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Reports and Weather Looming Larger, Analyst Says

The quarterly Grain Stocks and Prospective Planting reports could have a significant impact and set the tone for price direction in the months ahead. The big question this year, of course, is if farmers intend to plant more soybeans and less corn. Or, in the end, will corn once again be king?
Why is it that farmers seem to want to plant corn? We believe it dates back the last 20 years when corn production has increased on a very steady and nearly predictable pace. In other words, most producers feel confident and comfortable, anticipating corn will yield better year in and year out. Until recent years, inconsistency and a lack of improving yields suggested soybeans were grown more for rotational purposes. That attitude may have changed, as yields over the last four years have steadily increased, with last year posting a national record at an average of 52 bushels per acre. It was not unusual that many producers in the Midwest experienced yields of 70 or 80 bushels per acre. Big world demand is also prevalent.
Visits with corn and soybean producers this winter at various functions and trade shows suggest that many may not be anxious to shift to beans. Record corn yields for many producers last year, on top of excellent yields the previous three years, make corn an easy decision. However, with bean prices on November futures trading over 10.00 for much of January, February and March, and December corn futures under 4.00, the price ratio of beans to corn has been favorable to soybeans and could encourage a shift to more bean acres.
In addition, tougher economic times are leading to sharper pencils when it comes to bank loans, and may cause producers to decrease their input costs. Beans also get the nod here. Prior to the report release on March 31, we would not be surprised to see producers take a more defensive posture in soybeans by selling ahead with forward contracts, using hedge-to-arrive contracts, selling futures, or purchasing put options. If, in fact, bean acres rise by 3 to 5 million and pull this from corn, it is likely that ending stocks for soybeans could grow to well over 500 million, and this would be enough to drive prices down to the $8.50 mark. In the end, weather will trump all.
Are you ready?
If you have questions or comments, contact Top Farmer at 1-800-TOPFARM, 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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