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Prepare for volatility

Agriculture.com Staff 04/05/2007 @ 12:23pm

Limit-down two consecutives days in the corn market this past week is an indicator of the potential for extreme volatility that may lie ahead for not only corn, but for all grain markets.

Tight world inventories and little room for error on this year's crop production will have both producer and end user on edge. In addition, speculative interest has poured billions of dollars into the commodity markets in the recent years. Bottom line, a perfect storm for high volatility is brewing and the market may have given us our first taste this week.

The key is preparedness. Prior planning prevents poor performance. We use this phrase when on the road conducting marketing seminars. Being strategically prepared for this year's high volatility will allow you to endure price crashes and steep advances with great confidence. The days of flying by the seat of your pants, producing and hoping to sell sometime later may be long gone.

The market may offer significant opportunity one week, yet take it all away the next. The corn acreage report released on Friday, March 30, while in the range of estimates, was construed just bearish enough to send prices reeling as traders decided to exit long positions. However, from a historical perspective, the March acreage estimate has little relevance to price. What lies ahead for the grain markets is weather. Weather may have a ten-fold impact compared to exports or acreage changes.

What does it all mean? Be a student of the market. Understand all your marketing tools and how they work. Know your alternatives. Don't get caught blindly bullish or bearish. Have a budget for marketing, and make sound strategic decisions. Be prepared; it could prove costly if you are not.

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

Limit-down two consecutives days in the corn market this past week is an indicator of the potential for extreme volatility that may lie ahead for not only corn, but for all grain markets.

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