Before we take a look ahead to the 2008-2009 growing season, let us take a quick look back at where we have been over the last two years.

During the 2006-2007 growing season, harvested corn acres dropped from 75.1 million acres in 2005-2006 to 71 million acres — giving up 4 million acres to soybeans. A sub-par yield during the 2006-2007 growing season left corn carryout around 1 billion bushels, forcing the corn market to rally 90 cents from Sept. 28, 2006 to May 31, 2007 to secure acres for the next growing season.

When the 2007-2008 growing season came around, corn needed to steal 12 million to 14 million acres from soybeans in order to maintain somewhat reasonable ending stock levels. Harvested acres jumped from 71 million acres to 85.4 million in 2007. Because of supply concerns brought on by the ever-increasing demand for corn, the corn market rallied $2 per bushel from Sept. 28, 2007 to May 30, 2008.

Looking at the previous two post harvest time frames makes me wonder what makes 2008-2009 different from years past?

Most long-term analysts are showing a need for 3 million to 5 million more acres of corn in 2009-2010 while also calling for 4 million more acres of soybeans to keep that balance table in good shape.

In years past, one of the two major crops — soybeans or corn — was able to give up acres to help maintain the balance needed to keep our supply lines full. Neither corn nor soybeans can afford to give up acres in the year ahead unless something drastic changes on the demand side of the equation.

The fact that corn and soybeans could potentially need more acres in 2009 would lead me to expect some type of post harvest rally in both commodities to help secure acres. I am not sure if we will see a rally in corn to the extent we saw last year, because the corn market will be starting from $5 not $3.25 like last year, but any rally is a good rally.

So the question is: As a producer are you prepared if this happens again?

Many producers do not have the ability to store everything they grow and are forced to move bushels at harvest for cash flow reasons. This is certainly the case this year as input costs have skyrocketed, hurting many producers’ bottom lines.

Cash flow concerns or not enough storage can limit one’s ability to participate in a post harvest rally. Some elevators and/or feed mills will allow producers to store grain at their facilities without forcing them to price their corn. This is a good option, but can come with monthly storage charges and/or time limits.

Using call options to protect upside in case of a post harvest rally can alleviate the problems with storage cost or time limit issues.

When trying to choose which corn call option is the correct one to purchase, you should consider: How much money can I afford to spend on an option, and how long do I think it will take the market to rally to capture any potential gains?

The closer the strike price of the option a producer purchases, the more expensive it will be. For example, if December 2008 corn is trading at $5, a $5.25 December call option will cost more to purchase than a $6 December corn call option.

The reasoning behind this is that there is a greater chance the $5.25 December corn option will produce a profit because it is closer to the current market value.

Option premiums can range from 5 cents to as much at $1. Options are also available in several different months to allow more time for the market to rally. The majority of post harvest call options that are purchased are in the months of December, March, and May.

If you think it could take until spring planting time for the market to rally, a producer would want to focus on the March and May option months. Purchasing an option in a later month such as March or May goes back to the cost figure from the first example. The CBOT charges more for a March call option than it does for a December call option.

The reasoning behind this is that buying a March call option gives you more time for the market to rally, hence the CBOT will charge more for that option month.

A producer will need to figure all costs associated with the option they are considering and compare that to storage costs (on their own farm or at a commercial facility) to determine which method is right for them. According to some experts, options expire worthless 67 percent of the time.

However, playing your cards right and purchasing an option at the correct time can pay big dividends down the road by giving a producer the ability to stay involved in the market without having the actual crop in his or her bin.

Lewis Campbell is a broker with Palmetto Grain Exchange, Ridgeland, S.C.