TOP FARMER WEEKLY PERSPECTIVE 3/13/20 BY BRYAN DOHERTY

LOOKING FORWARD: WHAT IF?

As the world deals with how to move forward while combating and living with coronavirus, the markets reacted by sinking to multi-year low levels in both commodities and equities. The current environment is one in which, unless you are near the age of 100, you probably have not seen anything like this in your lifetime. In this emotionally-charged environment, even after a major loss in value, there is still a real possibility for commodity and equity prices to work lower and economies sink into recessions or depressions. Yet, what if, say 90 days from now, coronavirus is on its last legs and the world has returned to normalcy?

The marketplace is providing opportunities to own assets that are on sale. A drop of nearly 40% in the broad market index for equities is providing an excellent ownership, especially for younger investors who, for the last several years, may have been waiting for a price setback.  Corn prices have dropped well below the cost of production before the planting season has begun. Weather is still a critical element for Brazil’s second corn crop, as it is in its early growing stages. What if China buys, energy prices rebound, and weather is less than ideal? And what if there are downgrades to 2019’s crop that reflect lower quality and test weights? It’s easy to suggest what-ifs, yet these are important and critical questions when prices could be hovering near what would be contract lows in a normal season.

The old saying, “it’s usually darkest before dawn” may be applicable this year. A government stimulus package, eventual win over COVID-19, and trade agreements are all in place, or likely to be in place soon. Even the most bearish of traders will exit at some time. Now is when you should be asking the “What if” questions. For those who buy feed or fuel, consider buying now. If prices go lower, consider buying more. Commodity producers could consider buying calls now. If prices recover, consider selling at trigger points that you would normally execute. With re-ownership in place, you may be able to sell aggressively. Of course, before entering into any position, consider the impact on your operation and cash flow needs.

Although challenging in this environment, seek the bigger picture perspective and align yourself with the right tools and execution for success.

If you have questions or comments, contact Top Farmer at 1-800-TOP-FARMER extension 129. Ask for Bryan Doherty.

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

Lisa Heder