TFM Perspective 7-19-2024

 

It’s all About Weather

 

 

What’s Happened….

Three major reports are behind the grain markets. The Quarterly Stocks and Acreage reports released on June 28, and July WASDE (World Agriculture Supply and Demand Estimates) out July 12. The Quarterly Stocks and Acreage reports were both considered negative for corn and soybeans. The July WASDE had a somewhat favorable tone for corn; negative tone for soybeans and wheat. All are old news. The market will now turn its attention to weather. Weather is the variable that can affect supply more than anything else and is the most dominant factor in ultimately determining price.

 

Why this is important…..

By early July, the market pays key attention to forecasts for mid-summer’s temperatures and rainfall. This year, most of the forecasts have been conducive for crop production. The most recent several 6 to 10 day outlooks appear especially favorable. The Midwest is expected to receive normal rainfall and average to below normal temperatures. For corn pollination, there couldn’t be a better outlook. Yet, the corn and soybean crops are not made solely on July’s weather. Timely rains must occur in late July and August to fill kernels and pods.

 

In the very short term, new contract low prices have been established, likely due to favorable weather forecasts. The signal to end users, at least for now, is to buy only as needed.

 

What can you do about it?

If you’re a buyer, continue to be patient and buy as needed in the near term. Prices are always dynamic and can move for no apparent reason. Be prepared to change gears quickly if necessary. Prices are trading at their lowest level in four years and below the cost of production for many producers. The bottom line is that the market is offering great value for buyers. At some point, not acting could be costly. If the market signals a low may be close, then consider becoming a more aggressive buyer.

 

From the producer’s perspective, in a low-price year such as the one currently facing farmers, the idea of selling cash at or below the cost of production is challenging. However, hedging with futures or purchasing puts or fences (buying a put and selling a call) may have merit. These strategies can protect prices and do not require delivery. Most contracts are viable, meaning they have enough open interest and volume to be of use. There are elements of risk and cost that need to be understood before entering any position. Have discussions regarding risk and expenses with your advisor before entering a position.

 

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 30 years at Total Farm Marketing and a 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 tools and markets, listens, and communicates with intent and clarity to ensure clients are comfortable with the 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

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