Top Tips on a Thursday
Labor Day is one of those holidays that feels ironically named. After all, most people get the day off from work and spend it instead on any number of leisurely activities. But after grain prices spiked noticeably higher in August, it may not be wise to sleep on your grain marketing plans in early September.
Weather, war and more continue to grab headlines, with harvest pressure likely to build in the coming weeks. Traders are also already eagerly anticipating the release of USDA’s next WASDE report, which drops Sept. 11. Are there some relevant marketing decisions you should be considering right now? Keep reading to see what our latest round of Top Tips reveals.
- Figure out your own situation rather than just speculating on the market.
- Will the funds dig in their heels on long positions or get spooked and bail?
- What is the “threshold illusion,” and why should you be wary of it?
Nick Tsiolois, Farmer’s Keeper
“If I’m looking at my farm, I’m thinking about a few things. No. 1, how much of my crop have I already sold? No. 2, what are my financial commitments that I have between now and the end of the year, because I’ve got bills to pay. Depending on that, I’ve got lots of options — everything from ‘I’m just going to go ahead and just sell some grain here’ to maybe looking at a paper futures and options risk management strategy where I might be able to still participate if the market goes higher or at least set a minimum price contract to lock in with where prices are right now. There’s lots of options available. It really depends on what’s going on for you and your farm, not speculating on the market.”
“The reality is that just like markets run up, markets also fall down. That’s why it’s about spreading out your risk.”
“Understand what options — not in the futures and options sense, but what options financially are available to you to hedge your price risk. Then you can have that assurance of going and making a sale or not and waiting because you’re not just sitting there naked.”
— Nick Tsiolois, CEO and founder, Farmer’s Keeper
ACTION: Stay disciplined. Set offers with your broker or at your elevator with your grain operator.
Matthew Pot, Grain Perspectives Inc.
“As producers, we head into each growing season prepared to market within the unknowns. All winter, presentations emphasize the importance of managing risk during the seasonal windows of May and June, and July for soybeans, with charts showing seasonality over 20- or 30-year time periods. Risk management into the unknown was not a mistake. New information is simply provided as the growing season progresses.”
“Seasonal charts are based on a generality: More often than not, the crop makes it into August without any significant harm, or in the face of the potential for tighter stocks. But when looking at seasonal models where new information is added, such as lower yield expectations, it is typical to see a rally into the end of August and strength into the USDA report in the middle of September. So far, the corn market has been following this adjusted seasonal behavior. Soybeans have as well.”
“The funds are loaded on the long side in corn and soybeans and are in a position to take profits at any time. The farmer wants to see where this goes before selling, but the door to exit is only so big if the alarm is pulled. Nothing is certain in markets. But an adjusted seasonal model incorporating the ‘new’ information around the pivotal 10% stocks-to-use level in corn shows a risk of late-September pressure before more sustainable demand-driven strength develops as we progress through harvest.”
— Matthew Pot, founder, Grain Perspectives Inc.
ACTION: Market like a dog at the dog park: “Don’t let it go all at once.” Make small marks on opportunities as they come.
Naomi Blohm, Total Farm Marketing
Heading into a three-day holiday weekend, the biggest question on traders’ minds is if the recent rally can continue for grains? Or will we see position squaring and profit taking ahead of the holiday weekend? So far, corn and soybeanprices have been able to climb a very steep uptrend, supported by the five-day moving average. If that support line fails, it may trigger a short-term wash of technical selling. Here are four items to monitor in the coming trading days and weeks:
1. Weather. Hot and dry weather continues to grip much of the Midwest. We are in the final window of the critical pod-filling window for soybean production. Will high temperatures zap yield potential for soybeans? There is also chatter of “sudden death” in some portions of the Midwest.
2. WASDE report. USDA’s Sept. 11 report could throw bullish or bearish surprises at us in terms of yield, production and demand.
