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Corn+Soybean Digest

Selling Spring Rallies

After this year, everyone will have become accustomed to volatile price activity. But it's seldom that two years in a row are alike. Unfortunately, human nature dictates that most of us only remember the past year and make emotional decisions based on what was done right or wrong within that year.

Markets change and the fundamentals change. But one thing is very predictable — human nature.

My bet this coming year is that price trends will not resemble those of 2002 or 2001.

Where We've Been

With 20-20 hindsight, marketing corn and soybeans in the last two years, frankly, has been easy. In 2001 you needed to sell everything early, preferably by January. Then, markets dropped precipitously right into the end of the summer.

In 2002, you only needed to put grain in the bins, then sit back and wait until the September crop report and sell everything.

The problem with these strategies, particularly this past year, is that many farmers can't wait until the end of summer to sell a crop — for cash flow and/or for transportation reasons. Marketing is always more complex than it appears on the surface.

What To Expect This Year

As I write this in early November, we're basing our strategy for our clients on the following:

  • The highs for the year for corn and soybeans have likely already occurred. It's going to take significant production problems in the U.S. this spring and/or summer to push the crops above September levels.

  • Supplies are tight in both corn and soybeans. As a result, prices will likely have at least one significant price rally late winter or early spring. That will be based either on problems in South America or in the U.S. that could shift everyone back to the bull side. In all likelihood, this will be a rally to sell.

  • If bad weather does not occur in either South America or the U.S., prices will be much lower by July.

Setting Goals And Objectives

While I know that many would disagree on this position, the current Farm Bill is not one that I like. Nor is it one that I view as good for farmers in the long term.

Why? Not long ago, goals and objectives in marketing were to sell everything at high average prices. Now the goal for many is to see how much money can be wrung out of the government, particularly from LDP payments.

Many have lost focus on what the overall marketing objective is. They are concentrating only on government payments and not on selling the crop. This type of marketing will lead to poor results in years like we've just gone through and in years to come.

Another factor that concerns me in the present Farm Bill is that the market has factored government payments into land prices. In most cases this artificially inflates the value of land.

What if, sometime in the future, the Farm Bill changes and these payments disappear? I'd prefer a system where farmland values are reflective of the market itself and not “manufactured” government inflation.

Parting Thoughts

If you haven't already done so, be at least 50% sold on this year's corn and soybean crop. And on any strong rallies this coming spring, wrap up old-crop sales and become aggressive on new-crop sales. Baring production problems, this will likely not be a year to store grain into mid- or late summer.

Richard A. Brock is president of Brock Associates, a farm market advisory firm, and publisher of The Brock Report. For a trial subscription and information on Brock services, call 800-558-3431 or visit

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