Accurately predicting the financial result of your grain harvest months ahead of time is certainly a challenge. A litany of factors impact the final bottom line, from crop yields to fluctuations in asset pricing. Fortunately for producers, grain futures trading can help maximize the rewards from a year spent in the fields.
Selecting the Right Grain and Oilseeds Market for Your Needs
No matter whether you’re in the wheat, corn, or soybean business, the Chicago Mercantile Exchange (CME) offers a futures product that can help boost profitability. Each of the following markets contributes to the comprehensive grain futures trading environment in a variety of unique ways:
| Crop | Product | Symbol |
|---|---|---|
| Corn | Corn Futures | ZC |
| Wheat | Chicago SRW Wheat Futures | ZW |
| Wheat | KC HRW Wheat Futures | KE |
| Soybean | Soybean Futures | ZS |
From a practical standpoint, selecting one of these markets to engage isn’t too difficult. However, the beauty of grain and oilseed products are the opportunities provided to those possessing ag industry-specific expertise. The interrelationships between the corn, wheat, and soybean markets are extensive, with an experienced producer having the inside track on those lacking perspective on the big picture.
As an example, soybean farmers who understood the implications of 2018’s U.S.-China tariff standoff were in a position to prosper. As grain and oilseed prices began to slide in the month leading up to the July 6 tariff launch date, a diversification strategy including corn and wheat futures was ideal. While certainly not long-term trends, corn and wheat futures rebounded from June lows, making 7.4% and 9.8% gains for July 2018. Conversely, soybeans only posted modest gains for the same period ― savvy bean farmers cashed in on their knowledge and quickly adopted a diversified grain futures trading plan.
Three Ways Grain Futures Trading Can Boost Profitability
Grain futures trading can be a great way to maximize the returns on your harvest. The flexibility that futures offer gives producers the ability to implement a variety of strategies designed to optimize profits. Here are three ways in which trading wheat, corn, and soybean futures can boost your bottom line:
- Risk management: In most businesses, it’s not the money you make, it’s the money you don’t lose. Grain futures products can be money savers, useful for hedging against the negative impacts of inclement weather, political upheaval, or an untimely economic downturn.
- Strategic speculation: On occasion, opportunity arises unexpectedly, as in the summer of 2018 with the U.S.-China tariff spat. Futures give market-savvy individuals the ability to capitalize on their insights in an efficient manner.
- Addressing basis: Staying aware of the differences between spot and futures pricing can be a valuable endeavor for any producer. Decisions regarding when and where to market, as well as when to lock in profits, are made much easier when using grain futures with respect to basis.
Perhaps the biggest advantage to grain futures trading is the diversity of options. Strategies for managing risk, speculation, and accounting for basis may be combined into a single comprehensive marketing plan. Every situation is unique ― the beauty of grain futures is that you can easily tailor them to satisfy your needs and goals.
Staying “In the Know” Is Half the Battle
Delivering a crop to market successfully is a year-round journey. From start to finish, the path is littered with risks, both anticipated and unforeseen. Staying up to date on important events in the ag markets is a critical aspect of making sure your harvest is all it can be.
For real-time analysis, news, and market insights, look no further than the DanielsAg Mobile app. Featuring hedge recommendations, expert commentary, and a daily overview of market conditions, the DanielsAg app can help you stay on the competitive lead lap.
