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Here we go

Agriculture.com Staff 06/01/2007 @ 11:28am

As of this writing, corn futures rallied sharply today with a gain of 17-1/2 cents in July, and 13-3/4 for December. The previous day, prices dropped 11-1/4 in July and 7-1/2 in December.

Overnight, forecasters had changed their outlook for less rain in the eastern Corn Belt. Volatility is picking up and will likely increase into the summer months. For now, the height of uncertainty lies yet ahead of this year's production for corn as well as other row crops. Therefore, volatility over the next 6 to 8 weeks will probably be heightened as compared to winter months.

As stressed in previous articles, we encourage farmers to become very familiar with their marketing tools. It is imperative that farmers have a thorough understanding of options strategies and strategies to protect the upside in case prices rally significantly. On the other hand, can you afford not to sell rallies when prices are at historically high levels?

Projected demand is simply that… projected. Until it actually occurs, there is always a chance something could happen to change the demand perception, and prices could drop significantly. Therefore, we encourage you to have a balanced approach moving into the summer. Forward contracts should be covered, or at least to some degree, through the use of call options. Put options may be a wise strategy to use against unpriced expected production. Stay vigilant to market signals as well. In February, futures posted a very bearish looking key reversal, and prices responded by dropping 60 cents in December futures and over $1 in July.

A drop through price support or a close above resistance could signal funds to become more active, changing market sentiment quickly and significantly. Lastly, if a weather market truly develops, you should prepare for grain prices to at least double in value.

If you have any questions or comments, please contact Top Farmer at 1-800-TOP-FARM, ext. 129.

As of this writing, corn futures rallied sharply today with a gain of 17-1/2 cents in July, and 13-3/4 for December. The previous day, prices dropped 11-1/4 in July and 7-1/2 in December.

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