It’s All About Harvest

What’s Happened…

For the better part of three weeks, corn futures prices consolidated between $5.24 and $5.49-3/4. This, after a strong gain from an August low of $4.57-1/2. A sharp price rally started after yield reductions for both corn and soybeans were noted on the August 12 WASDE report. Shortly after, private yield tours suggested even lower yield for corn. Other outside influences such as a sharp rally in wheat and energy prices, drought in Europe, and escalation in the Ukraine/Russia war added additional bullishness. Driven by heavy Chinese purchasing and rising corn and wheat markets, soybean futures climbed to new contract highs. Managed money went on the offense, aggressively buying to the point of setting new yearly and, in some cases, historical highs for the number of net long positions.

Why this is Important…

With corn and soybean prices stalling in a relatively tight trading range, both bulls and bears can argue that a breakout is coming. The bullish argument will need more conviction, as harvest pressure will likely cap prices. The old saying is “the bull needs to be fed.” Will harvest results support the bullish expectations (small crops get smaller), or have all the supportive news events been factored in? If harvest results mirror private tours, it is likely the USDA could lower yield in the months ahead. The current yield projection is 178.5 bpa, a drawdown from last year’s record 186.5. In 2024, the yield came in at 179.3, a new record. 

As of the crop progress report on September 15, only 8% of the corn crop has been harvested. This number is not high enough to draw correlation to a trend. However, in private conversations, there does appear to be consistent feedback that the crop is not as good as last year, or perhaps even 2024. Soybeans are similar with 6% harvested. The bottom line is that prices will likely make a move either higher or lower as harvest results become known. 

What can you do about it?

Take time to strategize for the potential move that lies ahead. The purpose of this Perspective is not to argue which way prices may go, but to prepare for price movement. There seems to be a growing bullish mindset. This may prove to be accurate, yet, what if the recent rally has already priced in bullish sentiment? To that end, ask yourself: what is my plan? Considerations are cash flow needs for the farm, storage capacity, carry charges and logistics. 

If there’s ever a time to be open to various marketing tools and strategies, it is now. Consider purchasing put options to establish a price floor if desiring to leave crop unpriced. If wanting to generate cash flow now, you can sell and retain ownership with call option strategies. Two terms to be reminded of: balance and seamless. Keep your marketing balanced for price directional moves, regardless of whether the market should move higher or lower. Seamless refers to making cash sales and retaining ownership at the same time. The current market environment suggests that selling and then planning to buy a dip is risky. The dip may not come. 

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 rather than 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