Markets are higher this morning with corn up 4 and beans up 11. The catalyst has been media reports suggesting that President Trump has signed off on a Phase 1 trade deal. While this is great news, Beijing has not said that the two sides have reached an agreement yet.
The deal presented to the President included a promise to buy more US agricultural goods. Officials also discussed possible reductions of existing duties on Chinese products. Terms of the deal would halt duties on $156 billion in Chinese goods and is thought to roll them back on another $360 billion goods by some 50%. The legal text has not been finalized and the White House has not commented, but if these rumors are true we can expect a reduction on the imposed Chinese tariffs and Beijing to start buying $50 billion of US AG products annually beginning in 2020.
While this is great news, producers need to keep in mind that this has not been signed and even if it does, it is just phase 1 and is not going to send the markets thru the ceiling. This is merely a small step in the right direction and there are a lot of details to be worked out.
This is the time of year when producers need to keep three things in mind:
1. Don’t get complacent – Just because harvest is compete doesn’t mean that your work is done. Now is the time to focus on the tough part of farming…. Marketing your crop! You know what you have from this year’s harvest so make plans to market it. You should also be making plans and offers to market next year’s crop. Most of you are already buying your seed for next year so you should also be marketing that crop.
2. Be Disciplined – Talk to your grain buyer, lender, advisor and make plans for how you are going to market this year and next year’s crop. Get firm offers in with your buyers and stick to these firm offers.
3. Diversify and be flexible – Put offers in and make sales for multiple years. 2019/20 crop, 2020/21 crop. Use different marketing tools (basis, HTA, cash, accumulators) to spread out your risk.
You typically get 1 or 2 opportunities to market your crop at decent prices and the only way to successfully hit them is to be disciplined and have offers in place to sell when they happen.
Have a Safe Day!