This year has been nothing short of emotional. Between floodwaters destroying fields and homes, to tornadoes decimating everything in their paths, to excessive rains demolishing farmers’ ability to plant, it’s been a tough year.
But, farmers still have more decisions to make, and it’s hard to leave emotions out of the process. With old crop still in many bins, and even some new crop, farmers need to be on top of their marketing plans.
“Disasters create opportunities for multiple seasons,” Mike North, Commodity Risk Management Group, told U.S. Farm Report Host, Tyne Morgan. “In the midst of disasters, we find the best opportunities for that year and the year after.”
North recommends that you work with your broker or make a plan on your own to take advantage of any price spikes throughout this tough season.
“You need to be in a place to make sales,” he adds. “Have options, puts, sales with call option strategies.”
Determine your target “low” price and set price protection programs in motion.
“We’ll come up with an idea that will lock in, say, $7.80 an acre at $7 per acre in cost—go ahead and lock-in on the acres you need,” says Bill Biedermann, of AgMarket.net. “Right now, you’ve gotta lay the floor and see how high it goes.”
Farmers still have a long way to go before the season is over, and with it will come price volatility. Traders saw that this week when corn prices, surprisingly, dropped after Smithfield made a half-million-ton corn purchase from Brazil.
Now, farmers and traders have months before they will see how harvest acres yield.
“The weather market is far from over,” Biedermann says. “Yield will be difficult to decipher. We estimate lower yields as parts of [planted] fields won’t be harvestable. And there is the land that sat in cold, wet conditions longer than any year on record. We’re nowhere close to a 176-bu. national average yield; I think we could see a yield equivalent of a 1995 or 1993 season, a 10% or 18% yield loss. If that comes true, this year will go down in history as a catastrophic failure.”
Traders advise farmers to keep a close eye on crop progress reports to get an idea of conditions. The further the industry gets into summer, the more traders and farmers will know what’s going on in terms of crop health and yield potential.