The Law of Average Matters in Your 2018 Grain Marketing
If you live anywhere north of Kansas, you don’t take your family to the lake in November. Or hold a Sunday barbeque in March. And you certainly weren’t out planting over the holidays. Sure, you might get unseasonably warm weather in an odd year. But it’s not the exception you plan around—it’s the average.
It’s surprising, then, that farmers still market so much of their crop at harvest. Fall prices are lower than spring a majority of the time, according to history. That’s happened eight out of 10 years for corn, and six out of 10 for soybeans.
Tip: Spring markets are historically stronger, so getting corn priced from February through June carries a lower risk than selling for the spot price at harvest.
“That February through end-of-June time period is a historically price-friendly time in the marketplace for corn,” says Jason Depenbrock, a grain origination manager for ADM out of Mendota, Illinois. “If you look at history, markets tend to drop off after that early July point in time.”
It doesn’t happen every year, Depenbrock points out—but often enough to matter in your annual grain marketing plan.
That’s why Average Seasonal Price (ASP™) is a smart move for a portion of your 2018 production. In ASP, you enroll bushels and choose a futures reference month (corn: September or December of 2018 or March of 2019; beans: November 2018). Your bushels stay in the market from February 5 to July 5 for corn, and May 29 to August 2 for soybeans—typically price-friendlier windows.
“It’s called Average Seasonal Price because, at the end of each day over the entire period, an equal portion of your grain is priced,” says Depenbrock. “At the end, it’s all averaged together into one futures level. But it’s not really average. You’re getting some of the typical high months in the market.”
Stay alert to ASP sign-up deadlines: January 26 for corn, and May 18 for soybeans.
Another corn and soybean enrollment deadline on January 26 is for ADM Advantage Expert. This contract actively manages your bushels, instead of pricing them automatically. Choose a futures month and a grain-marketing expert who’ll watch the markets for you and try to jump on the best price. We provide three experts to choose from—Kevin Van Trump, Richard Crow, and the ADM Experts. You can meet them in this short video:
In both ASP and Advantage Expert, you set your basis before delivering the grain, and if circumstances dictate, you can even price out early.
If you’re planning 2018 production, get into another routine: manage risk by committing a portion of your new-crop bushels in January. Used every year, ASP and Advantage Expert are good building blocks in your annual marketing plan.
Time is running out, so don’t delay. Talk to your ADM representative by the January 26 signup deadlines!
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.