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Veteran Contributor
Posts: 71
Registered: ‎04-28-2011
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Accepted Solution

Stiff upper lip!

Each year as harvest approaches, traders will gauge S&D numbers and discover an appropriate price for corn and soybeans. It feels as if we are entering the harvest doldrums, although this year is set up much differently. The great unknown (China and trade) offers an incredible potential to tighten the balance sheets next year (from the current 785 mil. bu. soybean carryout). At some point in time, could we expect an agreement to be reached? What would that agreement do immediately to the market? Farmers don't need another reason to be bullish, but the unknown should keep us intrigued at least. It seems to me that the risk/reward of $8 soybeans does not favor the sellers. Prices could always go a bit lower and sometimes sales are unavoidable. Here is my advice... Look to own CZ'19 calls now while they are historically cheap. This can either protect a sale (corn or soybeans) you plan to make in the future or act as re-ownership of a sale you do not like. For the sake of reference CZ'19 ATM calls are $.28 vs. the '14-'17 average of $.35 with 450 days to expiration. CZ'19 calls that are 50 cents above the market are just $.15 vs the '14-'17 average of $.21. The calls could lose a few cents if the markets continue to grind lower, but the risk with owning them from now until June is low.
Senior Advisor
Posts: 1,159
Registered: ‎05-20-2010
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Re: Stiff upper lip!

I like the strategy but really doubt there is much reason to do it before October.

Plus, if you do it, you really should sell the carry on the old bushels, or a sell a nearby call on the old.

Advisor
Posts: 1,076
Registered: ‎05-13-2010
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Re: Stiff upper lip!

Nice Justin. Unlike Kenny I would consider the plan next week. We have the “implode the free DP bottom “coming up next week. It is one of the most consistent cycle bottoms that has happen the last four year. It is just as consistent as the rally through the Insurance pricing period of October.
Frequent Contributor
Posts: 26
Registered: ‎09-26-2013
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Re: Stiff upper lip!

Farmers only need to protect the downside, get in touch with TJ Spohr... he will help you with a marketing strategy... 

Veteran Contributor
Posts: 71
Registered: ‎04-28-2011
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Re: Stiff upper lip!

There is always risk to the downside, that is true. In my opinion the downside is very limited in corn and the unknown regarding China gives soybeans upside potential that we otherwise would not have.

 

With that in mind, use some patience, and display a stiff upper lip. Take some pride in what you produce and try not to sell too much at the lowest price in a decade. 

 

How do you like my marketing strategy?

Senior Advisor
Posts: 1,159
Registered: ‎05-20-2010
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Re: Stiff upper lip!

Like I said, I like it...probably rather than a stiff upper lip, since your strategy requires no pain really, maybe just some patience and you'll be fine. We discussed the upside in corn at the meeting. China needs a few bil bu a year for ethanol, where they going to get it?

 

 

Advisor
Posts: 1,076
Registered: ‎05-13-2010
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Re: Stiff upper lip!

Back the truck up. I am as bullish for e 10 in China too but there are other sources they could fill it with. Brazil cranks out many gallons of sugar Cain ethanol. They could buy it from the us. Fact is many studies doubt they have enough water to produce that much ethanol.