VIDEO: Commodity Classic Day 1: Farmers warned against locking in futures prices

Sean Pratt is attending the 2018 Commodity Classic in Anaheim, California. The gathering of U.S. corn, soybean, wheat and sorghum growers is America’s largest farmer-led convention. Look for stories in upcoming issues of The Western Producer. In the meantime, here is a blog of some of the things he is hearing at the conference.

ANAHEIM, Ca — Day one of the 2018 Commodity Classic kicked off with a warning to growers seeking advice on marketing their grain.

Dave Fogel, ag risk management consultant with Advance Trading Inc., told them to disregard any expert professing to know where prices are heading.

He said there is a 100 percent chance they have no clue where prices are going.

That is why Fogel is not a big fan of locking in futures prices.

He prefers selling grain in the cash market when basis prices are good and using an underutilized grain marketing tool.

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“I like options. Options have worked so well for us over the years,” Fogel told delegates attending his session.

They protect farmers from any downside in the market and if there is upside in the market they can still participate by selling some of their other grain in the cash market.

Of course there is a cost for taking out options, but right now the cost is as low as it has been in about 12 years due to low price volatility in grain markets the last couple of years.

Jason Henderson, associate dean of agriculture at Purdue University, talked about some of the risks and opportunities facing growers in 2018.

The U.S. Federal Reserve wants to raise interest rates, which is bearish for agriculture because many farmers are carrying heavy debt loads.

Money is starting to move around, which means the days of low price volatility are probably coming to an end.

He said some of that money may move into agriculture, which will cause some bull runs in commodity prices.

“I’m not saying we’re going to see $7 corn. Don’t take it that far,” said Henderson.

He expects the strength in the U.S. and European Union economies to spill over into developing countries, which will also be good for agriculture.

Jim Mintert, professor of agriculture economics at Purdue University, said a monthly survey he conducts of growers shows people became far more optimistic about farming once Donald Trump was elected president.

That optimism tailed off shortly after the November 2016 election but farmers are generally way more optimistic than they were prior to Trump becoming president.

The survey shows farmers are still struggling, with 43 percent saying their operations are financially worse off than they were a year ago. But that is down from 80 percent in the summer of 2016.

Mintert strongly encouraged farmers to revisit their crop budgets on a quarterly if not monthly basis to plug in updated prices, costs and yield estimates to get a better idea of their break-even prices.

“If you’re not updating your financial plan throughout the year, you’re making a mistake,” he said.


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