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Earthquake disrupts markets

03/11/2011 @ 10:44am

Any good technical or seasonal system can be disrupted by a worldwide cataclysmic event. Such things as the Chernobyl nuclear explosion in Russia or the terrorist attack on September 11, 2001caused the markets to act irrationally for a while. Today’s earthquake in Japan fits in the same category.

There was already plenty to talk about in the grain markets today. The government report that was released yesterday was expected to have some surprises, but the numbers fell about as expected. Initial reaction was bearish. At the end of trading on Thursday the action was not as bad as many had feared. The corn market was poised for a correction so a lower close was not a big surprise.

The deadline for making changes in the crop insurance program is coming on March 15. Those wanting to take advantage of revenue guarantees that are at historic highs need to evaluate their policies and make the necessary changes by the close of business on Tuesday. In my own case, I was surprised that the premium costs did not go up as much as I anticipated. It appears that I will be able to get insurance that will adequately cover both production risk and price risk for a premium I can afford. Here in Cass County we have a history of consistent yields that helps keep the cost reasonable.

The markets appeared to be poised for a major correction before the earthquake hit. Last week at the Commodity Classic in Tampa a panel of “experts” was uniformly bullish on the corn market. A lot of us walked out of the session thinking that was probably a cautionary sign.

My experience with previous events such the disaster today is that prices rebound quickly after acting crazy for a day or two. If you need to make sales, you will probably get a chance some day next week to sell at a price higher than today’s close. A rebound is common. A target is half way back to the price before the event took place. There is no guarantee that the market will not go straight down. However, there is still the need for a big crop this fall.

The whole growing season is ahead. Until the seeds are planted the production risk is 100 percent. There should be at least one more big rally before the kernels are on the cob and the beans are in the pods.

On Monday, March 14 I will be part of a team doing a program at the ARDC at Mead, NE on Farmland Rental Arrangements Update. The other person on the program is Al Vyhnalek, UNL Extension educator in Platte County, NE. He has extensive experience with various leasing arrangements. The meeting is 9:00 to noon with the meal sponsored by the Nebraska Soybean Board. If you want to attend, call 800-529-8030 for reservations or e-mail kglewen1@unl.edu. today

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