February Looms Large

What’s Happened…

As February approaches, the corn, wheat, and soybean markets will be on edge. South American weather will be the dominant factor over the next 30 to 60 days, providing price direction for row crops. Also important to note is the spring insurance price levels that will be set with the average price of December corn and November soybean futures, determining the level of coverage available for the 2026 crops. 

Why this is Important…

Large world crops in recent years have kept grain prices generally suppressed. In January, the WASDE report (World Agriculture Supply and Demand Estimates) added extra supply, which sent a signal to end users to buy only as needed, otherwise known as just-in-time inventory. Speculators were also reminded that big supplies are on the horizon. Though end users have the luxury of buying as needed, that mindset could pivot quickly if weather developments in the Southern Hemisphere are less than ideal for crop production. World demand has responded to low prices and is on the rise. The need for continuous large crops is necessary. With the January report factored into prices, end users should now be more aggressive in buying long term needs, especially with prices at or below the cost of production for row crop farmers. Much lower prices in the near-term horizon (the next three to six months) are not likely.  

Trying to out-guess both the Northern and Southern Hemisphere crop production could be a tall task. Weather conditions will be the dominant factor determining supply and, therefore, prices. While row crop prices have remained suppressed, other commodities have skyrocketed in recent months and years. Most recently, the cattle and metal markets have reflected record volatility and high prices. If managed money sniffs the potential for cheap grains to move higher, a flip from short to long positions is likely and could occur very quickly. 

Crop insurance price levels will be established in February. This will be important for farmers to plan for the year ahead, knowing what type of flooring mechanism may be available to them through insurance products. This author will continue to suggest that insurance is just that, to insure against loss. Marketing will still be paramount to a successful business plan. 

What can you do about it?

If prices were to rally on weather concerns in the Southern Hemisphere over the next 30 to 60 days, the opportunity to sell into this rally with both old and new crops becomes critical. Yet, what can happen when a market does rally is that sales are made and then either one of two events occurs: prices tip over or they accelerate higher. If prices accelerate higher, you may regret earlier sales, and when you should be adding to sales, you may not pull the trigger. On the other hand, price rallies tend to die quickly. You may not have sold enough. It can be a stressful conundrum.  

The key is to sell responsibly into the rally yet be positioned so that if prices move higher, so you can take advantage of this as well. This implies creating a balanced marketing approach. This will come through strategic planning. As stated in previous articles, marketing never takes a day off. A time is quickly approaching where price volatility could rapidly rise. Planning and preparing for different price scenarios are a critical step in managing price volatility.   

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, a strong 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