Wonderful topic and points, cutworm.

We have several producers here that make a living growing crops. They will always want the highest prices and the best weather to grow their crops.........which almost never happen simultaneously.

I have some friends that are big farmers here in southwestern Indiana and a couple of brothers have joked a bunch of times, when asking me about the upcoming growing season weather if I can bring a drought..........to Iowa. 

Totally joking you guys in IA (tallpine/mcfarmer).

On the other side of the coin, I can recall a dozen spells when the most adverse weather was in IN and IA was great. The prices were crashing from the IA weather/crop, while our crop deteriorated. mcfarm and cutworm have lived that dozens of times.

So the point is that each producer is dealing with different dynamics each year. A good place to lock in prices might be totally different, depending on those dynamics.

Here in mid/late July 2023, the outlooks have been better for the ECB than the WCB but rains have been great in some places but still short in others, even in the same state.

Great rains with an excellent crop and good outlook  for one producer mean something different than a producer with the same market but has missed the rains and has a poor crop because of it.

And the corn yield is usually more certain earlier than the bean yield......but heat fill can alter that. 

A rule of thumb that often works in the long run is to harvest speculator driven spikes higher at this time of year if you feel comfortable with your own  production prospects.

Producers know their input costs and the market from the business standpoint.  They know what prices can make a decent profit FOR THEIR BUSINESS.

Getting excessively greedy to try to get the highest possible prices is using your business to speculate.

That's fine if you are really tuned into the markets and have a good track record for speculating and KNOW WHERE TO PULL THE TRIGGER!

The time to pull the trigger and hedge/sell at least some of the crop is not at the top unless you are a gifted speculating guru.

The top will probably happen overnight or some other time and you won't have the ability to lock in the price right then anyways.

Here's what can happen.

1. When prices are going up, everybody is the most bullish, including producers . By definition, in bull markets, the majority of traders think prices will go higher.

2. If producers think prices will go higher, they are inclined to hold off on sales because they feel they can get a better price.

3. The top happens, often with a spike higher and in a flash we're down 20-30 cents with the market still seeming to be bullish but with a wake up call because the market didn't act right with more bullish news. 

4. But the lingering bullish news and huge price increase recently(before the sudden drop), CREATES HOPE. Producers may assume that with that much bullish news left, the market will at least get back to the old highs and THEN they will sell. 

5. But the bullish news is weakening, which is why the spike top happened(the market is looking ahead and trading on LESS bullish news) and instead, the market drops, maybe as fast as it went up, maybe not. HOPE continues and the producer decides that if we can just get back to price X, they will sell then because it was just a few days ago or a few weeks ago they could have sold at that price and surely the market will at least get back there............but it never does after the top is in and the crop gets 1 day closer to being made on the turn of the calendar page.

6. As the price erodes from risk premium coming out after the midway point of the growing season from harvest and new crop supplies getting closer and 1 day less to kill the crop, many producers are stuck with a less favorable price selling environment.

7. A number of things can happen at that point, depending on the local prices offered, their crop condition, their individual costs and so on.  It's different for everyone and different each year. Fertilizer costs were down this year, for instance. So for corn, maybe the selling point didn't have to be as high for some guys??? There are a dozen variables but these elements above make for some wonderful food for thought.

8. On the other hand. The complete opposite can happen. If the weather pattern changes to adverse and continues that way in August, the worst fear could happen. The producer sells way too early, thinking those are great prices, then it turns hot/dry and we spike $1 higher and his crop deteriorates. OUCH! Less to sell and locked in at lower prices. 

9. The fear of #8 happening is often a reason that producers hold off selling until they miss the best opportunities. It's also an example of the EXTRAORDINARY RISK and uncertainty that producers face in most years. There isn't another business like this.

The weather will make or break you every year. The price environment is always uncertain and never stays the same. The input costs are out of your control and can sometimes bite.

Speculators take on risk for a living but the fact is, they have the least amount of risk. They can get in and out of a market with a mouse click and decide everything based on the bids and offers.

Producers have their livelihood on the line and multiple, always changing and complicated variables to consider that are often totally out of their control and represent RISK.  

Thanks, cutworm for bringing this topic up!

What are your thoughts?

Well said Mike! I can say that I have dealt with all 9 of those and more. But I love the challenges. Epically when the plan comes together.