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Turner's Take Ag Marketing | New Crop Corn Hedge

By: Craig Turner, Senior Risk Management Consultant

Turner's Take Ag Marketing
 
Craig Turner
Senior Risk Management Consultant
Turner's Take Podcast

New Crop Corn Hedge | For 15% of estimated new crop corn production buy the Dec $6.00 Corn Put and sell the Dec Corn $10.00/$11.00 Call spread for 8 cents. 

New crop corn insurance is $5.90 and many farmers take 85% of their APH.  For the 15% that is not insured, I like buying the $6.00 Dec Corn Put and selling the $10.00/$11.00 call spread for 8 cents or less.  That puts your floor in at $5.92, which is close to the insurance price.  There is risk between $10 and $11 but that also means your corn would be $2 to $3 more than it is now. You'll need about $700 per 5000 bushels due to the premium cost and margin requirements. There is $5000 of risk if the market traded to $11 or higher so keep that in mind when it comes to available capital this summer.

I think we see higher corn acres by 1mm and maybe even 1.5mm in the June report.  S. America should have a very good corn crop.  I know there is a ton of uncertainty around Ukraine but high prices don't last forever.  The May WASDE will have new crop supply and demand estimates.  The USDA will have to use the 89.5mm acres and a 181 trend line yield.  It will be very interesting to see what they do with US export demand and ethanol usage. 

I think acres eventually go up from 89.5mm but yields could be in the high 170s instead of 181.  Currently Argentina corn is over $1.00 cheaper than the US and they could have a record crop.  Brazil is $0.30 to $0.60 cheaper than the US.  We should start to see planting progress soon and as we all learned from 2019, corn and soybeans can go in the ground later than we previously thought.  

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