MARKET THOUGHTS BY MARC Most Exciting Part of Marketing Year Still Ahead By Marc Peterson, Introducing Broker, MPT Trading As U.S. producers get ready to plant the 2017 crop, the corn and soybean markets enter what history indicates as the period of highest price volatility of the year. This is the time in the marketing year I like to refer to as the “toos.” This is when the market reacts to a weather forecast of “too hot, too cold, too wet or too dry.” Traders start buying in anticipation of some kind of shortage. Keep in mind, price controls demand. Raise the price, demand decreases and the anticipated limited supply lasts longer. On the other hand, lower the price and demand increases because we have plenty. It’s not until combines roll in the fall that we ultimately know if one of the “toos” really affected the crop. Over the last few years, the grain markets have spent a substantial amount of time below, or at least very close to, a breakeven price. With that said, I think farmers are going to be willing sellers during any rally that hints to profitability. For that reason, the idea of using some kind of courage call
strategy to remain in the market after making what hopefully are profitable cash sales can be a good plan. I define the courage call as an out-of-the-money September call option, which expires at the end of August. The exact strike price and premium paid depends on the individual. The goal associated with this call option is it gives producers the courage to make a cash sale even though all the news is bullish and prices have to go higher. (Key words have to.) Hopefully, this strategy reduces the woulda-coulda-shoulda part of marketing that producers deal with as harvest approaches and prices fall. Give me a call at 612-756-1406 and we can discuss whether a “courage call” strategy could be a valuable part of your marketing plan. As always, if you do not totally understand this strategy, do not try this at home. ●
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