Grain Prices Surge Heading into Harvest: Farmers Must Adapt

Grain prices are heading into harvest with an unusual amount of momentum. DTN lead market analyst Rhett Montgomery warns farmers not to wait for the perfect price, but instead use the rally to evaluate profitability, manage risk, and build a marketing plan.

Montgomery emphasizes the importance of knowing costs and what price works for each operation. He suggests that if a $5 plus cash sale is acceptable, producers don't necessarily need to hold out for a higher number.

The rally has been supported by tight corn stocks relative to use, strong demand, and broader macroeconomic factors. However, there's also a significant amount of speculative money invested in grain markets, with nearly 1.2 million futures contracts held by noncommercial traders.

Montgomery recommends producers pay attention to six key factors: trend, noncommercial positioning, commercial signals, seasonality, volatility, and price probability. He warns against building a marketing plan around successfully calling the market's high and encourages producers to use strategies like hedging grain while buying a call or using a 'min-max' strategy involving a put and a higher call.

For farmers storing grain, Montgomery sees an opportunity to retain ownership into 2027. He suggests using strategies that establish a price floor while preserving some upside. However, he also cautions producers to pay attention to what the commercial market is telling them before deciding to store grain.