Home / Market Analysis / Setting futures goals

Setting futures goals

By Jon Scheve, Superior Feed Ingredients, LLC

Phase 1 of the China trade deal was signed, but few specifics have been provided.

Corn

March corn futures have continued to trade at some point every day within a tight range of $3.85 to $3.90 for the last 24 trading sessions.

With corn carryout tighter than levels from the past 3 years, any additional exports or yield reductions in upcoming reports could provide corn with some upside potential.

 

Beans

March beans have been more volatile over the last 24 trading sessions, trading between $9.20 and $9.60.

This year’s carryout is the second highest in the last decade. Without additional exports, upside price potential may be limited, especially if South America has good growing conditions.

 

Market action – Selling beans and setting basis

 

Bean futures

The last time I sold bean futures was on 2/9/18 for the last of my 2018 production at $10.07, which was a couple months before the trade war started. The chart below shows, in the 10 years prior to the trade war, farmers had the opportunity to sell bean futures for above $10 at some point during every marketing year.

 

However, once the trade war started, bean prices dropped to the mid $8s within several months. Like many farmers, I waited for prices to rebound back to $10 before selling beans again.

Back in June, the USDA acreage report showed 10 million fewer bean acres were planted in 2019 than were initially planned for. This suggested higher price potential should the trade war end soon. However, the trade war continued, and despite Phase One being signed, there continues to be a lot of uncertainty on how demand will ultimately be affected or when.

So even though the market seemed to be moving in a positive direction, I was concerned $10 beans would continue to be unattainable for a while. That’s why I choose to reduce my risk and price some of my 2019 bean production. On Dec. 30 I sold 50% of my 2019 bean production using $9.50 March futures. Then on Jan. 2 I sold another 25% at $9.60. The chart below illustrates where I set my average futures price for the 2019 crop compared to where March futures prices have been for over a year.

 

So far, my price has been at the upper end of this year’s market range but I still have 25% of my production to sell.

 

Bean basis

One positive this year, coming out of harvest, has been the bean basis. Last month I made a goal to set basis at a level almost 30 cents better than what I sold last year and what I was currently seeing in the market at that time. If realized, it would have been the best price available on my farm Since 2015. Last week -40 against March futures, picked up on my farm near Beatrice, Neb., became available and I sold 100% of my 2019 production.

 

While bean basis prices could still improve, it’s hard to pass up these levels. So, I’m pleased I managed to set my basis 30 cents better than I planned for during the summer. Plus, this good basis value helps offset the consistent underwhelming futures values under $10.

 

Please email jon@superiorfeed.com with any questions or to learn more. Jon grew up raising corn and soybeans on a farm near Beatrice, NE. Upon graduation from The University of Nebraska in Lincoln, he became a grain merchandiser and has been trading corn, soybeans and other grains for the last 18 years, building relationships with end-users in the process. After successfully marketing his father’s grain and getting his MBA, 10 years ago he started helping farmer clients market their grain based upon his principals of farmer education, reducing risk, understanding storage potential and using basis strategy to maximize individual farm operation profits. A big believer in farmer education of futures trading, Jon writes a weekly commentary to farmers interested in learning more and growing their farm operations.

Trading of futures, options, swaps and other derivatives is risky and is not suitable for all persons. All of these investment products are leveraged, and you can lose more than your initial deposit. Each investment product is offered only to and from jurisdictions where solicitation and sale are lawful, and in accordance with applicable laws and regulations in such jurisdiction. The information provided here should not be relied upon as a substitute for independent research before making your investment decisions. Superior Feed Ingredients, LLC is merely providing this information for your general information and the information does not take into account any particular individual’s investment objectives, financial situation, or needs. All investors should obtain advice based on their unique situation before making any investment decision. The contents of this communication and any attachments are for informational purposes only and under no circumstances should they be construed as an offer to buy or sell, or a solicitation to buy or sell any future, option, swap or other derivative. The sources for the information and any opinions in this communication are believed to be reliable, but Superior Feed Ingredients, LLC does not warrant or guarantee the accuracy of such information or opinions. Superior Feed Ingredients, LLC and its principals and employees may take positions different from any positions described in this communication. Past results are not necessarily indicative of future results.

Check Also

Two trade deals and a price drop

By Todd Hubbs, Department of Agricultural and Consumer Economics, University of Illinois The signing of …

Leave a Reply

Your email address will not be published. Required fields are marked *