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Corn+Soybean Digest

Pricing Ahead Based On History

On the last issue's Master Your Marketing pages, I explained how to set cash price targets based on the 10-year history of July Chicago Board of Trade (CBOT) corn and soybean futures. The response at recent seminars to this concept has been huge. But one question consistently comes up: "Do you have the information and recommendations to use these commonsense rules to make new-crop sales?" Yes and Yes!

The November soybeans table on the next page shows the high price for each of the last 10 years, plus the date of the high price, the low price, the date of the low price and the price range. It shows that, in the past decade, the average high for November CBOT soybean futures was $7.05 and the average low was $5.22, projecting a yearly trading range of $1.83. At this writing, the current price for November soybeans is below the average low. This suggests an early low as projections for another large increase in acreage gets built into the market.

The November 2001 CBOT soybean chart price analysis, below, shows the contract high at $6.05, with the year-to-date contract low at $4.78.

The first level of resistance is now at $5.20 with support at $4.50. If we project a yearly price range of $1.83/bu, the projected high (low + $1.83) is $6.61. The projected low (high - $1.83) is $4.22, which would be 23 below last year's low.

The December CBOT corn futures table on the facing page shows the average high in the last 10 years was $3.03, and the average low was $2.13. This projects an average trading range of 90/bu. With higher energy costs and a likely 2- to 4-million-acre drop in U.S. corn acreage this spring, it's easier for me to project $3 new-crop corn futures than to project $7 new-crop soybeans. Time will tell.

This year, projected global and U.S. ending stocks of corn are lower than last year's figures, suggesting a positive year for corn prices.

The December 2001 CBOT corn chart price analysis, below, shows that the contract high is $2.75, and the year-to-date contract low is $2.29. The first level of resistance is $2.62 with chart support at $2.45. If we project a yearly price range of 90/bu, the projected high is $3.19 (low + 90). The projected low is $1.85 (high - 90) - exactly at last year's low!

How to use this data: A farmer at a seminar in southern Minnesota said, "These studies allow me to set some price targets based on factual data and know how high is high and how low is low."

I agree, but caution that, even though the data is accurate, each year is different and what works well one year will usually backfire the next year.

With that disclosure made, here are some specific recommendations for this year's new-crop pricing strategy: Make eight to 10 scale-up sales rather than three or four. Spread your sales over the next four to five months and don't expect the July low that has occurred each of the last three years to happen.

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