March 04, 2024

Capitalize on market opportunities

Cody Dust

GIFFORD, Ill. — No one can will the corn or soybean market to jump a dollar, but developing a marketing plan can provide leverage to weather the swings.

Cody Dust, Strategic Farm Marketing and Crop Insurance grain market adviser, commodity broker and licensed crop insurance agent in Illinois and Indiana, gave his take on the grain markets during the Midwest Ag Expo.

What are some of the biggest challenges that farmers face today in terms of marketing their grain?

Dust: In my experience, the hardest thing for a grower to wrap their minds around is we’re going to get our best pricing opportunities oftentimes when the farmer doesn’t think he’s going to have it to sell. There’s a big, strong emotional tie there.

One thing that we do really well, and I am a firm believer in this, is we try to tie everything together with bringing the crop insurance guarantees in that area of the business and tie it into the grain marketing and help us develop a strategy. If somebody is a crop insurance client, they don’t have to be a grain marketing client or vice versa.

But if a farmer can understand what his guarantee is or what kind of policy he’s bought, and then use that as a marketing tool, I think that really helps take away some that emotional fear of maybe not raising a crop, because, frankly, in the grain marketing world opportunities are going to present themselves and then they’re going to go away.

If you don’t capitalize on them when we get those opportunities, last year’s probably a good example of that.

Up until the previous few years, global demand for U.S. soybean was typically strongest in the fall through early winter and then shifted to South America as harvest ramped up there early in the year. That dynamic has changed. As those South American crops near maturity, what are you hearing of production there?

Dust: Brazil and South America as a whole is pretty interesting this year. Brazil had a record soybean crop last year. Argentina had essentially a biblical drought. You kind of have the opposite of that this year.

There were delays in soybean planting in Brazil. In my opinion, that’s going to do one of two things. Either that dryness and the heat that they’re going through in Brazil right now is going to speed up maturity, you’re already seeing the USDA stair-step Brazilian production back.

They’re not going to stair-step it back at the same rate that some of the private estimates that we’re seeing out there are at, but regardless it does seem like that Brazilian crop is starting to be trimmed. On the flip side of that, Argentina is essentially doubling the size of their crop next year.

One thing that someone could probably poke a hole in, we’re struggling on the export side right now. We are competitive, but we’re still not the cheapest, and that’s obviously a problem. We desperately need export demand on soybeans to come back to the U.S.

A lot of soybeans that are produced in Argentina are processed at port and the byproducts are what is exported. Brazil’s main export is going to be soybeans. They’re not going to export meal or oil. That’s why when we hear about logistic issues and things out of Brazil, that’s why that is so significant.

The losses in Brazil at this point with the information that we know today are going to be offset by the gains in Argentina, but our sources in those regions would indicate that that production number in Brazil is going to continue to trend lower, but it’s still probably looking as a region in South America like they’re going to pull off a record soybean crop. It’s kind of the same on the corn side, too.

Multiple projections are rolling out for the 2024 corn and soybean planted area. What do you think the numbers will be?

Dust: The next couple months are going to be interesting. There are people in the industry right now talking that corn essentially is going to have to buy acres back from soybeans. They don’t have to buy them. Soybeans can get cheaper.

That ratio can certainly come into play one of two ways. Either corn rallies and corn buys acres, or corn does nothing and soybeans just get cheaper.

I’m not going to try to predict. The USDA balance sheet is a guess. Clients ask me what my guess is. So, you want me to guess at a guess? I think if you look at it in terms of profitability at the farm level, it’s probably a little more economical today to plant soybeans.

What I have told all of my insurance and marketing clients, and I am a believer in this, if you’re going to be making a planting decision around commodity price, that needs to get sold because that decision makes sense today and that crop is more profitable today.

But if we’re not going to capitalize on it and we’re going to make that big planting decision, that could go away and then all of a sudden situations have changed.

Those are the types of ideas that I think a grower needs to keep in mind if they’re going to be making those rotational decisions.

Is there anything you’d like to add?

Dust: I don’t want farmers to take this as me pushing brokerage because I think sometimes brokerage has a very negative view, but if a farmer makes a sale today and that was the wrong decision, you can fix that someway somehow.

Or, you’ve kept your sales at a level to where you are bucketing sales into a rally. You’re not ripping the Band-Aid off and going all your eggs in one basket.

But I think last year is a really good example for growers that if I sell today and I’m wrong, I can fix it. If I don’t do anything, I don’t care who you are, we’re all staring at the same market, I don’t care if you’re the smartest person in the room, you can’t make the market go from $4.50 to $5.50. That’s something that’s going to hit home with a lot of people after what we went through last year.

The other thing, I look at myself on the advising side and trying to tie-in the insurance piece to it, one thing I’m going to talk about differently this year that I probably didn’t talk enough about last year, I think growers really need to understand their guarantees and how their insurance works and really leverage it in marketing.

You probably hear crop insurance agents talk about it all the time, maybe they understand it, maybe they don’t, but when people say leverage your crop insurance, all that means is selling.

Tom Doran

Tom C. Doran

Field Editor