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The market doesn't care!

Agriculture.com Staff 07/20/2007 @ 8:32am

To say that this has been a frustrating season would be a gross understatement. One of the wettest planting seasons on record was followed by the driest June on record.

Adding to the frustration was the fact that the first 19 days of July were also rainless. Planting was a struggle. Farmers on the river bottoms planted as much as three times. Even after enduring that frustration, there are bare spots.

The corn and beans that were planted early are surviving. The earliest corn has pollinated. The late planted corn is curled and may not pollinate. I know of at least four fields of soybeans that did not germinate because of dry soil. It will not be a good year for those farmers. There is no question that yields will be below average in my county. The consolation for me is that conditions in the west end of the county are worse than they are at my farm. That should mean a good payback on the GRIP insurance.

When I spoke at the bankers meeting on June 12 in Springfield IL, conditions were just the opposite of what they are today. We had a soil profile full of water and they were suffering from lack of moisture. Corn prices were on their way to seasonal highs as the dryness lingered. The whole situation confirmed my long held belief that the closer the problem is to Chicago, the sooner the market reacts to it.

Unfortunately, I based my market action on what I saw in Illinois, not on what I know usually happens under those conditions. Not long after I was there, they began to get rain. The rain had already stopped for us. The drier it got in Nebraska, the more rain fell in Illinois. The market did not care what happened "out west". Prices tanked.

With more acres of corn planted than most of us thought possible, traders have lost their enthusiasm for being long corn futures. Even with the bullish acreage report for soybeans, soybean prices have not shot up as many of us thought they would. Negative cash basis of over a dollar a bushel indicates that the demand for soybeans is not real- yet. That day will probably come after harvest.

Some farmers have asked how to deliver on a soybean futures contract. For all practical purposes it cannot be done. Severe restrictions dictate that only certain firms with elevators at delivery points can make actual deliveries. Individuals do not have realistic access to that tool.

One of the marketing strategies I always have in my plan is to not hold cash corn unpriced after July 1. This year I fudged and said that I could wait until July 15. Since that was on a weekend, I waited until the 16th. That proved to be a mistake because corn was limit down, so I was stuck with selling Tuesday. I got the sale made early before the price went double digit lower. In order to stay long, the market just in case the dry weather still causes a late summer rally, I put on a December $3.50 - $4.00 bull call spread. Chances of this being profitable are probably less than 50:50. Still, it keeps the door open for higher returns and allows me to get my bin empty on a better than average basis for this area.

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