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Higher corn prices are no piece of cake for selling

As some elevators report a near record pace of farmer selling of corn, market analysts suggest keeping some crop back for expected higher prices.

On the Chicago Board of Trade, farmers can sell out to 2010. In fact, the July 2010 corn contract jumped $.15 on Tuesday at $3.52 per bushel. Farmers can sell July 2008 corn at $4.15, and July 2007 at $4.30.

Dan Basse, Ag Resource, said the elevators he works with are reporting heavy farmer selling.

"I'm hearing near record large crop selling," Basse said. "Because of price, the amount of corn already on the books is sizeable. I'm talking about 2006, 2007, and all the way out to 2008 crops."

Basse added, "Selling ahead 20%-30% of your crop at $4.00 per bushel is fine but maybe not the greatest decision right now."

Evidence of farmer selling is showing up on Agriculture Online's Market Talk section. In one discussion, a farmer expressed how hard it was to decide to sell when the price just keeps going higher.

"It's hard to make sales when the market just keeps trending higher, especially until the spring price is established this month for crop insurance. I think we could see more selling as that time draws near in the next week. I wouldn't want to bet everything here on a price break but it wouldn't surprise me," a poster using the name Outofthemoney said.

He added, "I have sold 25% of my APH at an average of 3.45 cash and feel pretty good about it. If it goes another $1.00 higher it won't feel near as bad as the $1.00 I left on the table last fall."

Another farmer followed up with his concern of making the proper selling decision. "I am at 22% sold on expected corn production for 2007 corn with an average cash price of $3.05. Now I have myself wondering what to do for my next sale. It is approaching $3.60 for a fall bid in my area now. Hard to keep scaling when it goes higher every time I sell, but could be a heck of a lot worse. It could go down for no reason and leave a guy wondering why not more sales."

Basse said people in farm country should be sure to put themselves in position to take advantage of upcoming higher prices.

"I think $4.50-$5.00 corn is possible with the ethanol usage doubling and the potential for cellulosic ethanol. As the prices go higher, the farmers posting on your site should sit back, smile, and do nothing," Basse said. "I don't see corn dropping below $3.50 in the fall."

Meanwhile, Shawn McCambridge, Prudential Securities, agrees in the increased interest of selling.

"The attractive prices are creating more hedges on futures contracts," McCambridge said. "We may be less sold on old-crop, but more of an interest to selling further out. In general, farmers have done a good job of selling supplies to generate cash flow. They have done that by selling in phases."

On price, McCambridge sees the corn market being range bound until there is a better definition of spring planting acres.

"To boost buying interest, we would have to reach new contract highs to go to the next level of prices. I don't see that happening short-term," he said.

Farmers are urged to look at what could send the market higher when deciding whether to price corn, McCambridge said.

"We are in a demand-driven market. That puts pressure on production every year," McCambridge said. Therefore, look for the March planting intentions for a trend and then a weather pattern this spring."

Meanwhile, despite many higher trade estimates for 9-11 million extra corn acres in 2007, Basse is estimating between 5-6 million.

"There is no doubt we are going to add corn acres, but with fertilizer companies already reporting a tight supply of railcars and river barges, it could be tough to get needed amounts of fertilizer in position."

If the higher corn acres are realized, the alternative for southern U.S. growers who don't get sufficient amounts of fertilizer product could be $8.00 soybeans, Basse said. "That's not bad."

As some elevators report a near record pace of farmer selling of corn, market analysts suggest keeping some crop back for expected higher prices.

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