TOP FARMER WEEKLY PERSPECTIVE 4/1/2022 BY BRYAN DOHERTY

Keep an eye on 2023

December 2023 corn futures rallied to over $6 and November 2023 soybeans are holding above $13, both historically high prices. The old saying is that bull markets have long tails. The real interpretation is that high prices cure high prices. The same is true when prices are low. Low prices cure low prices. Currently, there is talk of world food shortages, inflation, tight supplies, and the need for must-have crops. Futures prices for 2023 are building these variables into price. The market is signaling a need for more production.

Should you be selling for next year? The short answer is perhaps not. The trend is higher and, despite good value, too many unknowns could mean prices will continue to move upward. The long answer is that prices are at a level that shouldn’t be ignored. Selling early, despite not knowing what it will cost to farm, should lead to some action on your part. Fertilizer is at record prices and concern of shortages is legitimate. Yet, the market has a year to figure this out. High prices for fertilizer will likely lead to innovation and creative thinking to produce more.  When selling, you never know what tomorrow will bring, let alone a year from now. The point is that selling is always a risk. Markets and prices change constantly. Another saying is that you hope your first sales are your worst sales. If you sell too soon and you sell more later at a higher price, you are increasing the value of all sales. If you sell and prices drop, those first sales act as a pully on sales at lower levels, helping to pull the average higher. The point is that prices are at a level for next year that should create action, whether that is just keeping an eye on it, making small incremental sales, using futures, or developing some type of option strategy. It is time to do something.

World production of grains and oilseeds, now for the fourth year, have basically flatlined. Weather has been challenging world-wide. Still, you plant, expecting to do all you can to produce the best crop possible. So does everyone else. Improved genetics, tillage practices, equipment, and farmer knowledge increase the odds of greater yield and production. Early sales at historically high prices reward this view.

Despite all the chatter the markets are dealing with every day, the macro picture favors increased production and likely lower prices. Now is the time to strategize. Have serious conversations with those in your risk management circle who can help you prepare for 2023.

Before entering into any position, talk to your advisor. Review opportunities and risks presented by these prices, and what they may mean to your operation.

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

Futures trading is not for everyone. The risk of loss in trading is substantial. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Past performance is not necessarily indicative of future results.

Author

Bryan Doherty