Strategy Ideas for March 2019 USDA Reports

Preparing for USDA Reports on March 29th, Prospective Plantings and Quarterly Grain Stocks:

We want to insure profitable prices if possible before the high risk report day of March 29

We want to sell above Spring Insurance Price if possible, reducing deductible, Corn $4.00, Beans $9.55

We would like to lower our price risk as much as possible maintaining flexibility in our plan in case prices rise unexpectedly

Beans: We would recommend selling old crop on any rally, we are concerned longer term on futures and basis due to record supplies projected. Weather will have to be a real threat somewhere to sharply rally beans, or unexpected demand develops

If futures price or basis in not acceptable, consider July put options to at least put floor in.

New crop: We are sellers of November beans from 9.55-9.70 (most recent high) in either the cash or futures market depending on basis. We would not buy calls unless we see either a sharp break in price (at least 60 cents) or a close over 9.70 basis November

Corn: We feel the next 4 weeks could see some weather premium put in, so are buying "courage calls" now to make selling decisions easier. Buying short dated, July expiration December 4.10 calls for 10 cents or less makes sense to us, as we can then put sell orders in either in cash or futures at $4.10 and have our upside covered until late June. If prices rally sharply for any reason, we can 1) roll calls up to a higher strike, banking profit to be added to sales,2) sell the calls and add profit to sales, or 3) exercise calls to wipe out futures contract sales and sell cash then. The $4.10 strike is only an example, other strikes may be more applicable for your operation depending on price targets and expectations.

For old crop, we would do the same owning July calls now, and selling when price target is reached or basis is too good to pass up. These calls can be sold, rolled or exercised into long futures at any time you wish. IF a rally occurs in the next 4 weeks, we will have a lot of choices, and all of them good ones. The question is, is it worth it to YOU to have that as part of your plan, investing and risking10 cents or less to take the emotion out of selling when we hit a profit target price?

Make sure you call to go over the entire plan to be sure it fits what you want to do!