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Corn+Soybean Digest

February Lows Are Likely, Expect VOLATILE Prices


Several of the cyclical price patterns I work with project a low (possible change in trend) between Feb. 15 and March 1. These dates are key. Fibonacci and Gann timing patterns help anticipate key time periods when the market is likely to put in a high or low.

Historical seasonal studies of soybean prices also suggest a low in the futures market in late February.

The March soybean futures chart shows the major low in late July 2003 at $5.16, followed by the Oct. 30, 2003, high at $7.93 and the high in early January at $8.07. The lows came in November and December at $7.28 and $7.33. If you project the next rally to be equal to the previous rallies, it would target $8.26-8.88/bu. in the nearby futures market. The one sure forecast is that prices will be very volatile.

What to do: Soybean farmers who have followed our earlier recommendations have sold a minimum of 60% in the cash market. Producers who use futures and options have sold 100% in the cash market and are holding long soybean calls or call spreads.

If prices correct into late February, that could be a good time to buy call options to replace earlier sales. If futures rally up, the news is likely to be very bullish and you may even read forecasts of $12 soybeans.

Stay disciplined. Make sure your offers are in place. If nearby soybean futures hit $8.26, make sure you've sold at least 80% of your crop; if the $8.88 target is reached, get 90-100% of your crop priced.

February Marketing Checklist:

Winter is a key time for business and marketing planning. Here are some of my suggestions this month.

  1. Check your cash bids and their alignment. Odds are good you'll find that your bids for delivery in February and March are much higher than those for June, July or August. If that's true, you need to evaluate why you're holding onto any cash soybeans.

  2. If the cash market is inverted (nearby bids over the deferred bids), consider selling the last of the cash soybeans and hold onto inventory with calls or call spreads.

  3. Check your cash basis levels. Make sure you use any late February basis improvement to lock in your cash basis if you have March, or even May, hedges.

  4. Don't forget new crop. Pricing ahead this time of year hasn't worked the last two years. Pricing ahead on a spring rally when November futures trade up to $6.80 or higher in 2004 could be the right move this year.

  5. Learn more about marketing this winter. With higher input costs, and a big drop in government farm program payments, learning more about marketing and making the right decisions are more important than ever when striving to make a profit in 2004.

Alan Kluis is executive vice president of Northstar Commodity Investment Co. If you have marketing questions or want more information, write: Northstar, 1000 Piper Jaffray Plaza, 444 Cedar St., St. Paul, MN 55101; call: 800-345-7692 or e-mail: [email protected].

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