The market has rallied and we have made some new crop sales…….now what?
The recent rally in the soybean market has pushed the price to levels most thought were not attainable just weeks ago. The latter half of April provided the market with some cause for concern regarding the size of the South American soybean crop as excess rains fell across Argentina, hampering harvest efforts and leaving some maturing soybeans standing in water. At this point I’m not sure about the magnitude of the size of losses, but remember that Argentina and Brazil were on pace for another record crop of soybeans.
We saw funds covering their short positions that they have had in the market for months (due to the large and seemingly growing-by-the-day South American crop), and actually continue to buy to the point that they have reversed their position are now long nearly 130,000 contracts as of Friday, April 22nd.
The push in futures prices has also brought waves of producer selling as cash prices have escalated quickly through price targets and desired selling levels. It escalated so quickly that many producers are pondering the question if they have sold too much, too early, and some are unsure of what to do next……I like to remind producers that they have a cheap put option already purchased as a component of their crop insurance.
This year’s prices for Crop Revenue coverage that were set back in the month of Feb are:
• $3.86 on Corn (Today Dec corn = $3.95)
• $8.85 for Soybeans (Today Nov beans = $10.09)
• $5.12 on Spring Wheat (Today Sept Mpls = $5.50)
With those numbers, there is substantial risk on the table with soybeans as your safety net is around $7.08, if you raise an APH yield and have insured at the 80% coverage level. Nearly $3/bu below today’s market price! What happens to producer revenue if the prices fall back toward spring levels at harvest and we have not protected any of this rally? We can help manage that risk with cash sales, HTA’s for NC delivery, or by doing Min Price contracts to set a price floor and still leave upside potential open on the remainder of the crop.
Don’t dwell on the risk you took off the table on your initial new crop sales, stay focused on managing all your risk as we venture through the ups and downs of the growing season. What do you have in your marketing plan for when your sales objectives get met or exceeded?
Visit with any of the Wheat Grower Grain Marketing Specialists for more information and insight into managing risk when opportunities are given to us!