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Bryan Doherty: A new year

As 2010 comes to a close and 2011 is upon us, there are differing sectors of the agricultural community which are feeling the effects of volatility and high-priced markets or low-priced markets. Grain producers looking ahead to 2011 (or even 2012) are seeing real opportunity presented as the new year starts. For dairy producers, 2010 is another year that, for the most part, they would like to forget, as was 2009. Time changes many things, and it's highly likely that, by the end of 2011, there may be a flip-flop in price activity for dairy and grain.

It is important for grain producers to take stock of the market now. Recognize value and the opportunity that current prices present. Be strategic in your planning. There is an old saying: prior planning prevents poor performance. This may be acutely true in 2011. Prices are attractive. With tight inventory, they could get explosive. Yet on the other hand, from a historical perspective, just when supplies seem to be so tight that there's no turning back for prices, somehow record crops emerge and speculative interest quickly leaves the market. Therefore, be prepared and have enough sold into 2011 that, if prices crash, it makes a difference to your bottom line. Also be prepared so that, if prices rally, you've positioned yourself to benefit.

For dairy producers, it's highly likely that, between high grain prices and low milk prices, there will be a natural attrition of dairy cows and/or heifers. Ultimately, low prices cure low prices, and this could be the scenario that 2011 will eventually show. If prices recover, we want to encourage producers to recognize that getting aggressive on selling into the rally, while it can provide beneficial dividends, may also cut you significantly short if prices climb higher than you think they will. Therefore, we encourage a strong balance. If you forward contract milk into rallies, be prepared to cover a portion of this with call options. Or buy put options on rallies to establish a price floor, yet leave the top side open. 

Marketing is not easy. If it were, everyone would do it and farmers would have a magical solution to generate guaranteed profits. That just doesn't happen. The market will give and take. It's more important than ever to be perceptive of where the market is now, where it's been, where it could go, and how to handle these moves when they occur. We look forward to a prosperous 2011, and hope you do as well.


If you have comments, questions or suggestions, contact Bryan Doherty at 1-800-

Top-Farm, Ext. 129. 


Futures trading is not for everyone. The risk of loss in trading is substantial.

Therefore, carefully consider whether such trading is suitable for you in light 

of your financial condition. Past performance is not necessarily indicative of 

future results.

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