Al Kluis speaks to a group of farmers

Al Kluis, of Kluis Commodity Publishing, said that strength in exports have supported soybean prices this marketing year. (Photo: Joseph L. Murphy/Iowa Soybean Association)

Strategies for grain marketing in 2021

March 4, 2021 | Bethany Baratta

Farmers experienced the highs and lows of crop prices in 2020. But having crop marketing strategies in place helped farmers put a price floor in place to avoid the lowest prices.

Al Kluis, a 40-year veteran in the grain marketing arena, presented farmers with some tips to navigate crop marketing in 2021 during the virtual Commodity Classic this week.

2020 market movers

Kluis, managing director of Kluis Commodity Publishing, says several factors impacted prices in 2020:

  • First, the COVID-19 stock and commodity market meltdown in April.
  • After a nearly ideal start to the growing season with record yield forecasts, hot and dry conditions developed in the western Corn Belt. In August, Iowa was hit by the derecho, which negatively impacted soybean and corn acres. 
  • China came back in buying U.S. soybeans and corn in a big way upon recovery from African swine fever and the implementation of the U.S.-China Phase one agreement. “Record sales announcements changed the global fundamental situation. It was one of the most rapid and dramatic changes I’ve ever seen,” Kluis said.
  • A secondary low in August 2020 and historical rally into the first quarter of 2021.

“In 2020, grain and stock markets were falling and there was a lot of uncertainty,” Kluis said. “This year, it’s quite the opportunity. What a swing in attitude for the past year.”

Strength in exports have supported soybean prices this marketing year, Kluis said. But farmers shouldn’t put together a marketing plan based on what they think exports might do in the coming year, he said.

2021 strategies

Kluis currently has 50% of his 2021 new-crop soybeans sold using hedges. His updated recommendation for soybean sales are:

  • Use a rally up to $12.18 November 2020 futures to get at least 10% sold of your expected 2021 production.
  • If November 2021 soybeans rally to $12.98, consider getting put option strategies in place.

“If soybean prices are close to $13, the question isn’t if you should sell, it’s how you should sell,” Kluis says.

Kluis has 40% of his new-crop corn sold.

He has two recommendations in looking at corn marketing opportunities:

  1. Sell 10% of your production at $4.87 December 2021 futures.
  2. On rallies up to $4.87, consider buying some put options or some sort of put option strategy.

Opportunities, volatility

Make no mistake, Kluis says, the market currently offers profitable marketing opportunities.

“At this time, the profit potential is the best it has been in the last 10 years,” he says. He expects prices will move lower by the fall.

Kluis noted that areas in the Corn Belt are coming off a 2020 season plagued with drought, and that dryness persists in some areas. Weather is always a factor in the markets, he says.

“I think we are now entering a time of increased production uncertainty, more weather and production problems, smaller government payments, and much greater price volatility. This will make having (and executing) a marketing plan more important than ever,” Kluis says.

Planting intentions

Cory Bratland, chief grain strategist for Kluis Commodity Advisors expects more acres of both soybeans and corn to be grown this year as prevent plant acres come back into production.

“I’ll never bet against the U.S. farmer and what they can do to achieve yield,” Bratland says.

Bratland forecasts 2021 soybean plantings at 90 million acres, up from 83.1 million acres in 2020. Corn plantings are also expected higher at 92 million acres, up from 90.8 million acres planted in 2020.

The USDA’s March 31 planting intentions report will provide a clearer picture of farmers’ intentions for the 2021 growing season.

Three big things

Kluis recommends these three tips considering planting and marketing in 2021:

  1. Plant an acreage combination that allows you to maximize yields;
  2. Do whatever you can to increase revenue per acre;
  3. Create a flexible marketing plan that uses a combination of hedges and puts.

For information specific to grain marketing on your farm, learn more from the Kluis team here.