Crop Insurance and Marketing Plan Update

Grain prices have been stellar.  Something you don't see very often is for sentiment in the ag sector to outshine every other sector......especially this time of year.  The little chart to the right from Sentiment Trader shows the average sentiment levels for different sectors.  Let me warn you that there will soon be a huge pendulum swing back the other way.  Its not just that everybody is on the ag side of the boat but nobody is on the stock, gold, or bonds side of the boat.  Professional traders love selling in overbought sectors and moving their funds into un-liked sectors.  While the ag sector is the flavor of the day so to speak, I would expect the big money traders are already accumulating positions in other sectors that are out of favor at the moment.

​A few more pieces of the puzzle have come together for the 2018 crop year.  We now know  what the crop insurance guarantees will be.  The base price was set at $3.96 for corn which is identical to 2017 and $10.16 for soybeans which is .03 lower than last year.  It is a little weird that these base prices came so close to 2017's base prices.  Despite the prices being similar to last year, the volatility factors used to determine the premiums are quite a bit lower.  You should expect your crop insurance premiums to be lower as a result.

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The chart below left is the December corn chart and the chart to the right is the continuous weekly corn chart going back 3 years.  On the 3 year chart, the Stochastics and the RSI indicators are higher than they have been in 3 years.  

Optimism is at the second highest level in 5 years!  The last time optimism was this bullish was in the summer market of 2016!  Seriously folks, this market will run out of buyers soon and the market is going to leave you holding the bag if you don't get something done.  If you are afraid to contract through the elevator on a crop you have not planted yet, then consider using the option strategy that I have diagramed further below.  You can bail out of those at any moment.

​The soybean market looks even more overbought to me than the corn market does. ​ Soybean prices blew threw the summer high on the daily chart to the left, but notice that prices could be reaching some resistance on the weekly chart from the 2016 summer market highs.

The  soybean optics have reached overly optimistic levels.  Again, the last time bean optics reached these levels was during the 2016 summer market.  You have to make sales when prices reach these extremes!  Remember the professional traders I mentioned at the beginning of this post?  They have already recognized that there is limited upside to these prices in March and are looking for other assets to trade that are bottoming.  

As I have said many times already, you have got to sell this crop.  What if you have contracted every bushel of grain that you feel comfortable obligating yourself to at the elevator?  Then you would want to consider an option strategy such as the ones I have laid out below.  I explained these in detail last week so I won't go into a lot of detail now.  I will just say that the bump in price has allowed me to raise the floors a level without changing the cost.

If you need a brokerage account, the easiest way I know to open one is to click on the link below to begin the process.  It usually takes a day or two to get one opened.  You may call me if you have any questions about the plans or general brokerage questions.

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https://www.rjobrien.com/Esign/index.php?broker=37213