If you think you know what the markets will do six months from now, you're kidding yourself. And if you think trade agreements are not important, you need to think again. That was the advice that Darrell Holaday, analyst with Advanced Market Concepts and Country Futures, had for farmers and ranchers attending the annual convention of the Kansas Farm Bureau in December.

"The ability of U.S. ag to export has never been more critical," Holaday said. "As for trade, you don't need to just be concerned, you better be damned concerned about this. You start screwing around with trade agreements and you can really make a mess."

Holaday said that's why he thinks cooler heads in the coming administration will prevail and that trade wars will be avoided.

He said passage of the Trans-Pacific Partnership agreement is important to U.S. agriculture, particularly to the beef industry, which, if the agreement is approved, would see Japan take tariffs on U.S. beef from 35% to zero.

"The reality is, we will not survive a trade war with U.S. ag as a target," he said.

Holaday, known for his blunt speech and insistence on the simplicity of how markets move, said exports of corn and soybeans are at record levels but have weakened over the last year, and that does not bode well for prices moving into the next year.

"Don't ever assume that prices can't go any lower," he told producers. "The market doesn't care what your cost of production is. A lot of the world can produce cheaper than you can, and it will."

At the same time, he said, unforeseen forces can change markets.

"We don't know when or where the next drought will come," he said. "But when it does, it will change things."

On the beef industry, Holaday predicted the market will move to more cash procurement as more and more producers question the problems with formula or grid pricing and decide not to participate.

"The question is, how do you determine the true value of a fed steer or heifer of a feeder steer or heifer," he said. "The structure of the procurement process is still the problem."

He said the bird flu epidemic last year put more chicken on the U.S. market as exports shut down and drove prices down steeply, which also forced beef and pork prices lower to stay competitive.

For the coming year, there are ample supplies of feed from "Austin to Boston," said Holaday.

"The inventory of cattle and calves is up, and there is not a lot of equity in feeder cattle. Beef exports are expected to drop and pork exports are slowing down, while poultry is steady to increasing," he said.

He said the cattle markets have been rallying, with prices in December at $115.

With all of the grains in oversupply, it will be especially important to watch for any bumps in price and be ready to react.

Soybean acres are forecast at 87 million for 2017, he said, with China expected to buy about 1.5 billion bushels of this year's crop — and more if the drought in South America worsens.

He said he expects corn acres to drop, with U.S. corn for ethanol already at 5.3 million bushels and ethanol already above mandated use.

Ending inventories of wheat are very high, and even though acres were down, yields were up substantially.

"The Kansas state average on wheat was 56.3 bushels to the acre this year," he said. "That's crazy yields, and it's not likely we will see it that high again."

The bottom line, he said, is to be vigilant for prices that will bring a profit and be prepared to sell, all the while being aware that U.S. agriculture has to have export markets, and trade agreements are key.