Five Ways to Work the 2019 Grain Markets
The market is carefully watching news about corn and soybean acreage, planting delays from flooding, and trade news. Any one factor could quickly change price direction—or not. You need to be ready for both scenarios.
Bryce Knorr, respected grain market analyst with Farm Futures magazine, believes that 2019 will hold opportunities to make a profit on both corn and soybeans. But those chances may be fleeting, he says, and it will take disciplined marketing to capture them.
We spoke with Knorr at this year’s Farm Futures Business Summit. Listen to that conversation in Episode 13 of our podcast, In the Driver’s Seat: Work the 2019 Grain Markets.
Some of Knorr’s main points are:
We’ll have a shot at profits: “Once again, we’ll have opportunities to sell for a profit. In soybeans, they may be fleeting, but I think there’s a chance we can get November futures above $10. It may take some growing season weather or a trade-related rally, but I think we’ll have a shot at that. For corn, the carryout situation should continue to tighten unless farmers really boost their acreage. The cost of planting corn is a lot higher than soybeans, so if you’re financially strapped, you may be forced into soybeans. But I think with both crops, we should get an opportunity to sell for a profit.”
Watch seasonal windows:
“Look at three seasonal time windows in particular: the second week of April, the third week of May, and the third or fourth week of June. On average, these have been good times to sell. Spread out those sales, though, and mitigate the risk. When yields go down, prices go up (remember 2012?), so you need upside protection in place.”
Higher farm service support is coming: “Take a look at the Farm Program to see if that gives you enough downside support. It can mitigate some of the risk. I liken the Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC) programs to give you a floor. The size of that floor really can determine how aggressively you need to be selling when we get rallies, hopefully this spring and summer. With the new Farm Bill, it looks like we’ll have an opportunity to update base yields for the PLC program or to switch election from ARC back to PLC. Take a look at updating your yields on a case-by-case, field-by-field basis.”
We can’t depend on China:
“It looks like China’s long-term use of soybeans is going to be less. Their economy is cooling and their population is getting older. The Chinese government predicted their soybean demand would fall 12% for the 2018 marketing year. They also have African swine flu [in their swine population], higher prices due to tariffs, and they’re trying to convince their livestock producers to use less vegetable protein in their animal rations. The combination of those will be a long-term lower demand base.”
Think one and two years out:
“Pay attention to seasonal trends and consider making sales, but also have a Plan B. ‘What if things don’t turn out according to plan?’ Due to the low volatility we’ve seen in corn and soybean futures, this may be a good time to pick up a few out-of-the-money call options, to give you some upside protection. Most of all, don’t do everything at once. Avoid the temptation of trying to sell everything. Do a little bit at a time, and if we get a rally this summer, consider selling the 2020 crop.”
ADM grain contracts are a great way to act on Knorr’s recommendations. They’re designed to help you capture typically better months and price opportunities in the market.
- Average Seasonal Price™: Enroll soybeans by May 17 and receive the average futures reference price from May 28 through August 1— typically better months for soybeans.
- Price Daily™: Choose a time frame, and your enrolled grain will have the futures reference established in equal portions each day, providing you the average price during that pricing window.
- Minimum Price: Take a hands-on approach to ensuring a guaranteed minimum price with upside potential.
- Offers: Put offers in at your target futures or cash price to capture spikes that may happen overnight or while you’re busy. Manage offers with the ADM Offer Management app (in the App Store or Google Play).
- Brokerage: ADM can help you with futures and options as well. We can refer you to a reputable broker.
Each of these choices should be considered along with your crop insurance. We have a relationship with Crop Risk Services and can help you understand how to leverage your crop insurance to maximize your grain marketing revenue.
Need some help getting ready for market opportunities? We’re happy to walk through your choices and personalize it for you. With a few key strategies and contingencies in place, you can head into planting with greater peace of mind.
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ADM is providing this communication for informational purposes, and it is not a solicitation or offer to purchase or sell commodities. The recommendations in this communication do not take into account any particular individual’s or company’s objectives or needs, which should be considered before engaging in any commodity transactions based on these recommendations. The sources for the information and recommendations in this communication are believed to be reliable, but ADM does not warrant or guarantee the accuracy of the information or recommendations. ADM or its affiliates may hold or take positions for their own accounts that are different from the positions recommended in this communication. The information and recommendations in this communication are subject to change without notice.