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Crash and burn grains into harvest?

Agriculture.com Staff 07/24/2008 @ 7:13am

Grain prices plummeted the past three weeks, losing over $2 in corn and more in soybeans, before finding a bottom this week.

With a $2 corn break, a 33% recovery is 67c, and a 50% retracement is $1 gain which should occur in just a few short days! A dead cat bounce is not what it used to be, but these markets are now much bigger than they used to be. This type of recovery will be a perfect one to sell for those who have not been as aggressive of sellers as Progressive Ag the past few weeks. We've sold anywhere from 1.5-2 crop years of corn/soybeans as 2008 through 2011 offers have all been good ($8 corn 2008, $16 soybeans and $6.50 corn/$15.50 soybeans for 2009 through 2011).

It's funny, but everyone is always most bullish at the highs, and it was surprising how many people were afraid to sell 6.50 corn and $15 soybeans in the past few weeks, even after it seemed the corn market had topped. Crude oil now has dropped from $145 to $124/barrel, and even the crude oil market now appears that it finally formed its high. People are using transit more, and big SUV’s finally are being ignored in car sales instead for the economical Honda/Toyota vehicles. It's possible we have formed not only our yearly highs, but perhaps even decade highs in crude oil, wheat, and corn in the past few months.

While the ship has pulled out on 2008 crops, any sale over $6 corn will still turn out to be heroic in the end (as we have been saying since corn broke $6 months ago), as Pro Ag believes grain prices are finished now with their multiple year bull market (a once in 35 year venture). Now prices will likely trade between 4.50 and $6.50 corn for the next few years, with prices still very profitable for the most part as we need to continue the incentive to pull CRP acres out and expand production more worldwide to meet demand. $10-$15 soybeans might capture soybean trade the next 2-5 years as well. Note we are still in the upper end of those ranges for both soybeans and corn ($14 soybeans and 6.30 corn for 2008 through 2011 crops), so there still is plenty of sales opportunity left in this market.

Are you willing to accept the huge profits still offered on paper from sales of grain? Or has the past 2 year memory of losing hedges/sales going to prevent you from taking advantage of perhaps the best marketing opportunity you will see in your farming lifetime? These are very important questions to answer, and ones which each individual farmer needs to dig deep inside his heart and soul to see what it is made of!

The information contained, while not guaranteed as to accuracy or completeness, has been obtained from sources we believe to be reliable. The opinions and recommendations contained are based on our judgment and do not guarantee that profits will be achieved or that soles will not be incurred. Recommendations should not be construed as an offer to buy or sell commodities. There is substantial risk of loss in trading futures and options on futures.

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