Make a marketing plan and stick to it

first_imgShare Facebook Twitter Google + LinkedIn Pinterest Last week’s USDA report showed few farmers switched intended corn acres to beans. This may cause trouble for corn prices, especially with rains right before pollination in the major corn states.  Weather reports show half of the Corn Belt is good or great while a third struggles. Overall, crop conditions have never been this good for the U.S. as a whole this far into the season. There is another two weeks where weather can have a major impact on corn yield.Without a yield reduction, it will be difficult reaching $4.  Even a 3% cut in yield from trend line of 166 to a 161 average yield would mean 1.5 billion bushel carryout, which is more than adequate.Even if weather is good for the next two weeks, there is the slight potential for a frost scare over Labor Day, which could affect prices down the road. Right now though, everyone is watching the weather the next two weeks.For soybeans, good weather allowed for favorable planting conditions, generating more bean acres, but not as many as the market wanted. The market was only 312,000 acres short of the goal of 84 million acres.  But this translates into only being short 15 million bushels on the balance sheets. Balancing this reduction with a 50 million increase in old crop stocks that were higher than anticipated, the net positive gain to the bottom line shouldn’t have warranted the rally on last Thursday.There are two bean unknowns — weather and export demand.  National yields have averaged over 46 bushels per acre the last three years with average weather conditions. At this level, the U.S. would have plenty to meet anticipated demand. It is also uncertain if export demand will continue at the same pace as this last year. It favors farmers in South America to plant beans over corn next year.Expect beans to remain volatile the next 45 days due to weather forecasts.Market ActionEarly last week a small nearby feed mill called needing some corn bushels. The bid was 15 cents better than my local bid and 20 cents better than what I sold two weeks ago. With 15% of corn left in bins without basis set, I sold 5%.Having a planTwo weeks ago weather conditions looked dry and $5 corn prices seemed possible. Funds dominated the market with strong buying as farmers didn’t sell, sensing dry weather and holding on to the crop.  This caused the market to rally significantly on technical strength.However, fundamentally the dry weather had to pull production estimates down or this rally was overdone. Remember that the market had 1.8 billion carryout to work with last year and the market sat at $3.70 for months. There was no reason to justify a rally to $4.50 without a major crop failure throughout the U.S. as 2016 carryout has always showed it should exceed 2015.  Farmers continue to hold out hope the market must rally….most likely out of fearI’m as guilty as the next farmer in believing the weather forecast hype and backyard views. Social media doesn’t help either. How many times do you see a picture of a field that looks good compared to one that has a major problem? I try avoid looking at other farmer posts because they overwhelmingly post bad fields.Instead, I have to remind myself to stick with my plan from the fall. I wanted to sell 2016 crop at $4.20+, which seemed almost unrealistic six months ago. Then beans rallied $3 pr bushel and everyone feared they missed something and corn would do something similar. Then some missed rains and farmers get spooked.Fear prevents so many farmers from selling into rallies because of the “what if I can’t produce” mentality. While I understand this fear, it is possible to manage these concerns with using futures instead of cash sales. The futures market is more forgiving than an end user.  I have more flexibility and opportunities using futures, and potentially more profits.I don’t have a crystal ball.  I don’t know if corn will have record yield this year, just like I don’t know if corn can rally with a drought scare this month. I can only plan for what USUALLY happens. In the last 65 years, there have been 10 years (15%) where corn yields fell well below trend-lines. That means 85% of the time corn hits near trend-line yields. That’s a rate I’m willing to bet on every year.And after the report…..everything indicates a large yield drop is needed for the market to rally significantly.Jon grew up raising corn and soybeans on a farm near Beatrice, NE. Upon graduation from The University of Nebraska in Lincoln, he became a grain merchandiser and has been trading corn, soybeans and other grains for the last 18 years, building relationships with end-users in the process. After successfully marketing his father’s grain and getting his MBA, 10 years ago he started helping farmer clients market their grain based upon his principals of farmer education, reducing risk, understanding storage potential and using basis strategy to maximize individual farm operation profits. A big believer in farmer education of futures trading, Jon writes a weekly commentary to farmers interested in learning more and growing their farm operations.Trading of futures, options, swaps and other derivatives is risky and is not suitable for all persons. All of these investment products are leveraged, and you can lose more than your initial deposit. Each investment product is offered only to and from jurisdictions where solicitation and sale are lawful, and in accordance with applicable laws and regulations in such jurisdiction. The information provided here should not be relied upon as a substitute for independent research before making your investment decisions. Superior Feed Ingredients, LLC is merely providing this information for your general information and the information does not take into account any particular individual’s investment objectives, financial situation, or needs. All investors should obtain advice based on their unique situation before making any investment decision. The contents of this communication and any attachments are for informational purposes only and under no circumstances should they be construed as an offer to buy or sell, or a solicitation to buy or sell any future, option, swap or other derivative. The sources for the information and any opinions in this communication are believed to be reliable, but Superior Feed Ingredients, LLC does not warrant or guarantee the accuracy of such information or opinions. Superior Feed Ingredients, LLC and its principals and employees may take positions different from any positions described in this communication. Past results are not necessarily indicative of future results. He can be contacted at [email protected]last_img


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