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The months ahead

Agriculture.com Staff 12/03/2007 @ 6:24am

When analyzing the corn and soybean markets in most years, there is a general seasonal price pattern. Lowest prices are usually during harvest and highest prices during the peak of uncertainty. For corn and soybeans, that period of great uncertainty is quickly approaching, which generally occurs in the mid winter months.

Why the uncertainty? As one looks ahead to the 2008 growing season, every variable that could affect the crop remains unknown. Yet, that is a time window when pricing opportunity may be at its best. Farmers often need to make marketing decisions when they have little information to go on. As prices typically move higher into the winter months, they reflect growing uncertainty plus, generally, a weather premium of some type. If planting goes well and the crop matures into mid-summer, prices typically move into a downtrend.

Over the past year, there has been much talk about how the markets have changed. Yet, a hard look at what happened in 2007 suggests the market moves were typical, just mostly magnified. Prices rallied early in the 2006 harvest season and continued upward into the winter 2007, peaking in February. After that, prices began their typical slide, as more information became known. Acreage numbers, planting conditions, planting progress, etc. became a known fact, and prices continued to slide into late spring. Dry weather concerns quickly drove the markets higher into mid-June, only to see prices crash to the downside once forecasters put additional rain in the outlook. Prices then bottomed in late summer/early fall, to start their recovery.

The point we are attempting to make is that, in the months ahead, prices could react to the greatest amount of uncertainty - items like unknown acreage, demand, weather and peak in the mid-winter months. Therefore, be prepared to make sales for the old and new crops late in 2007 or in the first half of 2008. If you wait to see what your crop looks like, prices could be dramatically lower. To cover cash sales in a weather market, consider using CALL options.

If you have any questions or want help implementing a strategy for 2008, please contact Bryan Doherty at Top Farmer: 1-800-TOP-FARM.

When analyzing the corn and soybean markets in most years, there is a general seasonal price pattern. Lowest prices are usually during harvest and highest prices during the peak of uncertainty. For corn and soybeans, that period of great uncertainty is quickly approaching, which generally occurs in the mid winter months.

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Weather Trumps Demand