An Interview with Richard Brock
The Commodity & Futures Market Veteran Weighs in on Pricing the 2015 Crop
He grew up just south of Lafayette, Indiana and attended Darlington High School – today he’s known around the globe by farmers and investors for helping to take as much risk out of farming and marketing as possible. Since 1980, Richard Brock and his team of commodity experts have been producing the Brock Report, a 20 page weekly newsletter and daily market commentary, 3 times per day, on the state of corn, soybeans, livestock and more. Today, the Brock Report manages grain sales on approx. 700,000 acres in 14 states and strives to educate people on more than just the price per bushel, but market dynamics, historical trends and risk management.
I visited with Richard Brock’s team during a seminar in Lafayette, Indiana and had the opportunity to speak privately with Richard Brock himself to get his opinion on the current state of the corn and soybeans markets, pricing and go-forward plans.
The Markets Today
“We are in a supply driven weather market. Once you identify what kind of market you’re in, you can identify how those markets are going to behave.” – Richard Brock, The Brock Report June 2015
Explain the type of market we are seeing in June 2015 and your outlook?
According to Brock, “Supply driven weather markets are very short and they cause the market to spike. Markets like this typically don’t last long and we move through them very quickly, immediately followed by a market drop. All supply driven weather markets react in the same patterns and the odds are very high that we will have a top in this market before the middle of July. It wouldn’t surprise me to the top of this market trend before the 4th of July.
We’re getting to price levels now with both corn and soybeans that are going to be significantly above what we think the market will average for the year. Our approach is to look for a place to start scale-in selling because markets like this can, in one day, (for soybean prices) have a 30-40 cent trading range and corn with a 20 cent trading range. You need to have orders sitting there on a scale-out sale or you’re not going to realize the price benefits of this weather pattern.”
How does a weather driven market affect supply?
“Unless it keeps raining for the next 2 months, the crop that is drowned out in low areas is generally offset by crops sitting in the higher ground. Traditionally speaking you don’t get a huge cut in yields in a weather rally. In fact this is perhaps only the second weather rally I have seen in 35 years that is caused by too much rain during this time of the year. All said, it’s a very unusual situation to have this kind of weather market for corn and beans here in June 2015.
Supply driven weather markets perform similar to a drought weather market except that they typically turn and go much lower. Drought markets tend to hurt yields more than rain markets. The old adage “rain makes grain” generally rings true.”
“This is a market that will present some excellent opportunities for farmers to sell into, but it’s always about timing and preparation.”
What is your take on pricing the 2015 crop?
“Our goal and objective is that sometime here before mid-July we lock in a good percentage of this years crop. If December corn futures get above $4.15 to $4.20, we’ll look at this as an opportunity to, in some cases, get as much as 70% of this new crop sold. We believe those prices are far above what the market will average. In the case of soybeans, we are looking for the market to get above $10.30 and if it does, we’ll go to nearly 70% sold for the new crop.”
“This is a rally that we will be aggressive on.” – Richard Brock, The Brock Report
Looking historically, we’re not going into a bull market like we did in 2012 and we have a very large carryover of supply. Many estimates say that today’s carryover of corn is about 1.8 billion bushels, whereas back in 2012 there were approximately 800 million bushels of carryover.
What are your thoughts on old crop sitting in storage?
“Having old crop is very similar to baseball in that, you’re in the 8th inning, down 10 to 0, and there are two outs. It’s time to start thinking about tomorrow’s baseball game, take this rally, move that old crop and start thinking about next year.”
What factors are playing a role to help the American farmer?
“First off, the opportunities to market crops at much higher price levels have been there for a long time. The market has given farmers a lot of opportunities, some have chosen to take advantage of that and some have not. Look for price rallies like the one we are in today and make the most of it by doing a lot of forward selling. Think about the technology available to increase yields, when prices are down and you need to increase revenues, there are ways to better manage your operation to get the most out of your soils. Whether it’s new planter technology with multi-hybrid & variable rate potential, or getting the most out of nitrogen and chemicals, it’s amazing what can be done today.”
There are several schools of thought on the outcome of a strong market vs. a low market, but there are plenty of good things that can come out of low prices. When markets are down, it forces people to rethink their bottom line while, improve their management skills, and puts more emphasis on every marketing decision. Whether you agree with that or not, it’s clear that pricing today’s crop means paying more careful attention to the spikes and drops. When corn was $7.50, selling at $6.00 still meant a lot of great profits, but when a break-even hovers around $4.00, missing out on 50 cents is not be taken lightly. The sentiment among the farmers, producers, and agribusiness professionals I speak with daily is that you’ve got to take the time to learn to be a solid grain marketer. Going forward what will you do differently?
I welcome your comments, feedback and suggestions on this topic and all things Ag related
– shoot me an email at johnny (at) prairiefarmland.com
Want to learn more about The Brock Report? visit them online at www.brockreport.com
As a full service commodity marketing agency, the Brock Report offers their customers:
- Daily Market Commentary via the web or smartphone app
- The Brock Report Newsletter – For over 30 years, a leading source of market intelligence and insights
- MarketEdge – highlights changes in USDA estimates, carryover, acreage & production that impacts commodity markets
- MarketWeatherEdge – weather risk analysis and commodity market intelligence
About the Author
The Back Forty is a syndicated column written by Published Author & Purdue Graduate Johnny Klemme. His reporting, interviews with Ag Experts and more can be found at www.Prairiefarmland.com/blog