Capitol Commodity: Hedging Lessons Learned from 2019: Stress Less

Published Apr 8, 2020 

It seems like every spring the same thing happens. Many people attempt to predict the corn and soybean markets for the new growing season. Capitol Commodity Hedging Services does not make predictions, but poses this question: What are the lessons from 2019 that we can apply to 2020?

Let’s go back to where we were this time last year. The corn and soybean markets were declining on bearish news, record crops from the year before in both the US and South America. Sound familiar? Prices continued to decline into mid May as beans approached $8.00 and corn at $3.63.

We all know what happened mid May, the rains came and did not stop.


FOMO is a popular phrase these days, "Fear of Missing Out", although a lot of grain producers feel this way every spring rally. "This time is different. This is the year we are finally going up big!" I hear the same thing year after year. No one wants to be the one who sold too early when the market screamed higher. I totally understand, farmers are born risk takers and have to be optimistic, however, becoming emotionally attached makes it extremely difficult to sell into these spring rallies.

The lesson from 2019 continues to be:
Use the spring rallies to price your crops, and don't try to pick a top.

Figure out how much of your production you are comfortable hedging and utilize our put option strategy to protect from lower prices. This way, if the market continues higher, you still have your bushels.
Capitol Commodity Hedging Services brokerage firm can help you make this put option buying determination, as well as advise you throughout the growing season and post harvest.

Not enough “experts” subscribe to our point of view. They are still trying to predict the future. You have likely heard the saying, “The definition of insanity is doing the same thing over and over again and expecting a different result.” We have seen people make these same mistakes for decades.

We will never know when the best time to sell in the spring, because it's usually based on weather and we cannot predict the future. And if you think about it, that makes sense. It is unrealistic to think the market would ever offer an obvious time to “sell.” If it did, there would be no risk and, more importantly, no reward.

We have created a limited risk "Scale-In" put option buying strategy that takes the guesswork out of hedging price protection. No forward contracting (yet), no futures and best of all, no margin calls! This strategy allow you to particpate in higher prices as well.

A 2020 Resolution
Looking forward, producers should keep in mind 2019’s most important lessons. Utilize a consistent strategy this year, and every year, reduce your anxiety by accepting the market’s inevitable ups and downs. Stop trying to figure out — or even have opinions — about the direction of the markets.

Easier said than done, right?

We are preparing producers now for this season's hedging program and reducing the emotions of selling.

Get a 30 day FREE TRIAL to my TEXT Trade Recommendation service, Text TRIAL to 317-590-3839. But don't wait too long, these rallies are often short lived!

Best regards,

Capitol Commodity: Hedging Lessons Learned from 2019: Stress Less

Lannie Cohen

Capitol Commodity Services, Inc.
3905 Vincennes Road 
Indianapolis, Indiana
(317) 848-8050 Local

There is a risk of loss in futures trading and is not suitable for all investors. 


Corn Soybeans Wheat