Who said grain marketing was easy?

What happened…

The person who coined the phrase “keep the faith” must have been a farmer. With prices continuing to hover at or below the cost of production for months on end, the emotional toll begins to mount. This may be particularly true so far in 2024 as prices have tried to rally several times and then quickly failed. The most recent price recovery for corn, soybeans, and wheat occurred over the last several weeks when prices reached their highest level in multiple months, only to quickly retreat. Yet, even these higher price levels were not what many farmers would consider a level that made for easy sale decisions and certainly not what might be termed no-brainers.

Why this is important…

Rarely does a market offer easy decisions for buyers and sellers unless there is a dramatic change in the underlying commodity. Shocks to supply or unexpected changes in demand are needed to move a market well beyond the general cost of production, which is where most commodity prices hover. When prices do offer an opportunity, it can be short-lived. The challenge is that one week the market looks strong, and the next week prices are imploding. In June 2023, December corn futures rallied from near $5 to over $6 on a hot and dry forecast in a matter of several weeks, only to retreat to sub-$5 levels within days, as the outlook changed to cooler and wetter.

In recent years, foreign competition has made supplies more readily available throughout the year. The investment community recognizes this and might quickly exit long positions (buys) and establish a new short position. This can pressure prices at a time when uncertainty from the producer’s perspective still exists. The larger bet from investors is that farmers and weather will come through in the end. Unfortunately, by the time a farmer has confidence in his crop, prices may have already dropped.

Farmers tend to worry about their production capabilities perhaps more so than outsiders looking in. This is understandable. As a farmer, it is helpful to understand that the marketplace has a high confidence level in your capabilities, as well as those who support you, such as agronomists, machinery manufacturers, seed developers, and others. Cumulatively, there is a strong history of farmers producing very good crops almost every year. Yet, the world is dynamic and ever changing. Weather is still the most dominant factor affecting crop production.

Every farmer knows that not-so-great feeling when a sale is made and prices continue to rally.

What can you do about it?

It is important to set targets and execute when the market reaches these pre-planned points. Consider purchasing call options as sales occur. The calls cover your cash sales, should prices work higher. More importantly, they provide a confidence factor to sell more when higher targets are triggered. Also consider purchasing puts to cover bushels you don’t intend to make cash sales on. These could be bushels you intend to store or perhaps you just want to be careful to not over commit on cash sales before you know for sure how much crop there will be.

Ultimately, you’re building a balanced approach. Should prices skyrocket or prices fall, you have created an environment where you are managing volatility rather than allowing volatility to manage you. You can be proactive rather than reactive. Marketing is not easy. Like anything in life, it takes serious dedication and work. Still, there are no guarantees. We all probably know people who, over time, seem to succeed at most anything they do. It is likely they are dedicated to a process that seemingly proves successful over time.

Editor's Note: If you have any questions on this Perspective, feel free to contact Bryan Doherty at Total Farm Marketing: 800-334-9779.

Disclaimer: The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Individuals acting on this information are responsible for their own actions. Commodity trading may not be suitable for all recipients of this report. Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Examples of seasonal price moves or extreme market conditions are not meant to imply that such moves or conditions are common occurrences or likely to occur. Futures prices have already factored in the seasonal aspects of supply and demand. No representation is being made that scenario planning, strategy or discipline will guarantee success or profits. Any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to Total Farm Marketing. Total Farm Marketing and TFM refer to Stewart-Peterson Group Inc., Stewart-Peterson Inc., and SP Risk Services LLC. Stewart-Peterson Group Inc. is registered with the Commodity Futures Trading Commission (CFTC) as an introducing broker and is a member of National Futures Association. SP Risk Services, LLC is an insurance agency and an equal opportunity provider. Stewart-Peterson Inc. is a publishing company. A customer may have relationships with all three companies. SP Risk Services LLC and Stewart-Peterson Inc. are wholly owned by Stewart-Peterson Group Inc. unless otherwise noted, services referenced are services of Stewart-Peterson Group Inc. Presented for solicitation.

About the Author: With the wisdom of 30 years at Total Farm Marketing and a following across the Grain Belt, Bryan Doherty is deeply passionate about his clients, their success, and long-term, fruitful relationships. As a senior market advisor and vice president of brokerage solutions, Doherty lives and breathes farm marketing. He has an in-depth understanding of the tools and markets, listens, and communicates with intent and clarity to ensure clients are comfortable with the decisions.