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Get ready for $12 corn, analyst says

Agriculture.com Staff 02/28/2008 @ 4:21pm

Get ready for more volatility, marketing adviser Scott Stewart of Stewart-Peterson told hundreds of farmers packed into a 7:00 a.m. meeting at the Commodity Classic in Nashville, Thursday.

"The kind of volatility we’ve seen in recent weeks and months is just a taste of what's coming," he said.

Stewart has been making that case for over a year now, with a handout called "$12 Corn Special Report." Last year Stewart talked about the potential for $12 corn, $18 wheat and $25 soybeans.

"The price of wheat is being met."

Stewart makes it clear that he's not forecasting those prices. In fact, he says it's a mistake to base your marketing on outlook, since no one really knows where prices are headed.

But Thursday, he painted scenarios of such high prices, based on tight supplies, the chance that elevators who can't get more credit for futures margin calls may have to buy back futures to cover short positions (driving prices even higher) and the potential for drought, which some weather experts believe is more likely in the next two decades.

Add into that a completely new source of demand for biofuels, and the ag commodities market is set up for volatility for years to come.

He does not advocate using cost of production to establish a marketing plan. The market never cares what you cost of production is. Nor is he a fan of rigid step-up marketing plans.

Instead, Stewart advocates having a marketing strategy, not a plan, that anticipates what you're going to do if prices move up a little or up a lot. And, likewise, knowing what you'll do if they fall a little, or a lot. Part of that will involve the use of options strategies, he said. If you can't do this on your own, hire a marketing adviser. But even if you do that, you need to know enough about marketing to be an informed consumer of that service.

Old marketing methods, or not having a marketing strategy, won't cut it in the future.

"That's what today's session is all about, to prepare you mentally so you don't sell $5 corn before it goes up to $7," Stewart said.

Get ready for more volatility, marketing adviser Scott Stewart of Stewart-Peterson told hundreds of farmers packed into a 7:00 a.m. meeting at the Commodity Classic in Nashville, Thursday.

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