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Shoulda, woulda, coulda
The recent break in grains has been breathtaking, with corn dropping in half
from $8 to less than $4 in less than four months.
Soybeans have similarly dropped,
with wheat taking a little more time to do an even larger decline (from near $13
to $5.50). These historic price drops in little time have illustrated the
importance of selling grains at high prices - regardless of how bullish it is at
the time. Pro Ag said most of last winter that any sale of corn above $6 will
end up being a good sale. When corn values were $2 higher than that, there was
certainly grumbling about those sales at the time. But in the end, those prices
and many more are now the discussion of lots of "Shoulda, Woulda, and Coulda's".
It's hard now to argue with 4 years of corn sales at $6.50 or higher, and 3 years
of soybean sales at $14.50 or higher. Well, look where prices are today! $5.50
wheat, below $4 corn, and below $9 beans are looking awfully bad right now. But there are
even worse scenarios. You could have taken the windfall profits from holding
grains and invested them into Lehman Brothers, AIG, or Fannie Mae/Freddy Mac
stock! Or bought inputs for three years out past summer, because it worked so well
in the past. Now, yesterday we had three different quotes for urea on the same day,
ranging from $550 to $750/ton. And of course, the $750 deal was sold as 'too
good to be true', but in reality was a market price quote $200 ABOVE a rival
dealer just miles away!
It's hard to imagine a scenario where any agricultural business, with closely
held ties in a small community, can gouge so deeply into a trusting customer and
neighbors pocketbook, but there unfortunately are countless example of this by
the fertilizer industry. The old saying is 'Fool me one, shame on you. Fool me
twice, shame on me!"
It's quite clear now there was a cataclysmic change in market strategies that had
to take place in June/July of this year on all commodities (both purchasing and
selling them). Prior to July 1, not selling anything and buying everything (the
more you bought and the further out, the better) was the perfect strategy.
Since July 1, selling products and buying no inputs (or selling them back to the
marketplace as we've been advocating since July) have clearly been the best
What goes around, comes around. And what was a brilliant strategy prior to July
has turned into a disaster of epic proportions. Did you wiggle a different way
in markets starting in July? If not, it was important not to be betting too
much on the new order in the commodity market.
It's astounding how quickly the times have changed, but there's no question now
that they have changed. And there are a lot of shoulda, woulda, coulda's that
occurred after July, as even as late as Sept. 24 Dec08 corn was trading at
$5.70. Did you get information such as Pro Ag's recommendation to make catch up
sales of 2008 corn at $5.60 Dec or better that day? Or selling 2009, 2010,
and 2011 corn at $6 that day? And this was after it was clear that any frost
threatened corn in the northern corn belt would indeed mature. Sales delayed
until this fact was known could have been made at $5.60-$5.70 even as late as
Sept. 24, when the rest of the commodity world was convinced corn prices had
bottomed. At $3.80 Dec corn right now as of this writing, that was a huge $1.80
mistake in less than 3 weeks! I wouldn't want to explain why I was a buyer at
$5.60 corn just 3 weeks ago in front of a frost-free corn harvest! But there
are certainly many advisors in that position today - thank God Pro Ag isn't one
I've written a lot about marketing wannabe's or 'pretenders' in the past, but
monthly charts have been a godsend to the study of price behavior (and in
essence, human behavior). Other lessons in human behavior are being taught all
over again in the stock and financial markets. There's no question that if you
waited for the shoulda, woulda, coulda's you are likely in some big trouble
But like always, markets are brutal to bulls at the wrong times, and just as
brutal to bears at the wrong times. Now as everyone becomes bearish at
drastically lower prices, history is bound to repeat itself in a big way, with
people becoming most bearish at the bottom of the price cycle, and at a time
when prices typically bottom (October). What is the new order of prices? Stay
tuned, as markets are likely in the process of providing a few more lessons
about price behavior during uncertain times!
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 judgement and do not
guarantee profits will be achieved or that losses 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.
Ray Grabanski is President of Progressive Ag, a marketing and risk
management firm for farmers located in Fargo, ND. For questions or
comments, or if you are interested in more information about Progressive Ag's
common sense marketing services, call 1-800-450-1404 or email
The recent break in grains has been breathtaking, with corn dropping in half from $8 to less than $4 in less than four months.