Bullish Grains: Suck It Up, Own it and Move On

I work by myself, which can be a disadvantage when you try to measure things.  For instance, on my farm there are many times I like to have the counsel of others to give me a different opinion.  It’s not always available mostly I soldier on.  Those things are always of a technical or agronomic nature.  On the other side of the coin, there are a plethora of opinions regarding pricing your crops.  In this agricultural risk management arena, there are never a shortage of people who are more than willing to tell you,” “I told you so.”

This past week, corn after making year to date highs, is now 8 cents from its year to date lows.  A friendly weather report drenched the market with bearishness.  Of course, you don’t have to go to far to hear the voices that told you to price more crop.  You don’t have to go to far for people tell you that the recent rally was a gift and that we all should have contracted more.  You don’t have to go too far to hear the guy who hits the top not only in the last couple weeks but also sometimes in the last couple years.  It is so ridiculous because the market is fluid and continuous.  Simply put, nobody knows the specifics of where market prices will be.

Getting there was pretty brutal today.  December corn fell $.15, November soybeans fell $.46 and Chicago wheat fell $.25.  Over the years I’ve seen all and more.  There is nothing quite like a -70 limit move in soybeans.  Of course there is nothing quite like a +70 limit move in soybeans.  Locked limit up or down had always the weirdest feeling, especially when you have your bins stuffed full of soybeans.  I’ve been there, alone with my secret, none hedged.

Needless to say, I try.  Risk management is the buzzword you hear everywhere regarding commodity marketing.  I do it myself.  My saying is risk management never grows old.  There have been guys who haven stolen that from me.  However, I’m sure I stole it many years ago from somebody else.   The world of hedging your risk has many facets.  Reaching up and grabbing the brass ring when prices are high is part of it.  Considering your options after the market goes against you is too.  Take it from me; I’ve seen almost everything when pricing grain.  I asked an older farmer once what was his pricing secret.  He turned and said, “Don’t get too greedy!”

That is what it is.  I don’t want to disparage hedging grain; I’ve got all kinds of friends and colleagues who are risk management specialists.  I never miss a DTN Daily Market Closing video. In a grain market that is disappointing we need every advantage we can get.  I try to immerse myself in market factors and make the best call I can make.

As I’ve said many times, risk management surrounding our grain pricing in Canada has two layers.  The value of our Canadian dollar has a huge effect on our cash prices.  For instance, as grains advanced over the last few weeks, the Canadian dollar has gained from a recent low of .72 cents on May 5th to .785 cents US today.  That six-cent rise over the last 6 weeks in the loonie effectively neutered the grain rally.  Now, it’s just painful.  It is such a risk management challenge for Canadian farmers.  Imagine if our American friends saw such a futures rally, but cash prices did very little?  Welcome to the Canadian price discovery.

I often get correspondence from readers.  Most of the correspondence is very supportive but usually includes the caveat that they don’t always agree with me.  However, they often say they appreciate hearing from a farmer’s perspective.  And yes, that is me.  Even though I’ve been schooled in all the nuances of agricultural economics and am a market student of Darin Newsom, I carry many of the psychological and emotional tendencies inherent with farmers marketing their grain.  To me and many other Ontario farmers, grain is more than a commodity.  It is something that we have a personal relationship with over a period of months.  Selling can be hard sometimes.  It can be an emotional experience.

So let me tell you something.  Grain futures markets are down hard right now, in fact, some people might think they can smell some burning embers.  However, markets are fluid, the trading will continue and so will your farm.  In the weeks ahead, you’ll likely hear about all the guys who contracted their grain at the highs.  It reminds me of the time in 2012 when corn reached $8.49.  How many guys sold then?  Me neither, I was waiting for $9.

There will be many marketing opportunities ahead.  Risk management never gets old.  You’ve heard it all before.  I hear you.  Tough marketing environments pass.  Sometimes, you just have to suck it up, own it and move on.