January 24 – GrainCents Crop Sales Position Update 2

This post serves a timestamp on our current crop sales positions.

Also included is our rationale for our current crop sales position.

This post is a reference to the time and data that we recommended crop sales of soybeans.

2017/18 (old crop sales)

Soybeans: Increasing from 60% to 70% sold

2018/19 (new crop sales) 

Soybeans: Increasing from 0% to 10% sold

January 24, 2018:

We’ve seen soybean prices add some weather premium over the past week, thanks mainly in part to Argentina’s dryness.

While we feel like there could be more upside ahead because of unknown certainty, we’re looking to lock in a block of both old and new crop today.

We are specifically pricing our 2017/18 old crop sales off of the July 2018 contract (priced at $10.135 on the Chicago Board of Trade at close of trading on  Wednesday, January 24th, which holds a nice carry relative to the March and May 2018 contracts. While you can decide if you want to just do a basis contract and then price the futures later, we are looking at just selling this 10% block on a straight cash deal

For 2018/19 new crop sales, we pricing off the January 2019 contract. You could do this as a straight cash deal as well, but I’m a little bit more open to a basis contract here. However, this is dependent on your thinking that the price of the January 2019 soybeans contract will be higher in the next 11 months. I would argue today that there is a 50% chance of seeing a $10.50 handle next to the January 2019 soybean contract

Again, while we are expecting more premium upside, the risks are steep, given the lack of knowledge on what is truly happening in terms of production risk. And since we know that there’s still a record amount of soybeans left in the pipeline today, we are managing our soybeans prices risk.

 

About the Author
Garrett Baldwin

Garrett Baldwin is a content strategist and editor at FarmLead. He covers the global grain markets and public policy issues related to the agricultural industry. He is a graduate of the Medill School of Journalism at Northwestern University. He also holds a Master’s Degree in Economic Policy from The Johns Hopkins University, an MS in Agricultural Economics from Purdue University, and an MBA in Finance from Indiana University.