Protect Profit as Bearish Concerns Grow

Bank Failures Add to Bearish Concerns as Farmers Contemplate 2023 Corn Sales

Katie Micik Dehlinger
By  Katie Micik Dehlinger , Farm Business Editor
Eastern Iowa farmer Erik Oberbroeckling began marketing his 2023 last summer and has now hedged around 35% to 40% of his expected 2023 corn production. (Progressive Farmer photo by Mark Tade)

MT. JULIET, Tenn. (DTN) -- Minnesota farmer Mark Nowak started selling his 2023 crop last July, after paying the largest fertilizer bill in his 50-year farming career. He looked at the December 2023 corn futures price at the time -- $6.84 -- and decided to make his first sale.

He made more sales as the corn market inched lower and has now sold about 80% of the corn he expects to grow this year.

"How do I dare sell that high a percentage? I look at my history. We're on some really good ground. It's all tiled. I don't think in the last 25 years, I've produced less than 80% of my projected crop," he said. It helps that his co-op will let him roll his hedge-to-arrive contracts to the next year if he can't deliver.

"I feel pretty good about where I'm at," the consultant and former lender said. "I've always been a big risk manager. I've always been, probably, above-average aggressive on forward pricing."

DTN Lead Analyst Todd Hultman said this year is one that's likely to reward early marketing and increased crop insurance coverage.

Hultman usually advises waiting until seasonal peaks, like April or May on corn or May or June for soybeans, to make substantial sales. Hultman makes marketing recommendations as part of DTN's Six Factor Strategies, which subscribers can find on the market page of their MyDTN (…) or GrainsPro (…) account.

"But in this year, I think we have a whole different pattern, given the weather expectation and given the financial sector problems," he said. "That's why I think the sooner, the better is going to be the better play for most producers."


With retirement somewhere on the horizon, Nowak's primary focus is on protecting his cash. After his first sale, he looked at the landscape. Interest rates were driving up the cost of servicing debt but hadn't caused any bank failures yet. The Russian war on Ukraine showed no signs of abating, and weather forecasts called for a shift to neutral or El Nino conditions, which are generally good for crop production.

"I just said, hey, the risks are to the downside, not to the upside, and I kept selling," Nowak said.

Hultman said that after two highly profitable years and tight grain supplies, farmers saw the warning signs in their fertilizer bills. Then forecasts started calling for better weather.

"We were already concerned that we're going to see much lower prices this fall," he said. "Then you add on to it these banking worries, and it just adds a whole other layer of bearish fear in the market, because anytime you even toy with the spread of banking problems, the potential of that scaring prices down in markets is just too big to ignore."

Silicon Valley Bank failed on March 10, and Signature Bank was closed to protect depositors the following weekend. Credit Suisse received an injection of capital from the Swiss National Bank, and on Thursday, 11 of the largest banks in the United States collectively deposited $30 billion into First Republic Bank to save it from a similar fate. For more, please read, "What Does the Failure of Silicon Valley bank Mean to Ag Markets" here:….

"I think it's going to continue to be a stressful outside market environment through this summer," Hultman said. That means there will be days when the pressure backs off, but there will be also days when traders panic and push everything lower. "That makes it difficult in the ag sector because, regardless of the fundamental situation of anything, when traders are scared, they sell the market lower."


Erik Oberbroeckling, who farms in eastern Iowa, started selling the 2023 crop last summer, like Nowak. Back then, corn was around $6, and he could still pencil in a 15% profit.

"Don't necessarily try to be greedy and get the high," he said. Over the past 15 years or so, his farm has averaged a 15% return. Some years it's been as high as 40%, while others it was -2%. So, when he looked at the market and saw his average return, he said, "What's wrong with taking a piece of that? If that's the worst sale you make, that's a 15% return. Great."

He likes to use options and hedge-to-arrive contracts for his early marketing. "Probably the biggest thing that's helped us do that is a separate line of credit just for hedging," he said, adding that when margin calls come, it eliminates concerns about the impact on the rest of his operation. (For more on Oberbroeckling's approach to marketing, please read:….)

He's slowly built hedge positions covering about 35% to 40% of his crop.

One thing he did differently this year was to boost his crop insurance coverage to 85% and purchase a supplemental policy. "Just given the whole dynamic of what's going on, we know where our worst-case scenario is going to be. We spent more on coverage than I ever have, but I'm going to sleep well at night."

Oberbroeckling said that with a breakeven of about $5 on corn and $11 on soybeans, there are still opportunities to capture profits in the market today, even though those opportunities aren't what they were two weeks, three months or six months ago.

Historically, the odds are around 90% that the market will offer a price higher than the February crop insurance guarantee, which was $5.91 for corn and $13.76 for soybeans, sometime during the growing season.

"Will this be the anomaly year when it doesn't? It could be. I don't know," Oberbroeckling said.

Nowak said he's had conversations with some of his consulting clients who have been diligent about making forward sales in the past few years. It's not uncommon to hear hesitance after multiple years when that strategy meant leaving revenue on the table. While the impulse may be to take a wait-and-see approach, Nowak advises staying the course.

"I like to be consistent. You just keep doing it, and this year, it looks like it may pay me," he said. "Even if it doesn't, even if prices for corn go back to $8, I'm sold at $6.20, I don't care. I'm making money. It's going to be profitable, and I'll start looking at selling '24 crop."

Katie Dehlinger can be reached at

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Katie Dehlinger