Hedging risk in a sliding market — practical advice for the current corn and bean market


Have you got your bushels covered?

Matt Bennett of AgMarket.net says that if farmers still have a lot of unpriced grain, it’s going to take some work to minimize losses in the next few months. Bennett spoke to several farm audiences at Commodity Classic at Houston, Texas, this week and he says farmers are listening intently on how to manage risk in this lower market.

It’s possible the corn market hit a reversal this week but Bennett says it’s too soon to tell — and farmers have to realize that it could still turn lower.

For producers in dry areas, such as Nebraska and Illinois (and Western Canada), there’s the threat of continued drought. Is that enough to get bullish on corn? Not necessarily.

“What I’m saying is this: if I’m going to get bullish at $5 corn, I better be careful how I do that. I think we need to lock in floors, but keep flexibility. And so there’s so many tools out here that we can use in this day and age… I want to lock a floor in but I don’t want to sell for instance, 60% of my cash bushels if it gets to five bucks, especially if I don’t have anything to protect me on the upside because if I can’t raise a crop, this thing could get wildly out of control the other way,” Bennett says.

This is where using options to hedge against that risk can work, but remember: hedging is about managing risk, not speculating on the market to make profit. Understanding the difference is key to make the best use of a hedge account.

For those with a lot of bushels unpriced from ’23, they’re going to have to have a strategy for ’24 crop running simultaneously. “I always say the farmer’s always long. If you’re not long old crop, you’re long new crop. And if you’ve already sold most of the new crop and you’re still long ’25 crop, I mean, you’re long somewhere, right?”

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