Another day lower in grain markets. Traders and producers alike are waiting and hoping we are nearing a bottom in prices. With the exception of Hurricane Harvey, a majority of the US growing regions are enjoying benign weather to help crop development. There is some concern about the lack of heat to help the crops finish maturing in the coming weeks. However, the market will continue to trade USDA yields until they are proven wrong, which is not likely to happen for more than a month. A bear market, such as the one we seem to be in, tends to be slow to alter course.
Consider this… Recently, prices have been trending lower, with little sign of improvement. The funds have continued to sell commodities with their estimated position thought to be net short. Looking at charts, it also seems this market is thin, oversold and due for some kind of bounce. The big question is when and how much. If you have old crop grain left to sell, consider taking advantage any price strength. With new crop, there is a case to be made for being patient to see what yields truly develop as we get further into harvest across a broader production area. At the same time however, any strength in new crop should not be ignored either. One option would be a minimum price contract, which would set the cash price for your grain but still keep you open to upside. With this contract, be sure to manage the call and put in a target to exit the option.
Don’t keep wondering… ASK A MERCHANDISER!
Is it better to use a minimum price contract or cash plus at these low prices?
The best route to take will depend on your personal market bias. A minimum price contract will be best suited to the producer who might need cash now, but believes we are due for a significant futures rally. For the producer who feels the market is not going to move much in the foreseeable future, a cash plus contract might be best. One key with the cash plus contract is to pick an offer price that still makes sense in your marketing plan, and pay attention to which crop year you are working with on the firm offer. Also keep in mind with the cash plus, you need to hold bushels off the market until you know for sure if the offer will fill.
Aaron D. Ulland
Kasson: 507-634-7545 ext 7
This Material has been prepared by a sales or trading employee or agent of CHS and should be considered a solicitation. The information contained in this presentation is taken from sources which we believe to be reliable, but is not guaranteed by us as to accuracy or completeness and is sent to you for information purposes only. There is a risk of loss when trading commodity futures and options. CHS bases its recommendations solely on the judgment of CHS personnel.