22 RVC Insights Spring - Flipbook - Page 14
Managing Price Risk
What is your plan to mitigate price risk when prices do begin to trend lower, especially
when prices are this high?
Michael Moellenbeck, VP Grain Business Unit
The above December ‘22 corn chart shows the $5.40 area as offering some support going back to early
November. December is currently trading around $5.80.
Many customers utilize price offers
to take advantage of bullish trends.
Offers are placed above the market
just in case there is a rally at a time
when we have limited access to
the markets, such as the overnight
trade or possibly following a key
government report. But what if the
trend suddenly turns and a rally
seems to be running out of gas?
The corn market has been in an
uptrend since early September, and
it is easy to get into the mindset that
there is a limited downside when
prices keep increasing. But just in
case, what is your plan to mitigate
price risk when prices do begin to
trend lower, especially when prices
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are this high?
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Can you tolerate a 10 cent price
drop?
Can you tolerate a 30 cent price
drop?
What is your tolerance, and how
can you manage the risk?
The December ‘22 corn chart (above)
shows the $5.40 area as offering
some support going back to early
November. December is currently
trading around $5.80.
Using this chart as an example, a tool
we can use to mitigate downside
risk is through the use of a $5.40
Stop Loss Order. What is a Stop Loss
Order? It is an order that establishes
a price below the current market that
is placed to avoid further losses in
the event prices turn bearish. In this
example, a $5.40 Stop Loss means that
you do not have to make a sale today,
especially if prices are trending higher,
but you are protected at $5.40 in the
event prices suddenly turn bearish. It
is that Line in the Sand that you don’t
want to see prices drop below without
making a sale.
This is a timely and straightforward
way to help manage price risk at your
convenience on your phone.
The River Valley Cooperative app can
be downloaded from the Google Play
store or the Apple App store.