Special Market Update
Grain Market Commentary
Monday, March 19, 2018
By Greg Johnson, Executive Account Representative, The Andersons
May The Odds Be Ever In Your Favor
Although the odds did not work out for the star of the blockbuster movie “The Hunger Games,” more often than not you want to go with the strategy that has the greatest chance of paying off.
Historically, the highs in corn occur more often in the April/May/June/July period (53%) than the other 8 months combined (47%). So by selling in this 4 month window, you raise your odds dramatically of getting a higher price vs. other strategies.
In 2017 (once again) pricing a large percentage of your corn during the growing season (April through July) resulted in getting your corn priced at the highs of the year. ($3.90 December futures).Also once again, waiting until the fall (September through November resulted in the lowest price of the year ($3.49 December futures).
Not convinced? Let’s take a look at 4 other common strategies that producers used:
- Sell across the scale in the fall. In Champaign, you would have received $3.28 for selling your corn on October 1, 2017.
- Delayed price. Corn today in Champaign is worth $3.64. Subtracting DP charges would net you $3.37 ½.
- Basis contract. Putting corn on a basis contract vs. the July 2018 futures in the fall and pricing it today would net you $3.38.
- Sell the corn and buy an at-the-money call option. If you would have sold your corn on October 1, 2017 at $3.28 and bought a July 2018 call option the same day, you would have spent 26 ½ cents for the option (plus commission fees). Today, that call option is worth 25 ½ cents, meaning that you would have netted $3.27, 1 cent less than if you would have just sold the corn across the scale and done nothing else.
- Enroll in the Seasonal Daily Average Program. Selling corn ahead in the 4-month window that historically is the highest price would have netted you $3.62 cash ($3.90 December futures minus a 25 cent basis minus a 3 cent fee for enrolling in the program).
The deadline to enroll in our Seasonal Daily Averaging Program is less than a month away. The cost is minimal (3 cents per bushel), and the results have been superior. Talk to your Andersons account representative, and ask how you can enroll in the Seasonal Daily Average Program and put the odds in your favor.