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Volatility has Returned to Grain Markets

Volatility in the grain markets has been somewhat subdued, especially in corn and wheat during the early winter, as futures prices remained in a downtrend. Both wheat and corn, however, have turned around in recent weeks with wheat prices rallying over $1.50 and corn well over $.50. Even so, the corn market remains in a larger general sideways to lower price pattern. For many, it feels like volatility is not what it was in recent years. When taking a step back and looking at other agricultural commodities, volatility is alive and well and perhaps stronger than ever.

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Respect short-dated options contracts

In the search to provide tools useful to the marketplace, the Chicago Mercantile Exchange introduced short-dated options for corn, soybeans and wheat just over a year ago. While these tools may have many advantages, they also need to be treated with respect like any other tool.

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A 2014 corn marketing strategy

As 2014 unfolds, corn prices could drop to under $3.50. If weather takes hold, a rally back toward $6.00 or $7.00 could occur. Carryout has declined the last four months from close to 2 billion bushels to near 1.5 billion, due to higher-than-expected feed usage, good exports, and an excellent crush pace for ethanol. This sets the stage for corn prices to rally. On the other hand, a good crop could send prices significantly lower from the current price of near $4.60 December.

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Higher prices quiet sales too

The relationship between higher prices and customers taking advantage of rallies seems to be inverse. When prices begin to rally, there is all the excitement and buzz of where prices may go and all the pricing you will do. As a market begins to move higher, you begin to make sales. As prices move upward after that, you begin to feel as though you made a mistake. As prices screech higher, you tend to sit on the sidelines, waiting for the market to show a better sign of a top. Does this sound familiar?

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A new farm bill

The much anticipated (and delayed) farm bill finally passed the House this week and is on its way to the Senate, where passage is expected.

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A new year, different crop-weather

As a new year gets underway, we'll take a look at 2014 and the general expectations for markets in the year ahead. We'll cover the row crops as well as livestock. We'll provide a general overview from a high altitude based primarily on fundamentals.

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Rewarding rallies

The bean market has rallied about a dollar off its contract lows from earlier this fall. Should you sell? Rallies after harvest are opportunities to lighten up on inventory and reward yourself.

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It's all about planting progress, weather

The April 10 Supply and Demand report contained some surprises, namely a lack of reduction in U.S. corn carryout compared to expectations, as well as supportive reductions in world carryout for corn, beans and wheat. Beyond that, the report was termed mostly neutral and really didn't provide the market with much fanfare. For now, that means the market will focus on planting progress and weather.

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Sometimes waiting can be costly

Haste makes waste comes to mind when people make decisions without a lot of information. Farmers are generally very diligent about gathering enough information to make good decisions. When researching something like buying a new corn planter, it takes a lot of time and effort to make sure that your decision is the right one.

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Wheat a drag on corn prices

Corn futures are poised to move higher as record tight inventory (in the U.S. and world) suggests rally potential for prices is high. Any disruption to this year’s supply, or even the perception of trouble growing this year’s crop, and prices could take off. However, the wheat market will act as a drag on corn prices. Unless there are weather-related problems elsewhere in the world with 2012 wheat crops, corn prices may likely have a limited upside potential despite tight inventory.

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