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 strategy.
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 of them!