Weather Markets Looming Larger
What’s Happened…
Historically, the most impactful changes to row crop prices are changes to supply. Supply is most impacted by weather, which has a direct impact on crop size and, therefore, price. Weather is the one variable for crop production that farmers have the least ability to control. Now that spring is here, it is go–time for farmers. All bets are off. The theoretical view of production and prices can change in a heartbeat as the reality of real time weather and conditions take center stage.
Why this is Important…
Most producers farm with the understanding there is weather risk and its potential negative impact on crops. They also recognize that, in most years, weather will be adequate. History also shows that yield and production incrementally increase over time. Better equipment, tillage practices, genetics, and overall farmer practices have made for reliable harvest year-in and year-out, helping to absorb some production risks.
Yet, it is production uncertainty that creates price volatility, which in turn creates marketing opportunities. When prices move, they sometimes do so quickly or even violently. This can paralyze decision-making. Selling too much or too little too soon or too late can be financially devastating. Perceptions of crop size can vary significantly, and so can prices. There is little room for error.
What can you do about it?
Plan, plan, plan! For many, this first means taking steps to ensure revenue. This can be accomplished through crop insurance. Conversations with your insurance agent can help shore up this concern. Plan a balanced marketing approach. Create strategies that position you to take advantage of whichever way the market moves. Preplan potential price activity and how you will execute. This means comprehensive communication with your advisor and buyers. Farming is a profession which producers take seriously. Marketing should be treated the same. Spring is here and so is weather! Are you ready?
Find out what works for you…
Work with a professional to find the strategy or strategies that are best suited for your operation. Communication is important. Ask critical questions and garner a full comprehension of consequences and potential rewards before executing. The idea is to make good decisions for the operation and less emotionally–charged responses to market moves, which are always dynamic.
About the Author: With the wisdom of over 36 years at Total Farm Marketing and 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 markets and marketing tools, an excellent listener, and communicates with intent and clarity to ensure clients are comfortable with their decisions.
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.
Author
Bryan Doherty