Why Working with a Grain Marketing Expert Makes Sense
Grain markets have become terrifically complex over the past 20 years. It’s not just U.S. weather driving prices anymore; it’s a web of fluctuating data points like export demand, ethanol consumption, global crop outlooks, even politics. Add the movement of huge investment funds in and out of most markets, and you get rapid price swings that can make or break opportunities in a matter of hours.
“Through the ‘90s, there were years when corn wouldn’t trade 30 cents in a year,” says Kevin Van Trump, a prominent ag investor and market commentator. “Now you can go to lunch and we’ve moved 30-some cents.”
“Volatility and speed are the hardest part of these markets,” agrees Todd Harman, a grain trader and manager with ADM. “You don’t know what these algorithms are going to do; but with strategy and positions in place, you can take advantage of them if they go in your favor.”
The ADM Expert team, along with independent pricing experts Farm Direction, LLC (led by Kevin Van Trump) and Crow Trading, Inc. (led by Richard Crow), are available to work for farmers through the ADM Advantage Expert contract this year. Producers who sign up 2017, 2018, and 2019 corn, soybeans, and wheat in the contract may choose one or more of these experts to establish the futures reference prices on a portion of their grain. Farm Direction, LLC (Van Trump) is a new participant to the program, replacing long-time independent ADM Advantage Expert John Stewart, who’s retiring when he completes his current pricing responsibilities.
“The experts who price bushels in ADM Advantage Expert eat, sleep, and breathe grain trading,” says Becca Burns, ADM Marketing Manager. “They’re in tune with all the macro and micro things going on in the market every day, and can leverage opportunities the farmer might not see or have access to on their own.”
Here’s more about the three “experts” farmers have to choose from:
Richard Crow, Crow Trading, Inc.
Richard Crow has been pricing the ADM Advantage Expert contract for more than 10 years. He has 30 years of experience in farm price risk management, and manages his own farm in Oklahoma. Crow is a registered Commodities Trading Advisor, an independent broker with the National Futures Association, and holds a doctorate in agricultural economics from the University of Oklahoma.
“We went into this business to help farmers as much as possible. You walk the roads they’re walking, you feel what they’re feeling. I’m an arm of his production. He works to maximize his harvest. We work to maximize revenue, given the resources sitting out there.”
Program Thought Process:
“We’re not in this to buy and sell every day. We follow prospective yields at four key points in the production cycle: pre-planting, planting, pollination, and harvest. If production looks promising, we may finish pricing the contract pretty early. If we’re looking at a risky time, we’ll defer pricing out as long as we can. In between, we watch how U.S. prices compare to world markets and to farm valuations.”
“Look past your individual prices. Look forward, because the forward prices in many years may be the best prices of the year. Also, in big carrying charge markets, I’d suggest you work towards hedging storage.”
Kevin Van Trump, Farm Direction, LLC
Kevin Van Trump is president and founder of the ag investment firm Farm Direction, LLC, and publishes the Van Trump Report, a respected market commentary. He grew up in a farm community in Missouri and worked as a trader for 20 years on both the Kansas City and Chicago Boards of Trade. He’s also an investor in farms and ag industry across the U.S. and South America, and draws on his network in hedge fund management for market clues.
“The last 10 years, I’ve tried to help the ag community understand the markets—the speed and rate of change. But we try to keep the process simple by focusing on profitability, like I do on my own farm. We believe we’ve developed a system that gives us a slight edge in staying ahead of where the ball is going.”
Program Thought Process:
“Traditional supply and demand are not the price factors they used to be. When corn and beans started trading as energy, it brought in a lot more money and more opportunities on the upside. We monitor money flow from the commodities indexes and what’s happening in the macro markets, and that allows us, as prices dictate, to put on strategies that are easy to enter and easy to exit.”
“When markets start moving, farmers tend to move the goal post—and that gets them into trouble. Know your break-evens and focus on profitability. Have a plan in place that you can execute in a timely manner. That means having prices in the market.”
The third “expert” in the program is actually a team: ADM’s own commodity traders. Members are based in the hedge centers of Decatur, Chicago, and Kansas City, and near South American production in Brazil. Tapped into yield, origination, and export data, they talk constantly to reach a trading bias and adjust their positions according to changing market conditions. They price ADM’s own grain and also ADM Advantage Expert bushels.
“First and foremost, we try to make sure farmers get the best value for their crop. Farmers need to be profitable. We put as much focus on ADM Advantage Expert bushels as we do on ADM’s own position. It’s not an afterthought. We’re proactively working to add value every day. We can’t promise profitability, but we can promise we’ll do our best to help them achieve that goal.”
Program Thought Process:
“The volatility will happen and we will work to capture those opportunities. We use a variety of tools to manage risk in the market in case there are unexpected moves. But we’re looking at the bigger picture, too: Where is the price going? Should we have a percentage locked in now, or will there be a better opportunity later? We do a good job of setting price targets and locking those price targets in on the portions that we want.”
“A farmer should be looking at how to achieve strategic price objectives and lock them in. Diversification is also important. Spread your bushels out and get different eyes or opinions on them.”
ADM Advantage Expert helps farmers do what is getting harder to do for themselves—survive increasingly unpredictable markets and wring some revenue from volatile markets.
“The experts have the ability to pull the trigger and set a lot of the emotion aside,” says ADM’s Becca Burns. “This program allows farmers to get grain priced by looking at the big picture when it comes to futures markets. Combine ADM Advantage Expert with your own price targets and other pricing programs to make this an even more powerful tool.”
Enrollment is simple: Choose the bushels you want to enroll, your delivery preference, and select your expert(s) to make the futures pricing decisions on that grain contract. We strongly encourage you to diversify by placing grain with two or even all three experts or in other pricing programs.
Talk to your ADM Merchandiser about the edge that ADM Advantage Expert provides. And enroll by September 22 to get an expert working for you!
Past performance is not indicative of future results.
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.