September 7, 2018

Are You Taking Advantage Of Futures? History Shows You Should

 |  By: Anna-Lisa Laca

While markets have come off of their July low, prices are still pinching margins. With the futures market offering $16 milk for the first half of next year, is that an opportunity to take advantage of? One analyst says absolutely.


“We’ve been telling guys to actually be taking some action,” Mike North of Commodity Risk Management Group told AgriTalk After The Bell host Chip Flory. “Here's why. If you look at the first half of 2019, it’s giving you $16 pricing. When you look at the last several years by way of first half averages, we've seen three of the last four years below that threshold.”


According to North, without even including the tariff conversation, history shows farmers should “be doing something.”


“We can't just idly walk past $16 milk,” he said. “Furthermore, if you look at this from a Class III standpoint, in the last 10 years, three quarters of the prices that guys have received, their benchmark price has been between about $13 and $18 with $16 being the average.”


North says that while the market is waiting to see what happens with trade, it’s providing farmers an opportunity to put a floor on their prices for next year.


“It's showing us average prices and giving us an opportunity to do something that we know, historically in the last several years, has not been present by the time we've gotten to that future time in the calendar,” he explained. “So, we like options right now. We've been getting put coverage in place, $15.50 coverage is affordable right now with different types of spreads, but we're telling guys to be active here because history was out of trade conversation has suggested we should be.”


Mike North will be part of a live taping of U.S. Farm Report at the 2018 MILK Business Conference. He will also present a breakout on risk management on the third day of the conference. 



Attend 2018 MILK Business Conference 

When: November 5-7, 2018


Where: The Luxor Resort & Casino, 3900 S. Las Vegas Blvd, Las Vegas, NV 89119


What: Be challenged, gain a competitive edge and connect with other dairy business owners and managers at this unique education and networking event. MILK Business Conference will offer expert insight on the constantly changing and challenging dairy industry.


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Thanks to our 2018 MILK Business Conference sponsors:


Elite Sponsor: Boehringer Ingelheim | Premium Sponsors: Dairy Farmers of America, Vault Technologies, Animal Health International, CHR Hansen, Farm Credit, GEA, MERCK Animal Health, Neogen, Pioneer, Virtus Nutrition | Supporting Sponsors: KCOE ISOM, VAS, Water Tight Roofing, SEMEX, Endovac Animal Health, John Deere