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I should have known

Agriculture.com Staff 05/04/2007 @ 3:05pm

One of the wisest farmers, I have ever known, told me many years ago that when your dentist asks you about getting into the corn market, the top is in.

Over the years, I have developed a list of "Murphy's Laws for Commodity Traders." That saying is not on the list, but it should be. The wise farmer's point is that when the move gets so obvious that everyone sees it, there is no one left to buy and prices will head down. The last people to buy are public traders that do not know much about marketing, and they will be the first ones getting stuck with losing positions when the trend changes.

During the last week of February, I got the first hint that the corn futures market might be making a top. First, I had two farmers wanting me to help them open a futures account. These individuals usually stay away from futures, but this time were looking at $4.00 December corn and thinking that selling futures was a good idea.

Secondly, I got a call on my cell phone on the way back from a workshop from an individual asking about the risk of buying a put option and selling a call. He understood the strategy correctly, but wanted to run it past me to see if he was missing something that he did not understand. I told him that it was a legitimate strategy that had very little risk doing it the way he proposed. I knew by the timing of his call and where it came from that this was very aggressive compared to his usual marketing methods.

As if this were not enough of a clue that a turn was imminent, a couple of weeks later I got a brochure in the mail from a marketing service exploring the possibility of $12 corn futures in the next few years. This is not a fly-by-night outfit, but one of the best known and most conservative companies in the business. The writer had obviously done a lot of research before putting such profound thoughts out to the public. Such bullishness makes it difficult for a farmer to sell even with corn prices at historic highs.

Action this week proves that the market is not dead. With prices right at some key chart areas, any further weather delays will be crucial to future direction. If the rain that is currently predicted becomes reality, we may see prices challenge the February highs. If prices are higher on Monday, I will seriously consider more sales. I still believe that this rally will be short-lived. What I do not have a good idea of is when the top will come and how high it will be.

The crop is getting planted. I finished my small acreage on Thursday. I got rained on twice during the morning, but was done before the ground got muddy. At breakfast this morning, with several other farmers, some were done planting and others very close. Almost everyone said that they had some fields that were really too wet to plant, but they did it anyway. We are fortunate in that our soils take in water pretty well and dry fairly fast once the rain stops. After the inch last night, I can relax for the weekend and wait for what Monday brings.

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