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Four Tactics During Uncertain Markets

October’s USDA report may hold more surprises. Here’s how to get ready.

Let’s face it. The recent USDA reports have been a jolt to reality. Given some early adverse growing conditions, just about everyone expected a yield decline to set off a market run. Instead, projections on corn and soybean yields are higher than expected, deflating optimism for a price rally across the country.

Nate Brabec, my colleague who works with farmers and ADM staff in Nebraska, was at Husker Harvest Days when the report came out. Talking with farmers that day and since, he’s suggested the same coping steps again and again. Nate shares them here, to help you prepare for the next report on October 12. The more-objective harvest data in the report could drive markets for months.

Here’s Nate’s guidance:

  1. Know your P&L. Sit down and figure your risks in dollars and cents. With some basic information—input costs, projected yield, what insurance may kick in, your farm program payment—you can see where you stand: “Here’s the line, and if yield and price land at this point, here’s how it impacts me.” Knowing where that line is quickly shows you risk and opportunity.
  2. Run scenarios. Identify the best and worst that could happen, and be prepared no matter what the report says. You could put all this down on paper, or a tool like GrainBridge automates it, and lets you see several outcomes very fast. Instead of trying to outguess the market, this is the logical way to determine if you’re making good marketing decisions or not.
  3. Manage risk. Avoid decisions just based on cash markets. At best, you get lucky. Put yourself in a grain marketing position that, no matter what happens with today’s price, you can feel okay. Start with the harvest right in front of you, but don’t forget about bin bushels and next year’s crop as well. And don’t put all your eggs in one basket—diversify.

Consider these contracts for markets like we have now:

  • Price Daily: This contract is mechanical, not emotional. It gets you the average over a period of days, weeks, or months relieving you of pricing a portion of your grain on your own. You can enroll any time depending on when you need cash, and even choose a short pricing window. If you intend to sell corn or beans for cash now, averaging is a great way to do it.
  • Price Accumulator. This contract can be used to make the most of your on-farm storage. Carry is the big discussion right now. Sell June or July bushels and use the carry to start pricing. If that premium builds over the coming months, as some predict, it can add dimes. A little more execution work now may pay off.
  • Advantage Expert: If you don’t want to make decisions for next June or July on the crop you’re just harvesting, you can park it with expert pricers. This is a good one if you want more of your marketing to be human-based. ADM offers three expert pricers who use all their insight and options to price the contracts.
  1. Resist impulse. You can do a lot of things wrong when you react emotionally. And if you just talk with others in a similar situation, it’s easy to wallow in the same puddle. It doesn’t help your business. Maybe you need someone to step back with you and think about things a little differently. The situation is even harder for farmers who have tight working capital—they can’t afford to be wrong too often. For those operations, I’d say more of their grain marketing should be set up to work mechanically to make sure you defend your cash flow requirements as well as your profit targets.

Hopefully, at ADM, we ask the right questions and give you options to make educated decisions, not emotional ones. You’re always going to care about the market. Price matters. But how do you look at everything? That’s what we bring to the table.

Thanks Nate. I couldn’t have said it better.

If you’d like to arrange a better cash grain sale—or need a bigger strategic plan—just reach out to your local ADM rep. In a few hours, we can walk you through the steps Nate lays out, to better manage your risk. We’re here to help. Take care and have a safe harvest.

Subject to Terms and Conditions in ADM-provided contract. Please see contract for details.

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.

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