Even before USDA’s friendly Oct. 11 reports, I was hopeful growers would get selling opportunities this fall. While that potential looks more likely, get ready for a game of three-dimensional chess to figure out where to pull the trigger.
While one of my jobs is to predict prices, that’s not the most important thing for farmers right now. Be ready to sell when you can lock in a profit, regardless of where prices may be headed. Risk remains too high to lose sight of that objective.
USDA’s move to cut the size of the 2018 crop chopped away at some of the increase in 2017 crop supplies left over at the end of the marketing year. But remember, we’re not talking tight supplies, just supplies that are tighter than they appeared earlier this month. And while the crop may turn out smaller once producers get back into the field, lower yields and increased drying costs will eat into profits too.
Most growers had one idea of their yields before rains stalled harvest. Now the question is what’s happened to the rest of the crop out in the field. Do some break-evens with difference scenarios to see just where your bottom line is.
The risk is a rally that peters out by November, which is the seasonal tendency on average in years of good production. And the 2018 crop is still above average, for a record-tying sixth year in a row. History suggests there’s potential for rallies to make sure farmers plant enough corn in 2019, and growing season weather could always bring more opportunity. But that’s a long time to wait, and a lot of risk to take if those rallies never come. An El Nino that lingers into the growing season has the potential to boost yields above average for a seventh straight year. So nothing’s assured.
Growers who made sales on the spring rally or before can be quicker pulling the trigger, though getting some sales on the books regardless is prudent. The ability of December futures to break through what looks like a head-and-shoulders bottom projects rally potential to June 14 highs at $3.955, just below a major retracement objective. Toss in carry to July of around 3.5 cents a month and hedging inventory in on-farm storage could net a profit.
The other question is how much. Covering sales with a few calls, then waiting for more opportunities in the winter doldrums is one way to keep some skin in the game. And remember: Most growers likely have plenty of 2019 corn they can price on rallies too.
But risk is an individual matter. So besides figuring your targets, also make sure you know how much you want to risk on rallies down the road, remember that it indeed is a risk.
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Senior Editor Bryce Knorr first joined Farm Futures Magazine in 1987. In addition to analyzing and writing about the commodity markets, he is a former futures introducing broker and is a registered Commodity Trading Adviser. He conducts Farm Futures exclusive surveys on acreage, production and management issues and is one of the analysts regularly contracted by business wire services before major USDA crop reports. Besides the Morning Call on www.FarmFutures.com he writes weekly reviews for corn, soybeans, and wheat that include selling price targets, charts and seasonal trends. His other weekly reviews on corn farming, basis, energy, fertilizer and financial markets feature price forecasts for key crop inputs. A journalist with 38 years of experience, he received the Master Writers Award from the American Agricultural Editors Association.
For more corn news, corn crop scouting information and corn diseases to watch for, follow Tom Bechman's column, Corn Illustrated Weekly, published every Tuesday.