It’s a dilemma every year: should a farmer sell off the combine or store the grain in the bin? The decision is a tough one every year, but analysts say the decision this year carries even more weight. Alan Brugler of Brugler Marketing and Brian Basting of Advance Trading talked about the harvest dilemma with U.S. Farm Report.
“For the most part, we're telling them to wait,” said Brugler. “We've got a little bit of an uptick on the on the charts here with the trend following systems are still bullish. basis is better than normal for this time of year. But this is not normally the strong time of the year, normally, it's going to be stronger as you go into December in January. So that's telling you, for the most part, don't sell new cash sales here. If you got forward contracts from last summer, we've got a lot of mid $4 plus, go ahead and deliver those, but let's put the rest of the stuff in the bin.”
Basting knows the decision to sell or store isn’t a “one size fits all model.” That’s why he thinks staying flexible is key this year.
“What I'd encourage a grower to think about is this: you want to get control of your 2019 crop,” he said. “By that we mean, we've had a nice rebound here following the stocks report, you want to put a floor underneath the market, however you want to leave yourself upside open, you want leave the upside and market open. So options would be one tool to consider, purchasing a put option to put a floor underneath the market, leave the upside open or if your basis is favorable, you can make a cash sale and purchase a call option. But flexibility is critical now with a crowd, you're basically just starting.
“I agree with Brian on the put option strategy,” said Brugler. “Or sometimes we advise selling 'come and get me calls’ up around $4.30 or $4.40.' You get paid to wait if it doesn't get there, and if it does get there, it kind of encourages you to make some cash sales at that point.
Watch the full Markets Now discussion below.