Analyst sees opportunities now for new crop sales


Analyst sees opportunities now for new crop sales

A market analyst says with commodity prices trending higher since August, farmers are exploring earlier new crop sales.

Bryan Doherty with Total Farm Marketing by Stewart Peterson tells Brownfield the market can get its head above water once the basis is off, then farmers wait for a little more only to see the prices disappear.  Doherty says he is seeing decreased carry out, fund money pouring into commodities, and upward-trending markets with momentum driven by weather issues.  “You’ve got drier weather, in parts of Argentina in particular, and Brazil.  You’ve got the U.S. drought monitor map looking very menacing for this time of year.  Even thought it is only December, I think it needs to be respected.”

And yet, Doherty says corn is hovering around $4.20 but things can easily change.  “So I’d like to argue the first anywhere from 20-30 percent of the crop, you make those sales on value sales and you hope your worst sales are your first.  $4.20 might be a starting point on five or ten percent.  Just get them in the books, and if we move up, you want to average up on that first 33%.”

Doherty says $4.20 corn now is already about twenty cents better than the best point in the market was a year ago, so why not get started?  And, he says farmers have additional tools to help.  “If you need to or want to retain ownership of those bushels, talk to an advisor that can tell you how to do that and whether you want a fixed-risk or unlimited risk, all have their pros and cons but you have the ability if you think you’ve sold too soon to retain the ownership of it.”

As for soybeans, Doherty says $10.88 is a whale of a price, and it can have an impact on 2021 acreage planted.  “If you take the price of November soybeans divided by December corn, that ratio today is 2.59.  Typically when that ratio is 2.5 even 2.4, 2.45, somewhere in there, usually, it will start to pull bean acres from corn.

With current market prices and more acres likely, Doherty does not believe farmers should wait too long.  “So, we’ll likely see more bean acres and you’re closing in on $11.00 new crop.  The question might be reversed.  When do you NOT start to make sales.”

Doherty says recent history shows that when prices are done rallying, they drop fast, so averaging sales higher with some committed sales in a price comfort zone