Factors to Follow in July/Strategies

[charliep]

What factors will you be following in July? Strategies?

Will note todays USDA crop acreage forecast and stocks report.

Surprise was slightly more corn acres than expected but need to realize that survey done ahead of flooding in Iowa (although I understand USDA did some adjustments later in the month).

Can give the positive and negative spin the on the above.

Positive - The acreage change is only 1.5 % of total (also subject to at least some speculation about impact flooding). A 2 bu/acre change in corn yields as a result of July weather would have similar impact on US corn production.

Negative - I keep looking at long term charts/current $8/bu futures and recognize the fact there is a lot of weather built into these markets. If acreage is accurate and weather in July cooperates to push yields back into the mid 150/bu range, there is likely some downside to prices.

[Kodiak]

Its relatively easy to follow the crop conditions and weather forecasts through-out the growing season. Everyone can and does speculate on the supplies that will be available, and we'll get a pretty good picture by mid fall what that actually is.

Demand is a bit harder to guage. We won't know until after the fact if there is significant domestic demand declines from high grain prices even though there are some reliable indicators to watch - livestock numbers, ethanol production etc......

What is, in my view, hardest to assess is the export demand. With the $US at a low level, increased demand from developing countries where economic growth is happening (albeit some of it tied to a strong US economy), it is hard to know what kind of demand there might be off shore.

Then throw high transportation costs into the mix, and what do we have?

We are in uncharted waters, where traditional price relationships and demand forecasts are less and less reliable.

Being nimble is probably one of the more important marketing strategies. Being married to old views and old methods might not work in today's marketplace.

So Charlie - you asked the question! What's your answer?!?

[parsley]

1. One other factor..there are a lot of farmers who are nearing retiring, and some do not have the same kind of pressure to meet payments that younger farmers have, so some of them may hold grain back from the market in the fall, and will wait until the following June to rogue sell into potentially higher spot markets.

2. Protectionist words coming from the lips of Democrats....if they win..... ie Tarrifs? Opt out of NAFTA? (Both are bad news for Western Canada)

Parsley

[charliep]

Not much different than your thoughts.

Would have enough forward priced to have a significant amount of fall cash flow needs covered. If I had fall cash flow covered, likely comfortable doing nothing right now although being a risk adverse type (i.e. need to know your risk taking preference/ability), would likely do a bit more than necessary keeping one eye on my crop prospects. If I have done limited new crop pricing (again recognizing condition of my crop), then I would be stepping up to the plate and doing something. As an example, I would find selling $19 to $20/bu flaxseed off the combine quite okay for first third.

Don't know if I would spend the money but options strategies can work either for someone who has priced/buys calls on dips or buys puts on rallies - will be expensive.

Only other comment is too have a marketing plan including when you will pull the trigger. Realize all the angst about individual farmer crop production prospects but there has to be a point in everyones mind where they will pull the trigger for another portion. The idea is not to sell at the top of the market but to be profitable/able to say you have done a good job in marketing your crop over the whole crop year.

[SASKFARMER3]

Ill agree on the Marketing Strategy, We have Always done Peas in Fall, for locked in price to cover cash flow needs then Hold. Pattern has worked in last 20 years except two. Have seen in my travels lately that a lot of guys locked in Flax to early this year and Canola. Lots of guys.

[cottonpicken]

80% of all options expire worthless.

[FarmRanger]

"80% of all options expire worthless"
As they should.

You are paying a premium for someone else to assume the risk of a price swing. Like price insurance. More expensive than a hedge, but not as risky if the price move is against your position in the market.