A weather market, fundamentals, and the December corn contract


The current down trend for grains and oilseeds is being driven by weather here at home and around the world.

In just the last couple of weeks the markets have bumped a little off the lows, most notably in corn. Why is that? As Ted Seifried, with Zaner Ag Hedge, explains, it’s all being driven by dry conditions.

“There’s a lot of comparisons being made right now to 2012, and how we are maybe actually in a worse scenario right now than we were at this time in 2012,” he says. That’s due to shifting the focus from demand to supply and, in the process of the shift, perhaps losing sight of how dire the demand side could be.

“[Demand is] not a very rosy picture,” Seifried says in the audio below. “We (the U.S.) can’t get our corn exports going, our soybean exports had been good, but they really slowed down. In order to hit the USDA target, we need to see some more sales and soybeans are just not really getting them right now.”

What can farmers do? This is where understanding the risk management tools available in commodity trading really pays off.

“It’s hard to be a technical trader in the weather market, right? Because you know, you can have these chart objectives. But as soon as the rains start happening, you can throw all that out the window,” he says. “I think you got to kind of scale in and I think now’s a great time to start doing that.”

For those who think there’s more upside potential and this weather issue is going to linger, Seifried says you can buy calls against cash sales to return those bushels and participate in more of a rally. The only thing you can do if you don’t want to actually commit to selling bushels is you can buy puts and create a floor price. And that might be a real smart move, as Seifried speculates sub $4 corn could be in the offing before you know it.

For the full discussion and analysis on this weather market and marketing options, watch the video below or download the podcast to listen later:

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