3. The funds. They are estimated to be near record long in both corn and soybean futures. Will they dig their heels in and maintain that long position into year-end? Or will something spook them to the point where they bail on those long positions, ultimately sending prices lower?
4. Chinese sales. From export sales to China and the Sept. 24 visit by Chinese President Xi Jinping to the United States, there is much at stake between these two global trading powerhouses.
— Naomi Blohm, senior market adviser, Total Farm Marketing
ACTION: Watch to see if the funds dig in their heels on the current long position or get spooked and bail.
Matt Wiegand, FuturesOne
“As we got into midweek with grain, trade has started to show some more signs of exhaustion with deeply overbought conditions holding. But accelerating to past fresh highs has become a little more challenging with the softer close Wednesday. Late heat has added more stress to the crop with some early-harvest yields reflecting the finish along with soybean conditions dipping on Monday. Overall demand has remained solid, especially with new-crop soybean action, and ethanol production runs remaining solid as we sort out the continued flow of biofuel news. Early-harvest pressure should continue to mount as harvest likely expands rapidly out of the holiday, and winter wheat will continue to bid for acres as early planting gets underway.”
“As we head towards the WASDE report next week, the main short-term focus will remain being sure harvest needs are squared away for space and cash flow reasons, along with watching the still solid carry to open up early opportunities to capture carry from on farm storage on strength. 2027 row crops have continued to hold the upper end of the range as well, with early opportunities to secure some sales with good margin out there. Short-term fuel prices remain elevated contraseasonally with the potential for short-term disruptions still out there. So making sure on-hand supplies are adequate into harvest are important as well.”
— Matt Weigand, risk management consultant, FuturesOne
ACTION: Make sure your harvest strategy addresses storage and cash flow needs.
David Widmar, Agricultural Economic Insights
“Throughout the 1960s and early 1970s, corn prices were frequently around $1 per bushel. After the ‘Russian Grain Robbery,’ U.S. corn prices hit $3.02 per bushel in 1974. At the time, $3 corn felt like a sign of good times on the farm.”
“Average annual corn prices would again top $3 per bushel in 1980 ($3.11) and 1983 ($3.21). But $3 corn didn’t occur in a vacuum, and its usefulness as a signal of good times became less meaningful over time. By 1983, the inflation-adjusted equivalent of 1974 corn was roughly $6 per bushel.”
“With corn futures crossing $5 per bushel in recent weeks, it’s important to recognize $5 isn’t the same as it was a few years ago. Don’t let $5 corn be your measuring stick for how good conditions are for your operation. Instead, keep it in perspective with your crop budgets.”
— David Widmar, ag economist, Agricultural Economic Insights
ACTION: Beware the “threshold illusion”; make sure plans for this year and 2027 align with budget realities.
Lauren Urbanczyk, Texas Hedge Risk Management
“Last week, we discussed creating a harvest logistics plan. It is still important to create that plan and know which bushels will move before, during and after harvest. Overcommunication will benefit you and your grain merchandiser. We also need to review current cash sales and look at re-ownership strategies through options. One strategy that we have been using frequently this week is buying December corn call spreads and selling short-dated December ’27 call spreads against them to make them very low cost. This works by re-owning December ’26 corn through long calls, but using the short-dated December ’27 call to achieve the same November 2026 expiration date. If your December 2027 call expires in the money, then you are getting started selling next year’s corn at $5.50 plus. This position carries risk through the short call and is intended as a dual-purpose re-ownership strategy for 2026 corn and a hedge for 2027 corn. As with any short-call position, there is unlimited risk.”
“On the cattle side, we are watching the $210 level in fats and $311.65 in feeders. We believe the market is overdone to the downside and expect the board to catch up to the cash market. However, if the support levels are taken out we could see another leg lower. Cattle hedgers should play defense if that cash convergence happens.”
- Lauren Urbanczyk, cofounder, Texas Hedge Risk Management
ACTION: Consider buying December corn call spreads and selling short-dated December ’27 call spreads against them to make them very low cost.