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Corn collapse lessons

Agriculture.com Staff 07/02/2007 @ 9:20am

The collapse of the corn market over the last week once again reminds corn producers just how rapidly prices can fall apart, especially after a rally.

Looking back just a month and a half ago, prices bottomed on December corn futures at 3.56 and then managed to rally up to the contract high of 4.31 on June 18th. Within a mere short eight trading sessions, prices moved to under 3.60 or drop of over 70 cents. So what is to be learned?

We see two lessons that have been learned over the last couple of months. First of all, corn futures often provide a second opportunity for farmers to sell. When prices first peaked in February and then worked lower for three months, many farmers concerned themselves that they should have been sellers in mid-winter. The market did provide a second chance. However, pricing opportunities, especially when related to weather, often come fast and leave faster.

The second lesson is that prices can move rapidly. The market continues to signify that high volatility could be here to stay for some time. As both U.S. and world inventory numbers continue to tighten and demand grows, it will take larger and larger crop year in and year out to meet demand. As the critical growing season continues, weather forecasts are everything. If the market perceives dry conditions or crop concerns, expect rapid price rallies. Expectations of rain or better growing conditions, and prices will quickly drop.

Be prepared for volatility as the summer wears on. Normal type growing conditions could send corn and soybean prices considerably lower. However, if the outlook changes, expect prices could rapidly rally. Be prepared for the market to move in either direction.

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

The collapse of the corn market over the last week once again reminds corn producers just how rapidly prices can fall apart, especially after a rally.

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