Unrest Suggests Locking in Energy Needs

What’s Happened….

Is the world on fire? The way events seem to be playing out, maybe so. Escalation in the Middle East as well as the Ukraine/Russian war would indicate as much. The nightly news is filled with strife from different parts of the world, suggesting conditions may get worse before they get better. A recent visit by Ukraine President Zelenskyy (where he secured more U.S. funding for the war) and Russia’s President Putin (ordering a conscription/draft of 133,000 service men) suggest no end in sight for the conflict. Threats by Iran against Isreal are headlines and real. And then there are hurricanes, port strikes, and an upcoming election. I could go on, but you get the picture.

Why this is Important….

Uncertainties can create volatility in commodity prices. This may be especially true for the energy complex. A long-term picture suggests energy prices are trading in a sideways pattern. Increasing supplies, potentially less demand, and a move toward electric cars coupled with shaky economic conditions suggest crude oil (energy) prices could be on a path of longer-term declines. Yet, if supply disruptions occur, this economic theory likely goes out the window as the world will race to secure inventory. A bird-in-the-hand mentality will loom large.

From a farming perspective, energy prices have been relatively stable for some time, yet now is not the time to take comfort. It is, however, time to sharpen your marketing pencil and determine where your greatest vulnerability for price risk exists. It may likely be on the input side, as energy prices are poised to rally quickly and sharply.

What can you do about it?

Take time now to talk to your vendor. You are busy harvesting and trying to get fall fieldwork in order, and the markets aren’t going to wait for you. If unrest turns into supply disruptions, energy/fuel prices could take off. For many, securing cash contracts make sense, yet may not be available. Talk to your advisor and explore options or futures – are they a good alternative for you? Planning and having a strategy you can incorporate will likely fare better than the wait-and-see approach.

Find out what works for you….

Work with a professional to find the strategy or strategies that are best suited for your operation. Communication is important. Ask critical questions and garner a full comprehension of consequences and potential rewards before executing. The idea is to make good decisions for the operation and less emotionally-charged responses to market moves, which are always dynamic.

About the Author: With the wisdom of 30 years at Total Farm Marketing and a following across the Grain Belt, Bryan Doherty is deeply passionate about his clients, their success, and long-term, fruitful relationships. As a senior market advisor and vice president of brokerage solutions, Doherty lives and breathes farm marketing. He has an in-depth understanding of the tools and markets, listens, and communicates with intent and clarity to ensure clients are comfortable with the decisions.

The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Individuals acting on this information are responsible for their own actions. Commodity trading may not be suitable for all recipients of this report. Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Examples of seasonal price moves or extreme market conditions are not meant to imply that such moves or conditions are common occurrences or likely to occur. Futures prices have already factored in the seasonal aspects of supply and demand. No representation is being made that scenario planning, strategy or discipline will guarantee success or profits. Any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to Total Farm Marketing. Total Farm Marketing and TFM refer to Stewart-Peterson Group Inc., Stewart-Peterson Inc., and SP Risk Services LLC. Stewart-Peterson Group Inc. is registered with the Commodity Futures Trading Commission (CFTC) as an introducing broker and is a member of National Futures Association. SP Risk Services, LLC is an insurance agency and an equal opportunity provider. Stewart-Peterson Inc. is a publishing company. A customer may have relationships with all three companies. SP Risk Services LLC and Stewart-Peterson Inc. are wholly owned by Stewart-Peterson Group Inc. unless otherwise noted, services referenced are services of Stewart-Peterson Group Inc. Presented for solicitation.

Author

Bryan Doherty