Summer flew by. The kids are back in school, late-season scouting is complete and crop tours are in full swing. It’s hard to read the news these days without hearing about ‘bigger than ever’ yield estimates from across the U.S. We’re now just a few weeks away from my favorite time of year, harvest. Many have been focused on production all summer long, surveying several key crop reports. But I’m wondering, how many people have updated their hedging strategy to align will all the information that’s been shared this year? With very accurate estimates of final cost of production, now is the perfect time to re-evaluate marketing and hedging strategies.
I usually recommend that both producers and end-users of commodities use this month as a bench-marking session. It’s a great time to pull out the spreadsheets from January (around the time we were preparing for final yields of the 2017 crop) and compare estimates with where we are today. This is also a good time to ask some questions:
- Are you on track with the revenue or purchasing goals you set back in the winter?
- With updated yield estimates, have you marketed or secured enough grain?
- Do you feel confident in your marketing, purchasing or storage plan for your grain?
- Are you positioned to capture market opportunities?
We recently wrote an article about ‘do nothing strategies’. At Cargill Risk Management, we believe doing nothing at all, is in fact doing something. If you don’t plan and prepare for the year, what will happen to your end-of-year financials if the unexpected occurs? You’d be surprised to see how planning ahead can impact your financial performance for the end of the year.
For producers, adding market participation to those ‘must-sell’ bushels at harvest can be a strategy that can provide opportunity for price movements as well as limiting downside risk. Implementing this can take many forms, including OTC options allowing customization for price risk management.
If you are an end-user of commodities, have you taken advantage of pricing opportunities? If large crops are realized, do you have your needs for the next 6-12 months covered? Revisiting your risk management plan now can pay dividends into the future.
Securing a price through customized risk management products can be a cost-effective way to gain market participation. These tools allow you to participate in future market moves that benefit your position while limiting moves that do not.
Last, it’s important not forget about the 2019 crop, As the harvest begins, you should be thinking about crop plans and pricing strategies to help ensure 2019 is another year filled with success.