Get More “Base Hits” with Spring Market Trends in Corn
In 2003, Michael Lewis authored Moneyball: The Art of Winning an Unfair Game. If you’ve seen the movie version, you know it’s based on the career of Oakland A’s general manager Billy Beane, who bucked conventional scouting by drafting players with a quiet, statistical edge. Rather than competing for stars, Beane—in a disadvantaged revenue situation to say the least—looked for consistent base hits. And in doing so, he transformed the last-place Oakland A’s into a title-contending baseball team.
The story holds parallels to farming. For one, the “unfair game” subtitle could well represent factors beyond your control: weather, input costs, and markets. But on the positive side of the analogy, corn markets have patterns something like incremental base hits.
Past performance is not indicative of future results. ADM does not warrant this information to be free of omissions and errors.
One key market stat is a seasonal trend for corn between February and June. During this window, new crop futures markets are usually strong—and by “usually” we mean 8 out of the last 10 years. Using Beane’s reasoning, a player who gets on base 80% of the time is not a bad draft bet.
This is why ADM offers a grain contract for corn called Average Seasonal Price (ASP™). It’s hard to spend every day watching the markets, even if you did have the genius to strike at the right moment. With ASP, it’s a calmer scenario with strong odds of being right more than wrong.
You enroll a percentage of your projected new crop bushels with ADM by January 27, 2017. Then an equal portion of the grain is priced every day during the ASP pricing period, based on Chicago Board of Trade’s daily futures settlement price for the respective futures month. At the end of the pricing period, you come away with the seasonal average futures price that the market achieves during that time.
Remember, all of this happens during a historically “price-friendly” spring season. Along the way, with ADM’s weekly performance email updates, you always know where your “average” stands—and there is an early price-out option available. With this tracking tool, ASP gives you a helpful benchmark for grain marketing decisions you’re making on your own.
Each day, it’s easy to see the futures settlement, as well as the closing bid at your ADM location, all on the website of your local ADM office. (There may be some flexibility on delivery locations and setting basis in your area. For details, ask your ADM rep.)
Practiced with a portion of every year’s crop, ASP may be a statistically wise strategy for your operation over the long haul.
Approximately 80% of the time, ASP has outperformed the harvest price.* Of course, even the most dependable players can suddenly experience a slump. In grain marketing, too, price can be volatile and break seasonal trends. But practiced with a reasonable portion of every year’s crop, ASP may be a statistically wise strategy for your operation over the long haul.
If you want to make disciplined pricing decisions over a period of time—and have historical trends on your side—then ASP from ADM may be a marketing alternative to consider.
* Harvest Price is in reference to the average Chicago Board of Trade December corn futures settlement price during the month of October in each respective year.
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.
© 2016 Archer Daniels Midland Company