TFM Perspective 12-23-2021


Don’t Forget to Unwrap Your Christmas Present

In the Midwest, a mild and drier fall has allowed for major fieldwork accomplishments. This has been a benefit, as farmers are well ahead of schedule in preparation of spring. At the same time, corn, soybeans, and wheat prices have made a recovery into the holiday season. Bottom line, you are busy! However, don’t forget to take a hard look at where the markets are and what this means to your operation financially. It is easy to get wrapped up into the hype of weather potential in South America, strong demand projections, and tight supplies. Yet, if the last 18 months have taught us anything, it’s that markets can change on a dime.

This month’s price recovery may be predicated more on concerns that parts of the Southern Hemisphere could be turning drier. Betting on adverse weather could be risky. It could be argued that tight world inventories and strong world demand are here to stay. That could be true. Or, if history proves to be true, high prices tend to cure high prices. The general point is that, when the price trend is up, the friendly argument is easy to make. It is also easy to expect it to continue. However, you could view this fall’s recovery as a gift. Prices are trading at their highest level in more than eight years, with corn futures now highest since June. Prices peaked in May. Keep in mind, this year’s corn yield at 177 bushels an acre is one of the highest in history.  If and when prices tip over, reasons for lower value will gain merit. This could happen quickly, as could a rapid price descent. Markets tend to move on perception. The bullish mindset can change quickly. That is how markets work.

So, in the end, don’t be afraid to sell rallies. By some accounts, the recovery in price has been a gift. You need to unwrap it! Use the marketing tools at your disposal to shift risk and manage opportunities. It may be a good time to lighten the load on cash holdings and price inventory.  If you want the ability to take advantage of more price rally, you can retain fixed risk re-ownership positions with option strategies. Create a balance between cash sales, re-ownership, and price floors. Be sure to understand your risks and opportunities before entering into any position.

Make it a great end of the year for 2021 and start for 2022.

As with any strategy, consider the risks and potential rewards before initiating any position. Seek out a trusted advisor to help you, and take control of the uncertainties.

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.


Bryan Doherty

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