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GRAIN TALK Marketing Edition Volume 10, No. 3 Feb. 2014
Providing Long Term Grain Marketing Solutions
Welcome to the 2014 Grain Talk Newsletter, Marketing Edition. In terms of grain marketing , 2014 is projected to be a challenge. It will be a time to buckle down and get back to the basics of grain marketing by understanding the cost of production, break even points, and working hand in hand with your grain marketing team. We at AgMark would like to offer our grain marketing insight in a streamlined, efficient fashion with our periodic Marketing Notes available to you via email or by visiting www.agmarkllc.com. To ensure that you receive Marketing Notes in a timely manner please contact by email at [email protected]. As always, we encourage you to contact anyone of our Marketing Team Members and personally visit about your specific marketing needs.
PROFIT MATRIX Making Profitable Decisions If you have ever wondered what crop insurance policy is right for you or what price you should sell your grain, then sit down with us and see for yourself the power of the Profit Matrix. The Profit Matrix software combines your input costs, crop insurance coverage and grain sales to show you your net profitability over multiple scenarios. You can see how changing your crop insurance policy or selling grain at a certain price will affect your operation.
The Profit Matrix software is just one of the innovative tools that comes from AgMark’s partnering with Diversified Crop Insurance Services. Having access to this tool is a huge advantage in today’s business environment. Seeing the net results before you deploy a strategy puts you in control while reducing risk, increasing revenue, and protecting equity in your operation. See for yourself where your operation’s green (profits) and yellow’s (losses) meet. The right crop insurance program combined with a marketing plan is critical to the profitability of your operation. The AgMark team of local professionals has the resources to help you and your farm operation succeed.
AgMark Marketing Team (888) 848-9979 Origination Mark Hafliger Nick Hansen Carrie Williams Eric Hilt David Pfizenmaier Tatum Couture
Crop Insurance Tammy Forshee Scott Ahlvers Scott Krier
You should know…... Tatum Couture Grain Originator Tatum is the newest member of the grain marketing team. She has 6 years of experience in the grain and feed industry and has been with AgMark since September. Tatum is working in the Beloit office and is available to help you with your grain marketing needs.
Rex Thomas Truck Traffic Manager When you need trucks to haul grain from your field or from your bin, Rex is available to work out the logistics for you. Rex came from a family farm at Mankato. He also has 16 years experience trucking grain & livestock allowing him the insight to know just what you need when you need it. Rex is working in the Beloit office and is available to help with your trucking needs.
February 2014 Marketing Recommendations Markets have three directions – up/down/sideways. Technically and fundamentally the grain markets have every reason to go sideways and appear to be trying to put in bottoms or at least the momentum of the drop is waning. We have, or are approaching the cost of production in grains and the speculator has shifted his interest to the stock market. Range bound markets offer less opportunity than the volatility-laden markets of the last 4 years. Capturing price targets during these times is best achieved by having open sell orders with us above the current market and ALSO consider using time constraints. Again, a time and price methodology keeps you from holding grain too long. OLD CROP ’13 WHEAT: Suggest scale up selling targets using Agmark Pricing Targets (APT’s). March wheat APT’s are running about 20c, so 20 or 40c targets make sense. March wheat has lost $3.26 per bushel in a little over a year. Would suggest the downside for March futures is somewhere in the mid-5.00’s as it’s deeply oversold. NEW CROP ’14 WHEAT: For those of you that have already sold some new crop wheat above 7.00, you can now cover with calls EXTREMELY cheap. 6.50 July calls trading around 21, 7.00 calls trading for around 10c. Scale up selling of new crop is suggested using 20 cent intervals. Technically the trend is down; world carryout is adequate; and all of this is already known to market participants. OLD CROP ’13 CORN/MILO: SELL YOUR CORN AND MILO AND RE-OWN WITH 20c OTM July calls for 16c. If not interested in that, at least recognize that basis on milo is historically very strong, so we suggest doing a basis contract on elevator or farm bushels dependent upon your futures objectives and cash flow needs. Reminder that setting basis stops all storage charges. For those with Price Later (PL) contracts at Concordia elevators, you can convert your PL’s to basis contracts easily as well. Suggest a price and time method of setting futures on this year’s crop. (i.e. so much every month or “x” price, whichever happens first.) LIVESTOCK PRODUCERS: Use this price weakness to purchase extended supplies NOW! At the very least buy OTM call options Mar through Sept and have orders in to roll them down. KEEP IN MIND, THERE ARE A LOT OF BEARISH FORECASTS FLOATING AROUND THE MARKETPLACE. THE BIG SURPRISE IS THE ONE YOU’VE NOT THOUGHT OF…..BUYING OTM OPTIONS ARE CHEAP INSURANCE. The ethanol industry and livestock folks are making money again and that should help regain some demand. NEW CROP ‘14 CORN/MILO: