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It's not doublespeak: It's reality

By Cathy Ekstrand
Cathy is filling in for regular columnist Naomi Blohm

If you are working with a market advisor it may seem like
they have a split personality. One minute they are telling you to protect the downside
on un-priced bushels, and then in the same breath they encourage you to buy
calls to protect the upside on what you may have sold or plan to sell. It's
like market advisor speak with forked tongue.

There is good reason for this. Depending on weather, corn
prices could drop to $4 or swing back up over $8, a potential 3 or 4 dollar
swing. And with Dec corn near the $6 level, we're smack dab in the middle of
that swing.

The key for marketing during a time of uncertainty is to
have flexibility and protection. You want to protect this price level because
you are profitable here, and if no drought occurs, these are strong prices.
Last year December corn fell a dollar into the spring, from the $6 area down to
the $5 area, before the concern over a drought started.

On the other hand, you may want to wait to price cash until
you feel better about the moisture levels in your area and basis improves.

In your particular situation, February may or may not be the
time to get aggressive with cash sales. You still need to be mindful where
price levels are and consider hedging to protect your investment. This month,
my focus will be on:

  • New crop corn. December corn at the start of the year traded
    down to 5.70 and then rallied to 5.95, basically a 25- cent gain. The market
    then retreated to the 5.70 area again. There seems to be significant resistance
    in the $6 area due to a potential increase in acres this spring, and tempered
    demand.
  • New crop beans have been a little more dramatic, having
    traded down to 12.59-2 early in January to recently hitting 13.50 area, a good 90-cent
    bounce on South American weather concerns. It would appear that resistance
    comes in at $13.50, while support is seen 50 cents lower at $13.00.  A change in weather pattern for South America,
    or decline in demand, could erase the recent gains.

What we have to remember is that often times the best
pricing opportunities arise when we know the least about our crop prospects.
Take right now for example:

  • We don't know for sure that we'll plant close to 100 million
    acres of corn in the coming year, but the market will assume that, until spring
    weather dictates otherwise. And should we get confirmation of those acres
    having been planted, whatever premium the market may have offered due to
    uncertainty will be erased.
  • We don't know if we could have a trend line yield or not, and
    there again, the market has to make some assumptions, until given reason not
    too.

What we also have to realize is that not everyone is dealing
with a deficit of moisture. Some areas have received some relief this winter, and
some weather experts feel that pattern of increased moisture could continue
into the spring and summer months as well.

So, what that means for marketing is that you should plan
like it's going to be a normal crop year, just like you will when it comes to buying
seed and fertilizer. You won't plant a crop like there is going to be a drought,
so don't market like there will be one. If there is not a drought, you'll want
to capture prices when they are strong. It is simply too risky to not capture
prices because you think there might be a drought and prices will be higher
later this year.

On the other hand, have pricing contingencies in place in
case there is a drought. With world stocks as low as they are, a drought could
have huge ramifications, even if you believe that the probability of drought is
not that high.

So if it sounds like I am speaking out of both sides of my
mouth, think of it this way: I am speaking to multiple possibilities. That is a
responsibility we market advisors have to you. I encourage you to be prepared
for whatever risks and opportunities 2013 may bring.

If you have questions, you can reach Cathy at
cekstrand@s-pelmwood.com, or post a marketing question in the Women in Ag discussion group.

The data contained herein is believed to be drawn from
reliable sources but cannot be guaranteed. This material has been prepared by a
sales or trading employee or agent of Stewart-Peterson and is, or is in the
nature of, promoting the use of marketing tools, including futures and options.
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 Stewart-Peterson. Commodity trading may not be suitable for
all recipients of this report. Futures trading involves risk of loss and should
be carefully considered before investing.  Past performance may not be
indicative of future results. Copyright 2013 Stewart-Peterson Inc. All rights
reserved.

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