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USDA's spoken; now what?

Wednesday's cuts to U.S corn and soybean crop size estimates by USDA, along with the realization that tight global crop supplies are only going to get tighter in the future, had the corn, soybean and wheat pits in Chicago posting double-digit gains earlier this week. And, despite a slightly lower trade Friday, most expect momentum to carry through winter and beyond.

"Corn futures prices are expected to extend gains over the longer term as end users, including livestock producers and ethanol plants, compete for a limited supply of corn," according to a Dow Jones Newswires report Friday morning. "Prices need to climb high enough to curb demand and to entice farmers to plant more acres this spring to replenish supplies."

"The bull market in grains isn't quite finished yet. There may be more excitement yet this year, with only the 2008 highs above current price levels now since corn and soybeans ran to new 2 year highs again today," said market analyst Ray Grabanski on Thursday. "Things are going to get interesting again. Get ready for more fireworks, as it's likely we could see significant upside potential in the near term, and once demand has been sufficiently cut -- also significant downside potential as well.  We could be looking at another dynamic winter in 2011, and today's price action might be the beginning of that dynamic run."

March 2011 corn futures soared past 2 1/2-year highs Thursday, as analysts and traders looked to take stock of how far the markets will go before Wednesday's USDA reports run out of gas. One Dow Jones Newswires report Thursday indicated Wednesday's numbers fell on top of an already 6-month-long uptrend in the corn markets for the March futures contract, amounting to a gain of almost $3 per bushel. "Technicals do suggest the path of least resistance for corn prices will remain sideways to higher for at least the near term," according to the Dow Jones report.

That report also indicates the next 2 points of chart resistance for March corn are $6.50 and $7. But, at the rate things have gone since Wednesday, farmers say they expect little resistance at those points.

"In my opinion, $7 is not major resistance at all. $8, yes," says Marketing Talk member Boarsnest1. "If there was to be a drought in the Breadbasket this year, Katie, Bar the door. Rationing must occur. We need a good planting season, a good crop and that national 175-bushel [corn] crop."

So, in terms of market moves now that USDA's numbers have come and gone, what's the best plan? Though prices are well above where they need to be for a lot of farmers to secure a profit, current projections have some holding back grain that they might otherwise be marketing.

"I will be setting some goals as the market moves higher to get to 75% to 80% sold before the March Planting Intentions report," says Marketing Talk member p-oed Farmer. "I plan on keeping some bushels back for the summer fireworks that may appear, but I will not gamble much more than 10% to 15%."

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