Selling new crop corn and milo using minimum price contracts is almost ALWAYS recommended, but we encourage you to look at constructing them with calls instead of puts this year as the volatility is low and they are relatively cheap. Selling new crop milo in the 4.25 range coupled with a Dec 30c OTM call would leave you with a base price of 4.00 cash and you’d still have unlimited futures upside UNTIL THE END OF NOVEMBER. Put users consider the Dec 2014 4.50 puts that are trading for 30c. APT’s that measure volatility show that sales/purchase targets should be set roughly 26c apart for scale-up sellers or those wanting to trail a stop. Technical trend is still LOWER. OLD CROP ’13 SOYBEANS: 100% sold. Current futures structure is still inverted (nearby March at 12.93 and July at 12.59, this suggests making cash sales). Once beans are priced, suggest buying ATM July 2014 calls AND MOST IMPORTANTLY, PLACE A PROFIT TAKING OFFER TO SELL THE CALL THE DAY YOU BUY IT, or at least have a plan on how long you’re going to hold it. Another option is to consider basis contracts in order to stop storage charges/ service fees. NEW CROP ’14 SOYBEANS: If we grow a good bean crop nationally this year, new crop beans could be below 9.00! Right now the APT’s are suggesting targets of 45cts apart. Dryland producers are encouraged to use min price contracts once a good ROI can be locked in. Right now, 11.00 puts for 2014 beans are 54c per bushel, 10.00 puts running around 20c. If you buy those puts, leave an order on how they are to be managed. Strongly suggest open-orders to roll them up in 1.00 strikes for .25 or less. If you sell forward contracts now cover with Nov 12.00 calls for 30c or less. That would give you a minimum price of at least $10 per bushel and unlimited upside.
** If you’re having difficulty in setting targets or making futures pricing decisions on your option strategies, be aware that AgMark now offers Flex Floored Average contracts on all commodities. They can be done in 1000 bu increments (normal min price contracts are 5000 bu minimum) and they have the added feature of allowing the producer to set his averaging period which automatically converts it from a minimum price type to a cash forward priced contract. This is a relief for those that agonize “when” to sell the option and “when” to price the futures. Generally the cost of these is about 80% of their exchange-traded counterparts. (888)848-9979
**Future editions of our Marketing Notes newsletter will be available on our website or by email. To sign up for future editions please email us at [email protected] or contact any of our AgMark locations. (888)848-9979
Providing Long Term Grain Marketing Solutions
Welcome to the 2014 Grain Talk Newsletter, Marketing Edition. In terms of grain marketing , 2014 is projected to be a challenge. It will be a time to buckle down and get back to the basics of grain marketing by understanding the cost of production, break even points, and working hand in hand with your grain marketing team. We at AgMark would like to offer our grain marketing insight in a streamlined, efficient fashion with our periodic Marketing Notes available to you via email or by visiting www.agmarkllc.com. To ensure that you receive Marketing Notes in a timely manner please contact by email at [email protected]. As always, we encourage you to contact anyone of our Marketing Team Members and personally visit about your specific marketing needs.
PROFIT MATRIX Making Profitable Decisions If you have ever wondered what crop insurance policy is right for you or what price you should sell your grain, then sit down with us and see for yourself the power of the Profit Matrix. The Profit Matrix software combines your input costs, crop insurance coverage and grain sales to show you your net profitability over multiple scenarios. You can see how changing your crop insurance policy or selling grain at a certain price will affect your operation.
The Profit Matrix software is just one of the innovative tools that comes from AgMark’s partnering with Diversified Crop Insurance Services. Having access to this tool is a huge advantage in today’s business environment. Seeing the net results before you deploy a strategy puts you in control while reducing risk, increasing revenue, and protecting equity in your operation. See for yourself where your operation’s green (profits) and yellow’s (losses) meet. The right crop insurance program combined with a marketing plan is critical to the profitability of your operation. The AgMark team of local professionals has the resources to help you and your farm operation succeed.
AgMark Marketing Team (888) 848-9979 Origination Mark Hafliger Nick Hansen Carrie Williams Eric Hilt David Pfizenmaier Tatum Couture
Crop Insurance Tammy Forshee Scott Ahlvers Scott Krier
You should know…... Tatum Couture Grain Originator Tatum is the newest member of the grain marketing team. She has 6 years of experience in the grain and feed industry and has been with AgMark since September. Tatum is working in the Beloit office and is available to help you with your grain marketing needs.
Rex Thomas Truck Traffic Manager When you need trucks to haul grain from your field or from your bin, Rex is available to work out the logistics for you. Rex came from a family farm at Mankato. He also has 16 years experience trucking grain & livestock allowing him the insight to know just what you need when you need it. Rex is working in the Beloit office and is available to help with your trucking needs.
