 corn puts with a time value cost below 12¢. Automatically roll-up if a bullish price event occurs. If one can average out around $4.10 and in the fall of 2019 roll the December 2019 to July 2020 contract at a 25¢ carry, it would be approaching $4.35 futures equivalent before basis is taken into consideration. That’s a return well above all expected costs for many producers.
11. Bryce Knorr/Farm Futures
Everyone need to look at how they are limiting risk. In a survey taken in August, 36.6% of farmers said that they had forward priced enough 2018 grain to make a profit. Fortunate farmers that sold during rallies last spring may also break even or profit. And the Market Facilitation Program also helps. There is so much uncertainty right now between weather, politics, and tariffs.
“No one can predict grain markets accurately.”
Be aware of different scenarios where profits can be made, and don’t be afraid to take advantage of them whenever they appear. Know how to use different pricing tools, and use what’s appropriate for market conditions.
“Large carries in soybean futures this fall and very weak cash markets were a signal to consider storage hedges while waiting for basis to strengthen.”
12. Joel Karlin/DTNPF Contributing Analyst
Many corn farmers haven’t been selling their 2018 corn because of low prices and availability of storage space due to the drawn-out harvest. There weren’t a lot of forced sales. And corn growers aren’t benefiting from the MFP like soybean growers.
Most farmers know that the lowest prices are usually at harvest. To avoid making ground piles, many farmers will sell some cash grain when their bins are full. The most popular month to sell is January. Usually by that time prices have recovered, and producers are waiting until the new year for tax purposes. Corn marketed from September through December can help provide the cash flow needed for spring planting. Utilizing forward contracts to capture some of the carry should increase returns.