Coming into March Like a Lion

Market down

The weather has March coming in like a lamb. In the grain markets, it's coming in like a lion. 

These first two months are ones that many of us in the grain market would like to forget, or at least not revisit any time soon. Since the first day of January, corn futures have lost between 28 and 30 cents. Soybean futures lost between 75 and 80 cents during the same time. 

As has been written and discussed many times, the reasons for this downturn are multi-faceted. A large South American crop becoming slightly larger; a strong U.S. dollar; anticipation of large corn and soybean acres in the U.S.; and, probably most problematic, the ongoing impacts of coronavirus. This last item, while unforeseen, should cause all of us to be more aware of the tenuous nature of a global economy. 

The real question should be: “what are we going to do about it?” A recent workshop I attended helped me put this question into context. The presentation was about forward selling and the benefits of starting early. Many of the people I have heard complain about the downturn since the beginning of the year are focused on the losses they have endured with their Old Crop. 

While the workshop advocated starting much earlier than most people are comfortable with, the speaker drove the point home by showcasing a pattern that develops with futures levels of both corn and soybeans. By taking a two to three-year advanced look, it becomes more obvious that uncertainty about the future crop sizes is priced in at a higher level than when the relative size of the crop is all but assured. 

This is especially true for crop years with relatively “normal” growing seasons, but even with the 2019 crop, the better opportunities to price over a longer period of time, was 18 to 24 months prior to Harvest, and then for a very short period of time about three months prior to harvest. 

Right now probably isn’t the best time to look at pricing your 2021 crop, but if and when we see a spike back up, it wouldn’t hurt to take a long, hard look at those levels and start pricing a small, perhaps very small, portion of your crop. Try it for a year or two and see if it starts to positively impact your bottom line. 

We are going to start advocating for people to forward contract even further out, as we continue to believe that the more successful marketers are those that actively price their crop prior to harvesting it. Contact your local Grain Marketing Advisor for more details.