February 2014 Marketing Recommendations Markets have three directions – up/down/sideways. Technically and fundamentally the grain markets have every reason to go sideways and appear to be trying to put in bottoms or at least the momentum of the drop is waning. We have, or are approaching the cost of production in grains and the speculator has shifted his interest to the stock market. Range bound markets offer less opportunity than the volatility-laden markets of the last 4 years. Capturing price targets during these times is best achieved by having open sell orders with us above the current market and ALSO consider using time constraints. Again, a time and price methodology keeps you from holding grain too long. OLD CROP ’13 WHEAT: Suggest scale up selling targets using Agmark Pricing Targets (APT’s). March wheat APT’s are running about 20c, so 20 or 40c targets make sense. March wheat has lost $3.26 per bushel in a little over a year. Would suggest the downside for March futures is somewhere in the mid-5.00’s as it’s deeply oversold. NEW CROP ’14 WHEAT: For those of you that have already sold some new crop wheat above 7.00, you can now cover with calls EXTREMELY cheap. 6.50 July calls trading around 21, 7.00 calls trading for around 10c. Scale up selling of new crop is suggested using 20 cent intervals. Technically the trend is down; world carryout is adequate; and all of this is already known to market participants. OLD CROP ’13 CORN/MILO: SELL YOUR CORN AND MILO AND RE-OWN WITH 20c OTM July calls for 16c. If not interested in that, at least recognize that basis on milo is historically very strong, so we suggest doing a basis contract on elevator or farm bushels dependent upon your futures objectives and cash flow needs. Reminder that setting basis stops all storage charges. For those with Price Later (PL) contracts at Concordia elevators, you can convert your PL’s to basis contracts easily as well. Suggest a price and time method of setting futures on this year’s crop. (i.e. so much every month or “x” price, whichever happens first.) LIVESTOCK PRODUCERS: Use this price weakness to purchase extended supplies NOW! At the very least buy OTM call options Mar through Sept and have orders in to roll them down. KEEP IN MIND, THERE ARE A LOT OF BEARISH FORECASTS FLOATING AROUND THE MARKETPLACE. THE BIG SURPRISE IS THE ONE YOU’VE NOT THOUGHT OF…..BUYING OTM OPTIONS ARE CHEAP INSURANCE. The ethanol industry and livestock folks are making money again and that should help regain some demand. NEW CROP ‘14 CORN/MILO: Selling new crop corn and milo using minimum price contracts is almost ALWAYS recommended, but we encourage you to look at constructing them with calls instead of puts this year as the volatility is low and they are relatively cheap. Selling new crop milo in the 4.25 range coupled with a Dec 30c OTM call would leave you with a base price of 4.00 cash and you’d still have unlimited futures upside UNTIL THE END OF NOVEMBER. Put users consider the Dec 2014 4.50 puts that are trading for 30c. APT’s that measure volatility show that sales/purchase targets should be set roughly 26c apart for scale-up sellers or those wanting to trail a stop. Technical trend is still LOWER. OLD CROP ’13 SOYBEANS: 100% sold. Current futures structure is still inverted (nearby March at 12.93 and July at 12.59, this suggests making cash sales). Once beans are priced, suggest buying ATM July 2014 calls AND MOST IMPORTANTLY, PLACE A PROFIT TAKING OFFER TO SELL THE CALL THE DAY YOU BUY IT, or at least have a plan on how long you’re going to hold it. Another option is to consider basis contracts in order to stop storage charges/ service fees. NEW CROP ’14 SOYBEANS: If we grow a good bean crop nationally this year, new crop beans could be below 9.00! Right now the APT’s are suggesting targets of 45cts apart. Dryland producers are encouraged to use min price contracts once a good ROI can be locked in. Right now, 11.00 puts for 2014 beans are 54c per bushel, 10.00 puts running around 20c. If you buy those puts, leave an order on how they are to be managed. Strongly suggest open-orders to roll them up in 1.00 strikes for .25 or less. If you sell forward contracts now cover with Nov 12.00 calls for 30c or less. That would give you a minimum price of at least $10 per bushel and unlimited upside.
** If you’re having difficulty in setting targets or making futures pricing decisions on your option strategies, be aware that AgMark now offers Flex Floored Average contracts on all commodities. They can be done in 1000 bu increments (normal min price contracts are 5000 bu minimum) and they have the added feature of allowing the producer to set his averaging period which automatically converts it from a minimum price type to a cash forward priced contract. This is a relief for those that agonize “when” to sell the option and “when” to price the futures. Generally the cost of these is about 80% of their exchange-traded counterparts. (888)848-9979
**Future editions of our Marketing Notes newsletter will be available on our website or by email. To sign up for future editions please email us at [email protected] or contact any of our AgMark locations. (888)848-9979
