Many corn farmers can turn a profit at current crop prices – provided they bought fertilizer at pre-Iran war prices.
However, several wild cards are still in play and farmers are wise to use risk management tools to navigate market volatility, says Jeremy Strubhar, a senior broker at Advance Trading.
On this week’s Ag Marketing IQ In Depth, Strubhar focuses on the potential for profitability in corn, soybeans, and wheat.
- Corn prices, with December futures at $4.82 and cash prices near $5 at terminals, offer a chance for farmers to make decent money. “It’s not a windfall, but it’s far better than the losses we’ve seen in recent years,” Strubhar says.
- Soybeans, trading in the mid-$11 range, present even stronger profit potential, especially with tighter carryout and China’s recent purchases.
- Wheat, while priced lower, could still yield returns with good harvests.
Farmers should not expect these prices to linger, however. Strubhar cautions against complacency.
Strubhar encourages farmers to lock in profits through forward sales and explore options strategies, including using puts as insurance against price drops. For example, a December $4.70 corn put is available for around 27 cents, offering protection against downside risk. Similarly, soybean puts above $11 can safeguard profits while leaving room for upside potential.
Looking ahead, Strubhar points out that full planting of 95 million corn acres followed by a mild production season could lead to a large crop and lower prices. A carryout of 2.5 billion bushels could push corn futures closer to $4, presenting a $1 downside risk. For soybeans, while prices are starting higher, the risk of falling below $10 remains slim but not impossible.
“Risk management is key,” Strubhar says. “We can protect profits today using the tools we have. Let’s not let this opportunity pass us by.”
For more detail and background on Strubhar’s recommendations, watch or listen to Ag Marketing IQ In Depth.