Jun 18 2020
How Accurate Yield Forecasts Increase Profits for Crop marketers and Market Advisory Services
Crop marketers and Market Advisory Services (”MAS”) firms need to have a clear view on price risks both to the upside and downside for futures and grain basis prices. With improved information these market participants are able to better employ marketing strategies that secure cash flow when beneficial, and reduce price risk by optimizing contract structures to future expectation.
For instance, a crop marketer with insight into the likely direction of the USDA’s yield and production estimate revision, which may be possible by using cmdty Yield Forecast Indexes as shown in Figures 14 and 15 below, would be able to structure their grain portfolio to benefit from either an expected increase or decrease in futures prices.
If this marketer expected futures to increase at the next USDA report, and had the expectation that basis in their area was likely to weaken, they could enact any of the following strategies to generate the highest possible return from their managed crops:
- Enter into a basis contract
- Sell cash and buy futures
- Buy a call option
- Enter into a minimum price contract
Combined with cmdty Basis Forecast Indexes, a marketer or MAS provider could develop highly targeted marketing strategies for hundreds of different production areas in one simple tool. Whether working for themselves or clients, an informed crop marketing strategist can generate real value with these products.
cmdty by Barchart has the data, tools and technology that Crop marketers and Market Advisory Services need to reduce risk and employ better marketing strategies. Download our free whitepaper to learn more about using Grain Yield Estimates to drive performance for your business. We’ll also be discussing our Yield Forecast Indexes in our new 2020 Grain Market Update Livestream Series, which provides insightful perspectives from industry leaders ahead of each WASDE Report. Register for the entire series here!