(This “From the Bullpen” column was originally published in the April 4 Pro Farmer weekly newsletter.)
USDA’s Prospective Planting and Quarterly Grain Stocks Reports offered up opportunities to manage new-crop risk as acreage and production unknowns linger. A 15¢ gain in November soybean futures on March 31 was precisely what was needed to negate the 40¢ mid-month drop, which accompanied a limit-down move in nearby contracts.
Meanwhile, corn futures were able to inch higher, with lower-than-expected March 1 stocks offsetting the higher than-expected acreage print.
With March behind us and planting efforts to pick up across the Corn Belt, the time has come to establish additional new-crop sales. On March 31, we advised hedgers to purchase $11.60 strike full-dated November soybean puts at a 60¢ cost to establish a net $11.00 floor on 40% of expected new-crop production. We also advised purchasing $4.80 strike full-dated December corn puts for 32¢ to establish a net $4.48 floor. This lends price protection on 50% of expected production, with the opportunity to capture upside on 40%.
We also advised cash sellers to advance another 20% of expected new-crop sales for both corn and soybeans, for a total of 30% sold on each.
Volatility is likely over the coming months, though these sales will provide peace of mind and the opportunity for greater margins.