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Corn+Soybean Digest

Soybean Bear Market Will Continue

Many producers have criticized my extremely bearish posture on corn and soybeans over the past six months — but it's been correct.

The table gives a quick glimpse of price changes over the last 12 months. What a wild year.

While you may look at grain prices and say what an awful year it's been, we all know grain markets have given us substantial opportunities to sell at prices well above current levels.

As cruel as it may be, if we didn't capitalize on those prices its not the fault of the market. We need to look in the mirror.

At this time of year I like to look back and analyze how well we've done in marketing — good or bad. Some argue that it was difficult to see the bear market of corn and soybeans coming. I'd disagree, but it was hard to get on board.

While this bear market was an emotional rollercoaster, it was an absolute classic bear market. As a result, this is one of the years I can look back and say that subscribers to The Brock Report and our managed clients (if they followed our recommendations) probably had the best year in farming of their entire lives.

So much for history. Let's look ahead to the new year.

Thoughts For 2005

Here are some of my general ideas for the coming year:

  1. The bear market in soybeans will continue. Producers who sold too early last year and had no soybeans left when they hit $10 will keep them this year and sell them for substantially less. This is not a year to be storing soybeans.

  2. Too many producers have already LDP'd their corn crop too cheaply and regrettably are hanging on to the corn with no downside protection. This should lead to a bottom in the corn market by late spring or early summer. If any market has a chance of coming back late in the growing season this year, it will be corn.

  3. This is not a year to buy input prices ahead or early. Crude oil prices have established a major top and are in the middle of one of the biggest bear markets in history.

    Anything related to crude oil is headed lower and thus purchasing decisions should be put off as long as possible. This includes diesel fuel, anhydrous ammonia and natural gas.

  4. Expect farmland prices to stay rock solid, but the big move to the upside is likely over. Lower grain prices will subdue some farmers from bidding on land. Should interest rates start creeping higher it will slow the 1031 tax-free exchanges.

But downside risk will likely be minimal as long as debt on farmland remains low. Even if interest rates rise, they're still at low historical levels.

Putting It All Together

Hindsight in marketing is both wonderful and frustrating. Never has there been a year that any of us hasn't looked back and said, “If I would have only done this or if I would have only done that.” That's why it's often advantageous to spread out marketing decisions rather than rolling all the dice on the fact that a market has to go up.

2004 Vs. 2003 Price Comparisons
Dec. 8, 2003 Dec. 8, 2004
Corn $2.38 $1.85 Down 22%
Soybeans $7.77 $5.15 Down 34%
Wheat $4.17 $3.35 Down 20%
Hogs $35.00 $55.00 Up 57%
DJI 9,965 10,500 Up 5%
Crude Oil $31.00 $41.00 Up 32%
Fuel Oil (N.Y.) $ .88 $1.19 Up 35%
Gasoline (N.Y.) $ .88 $1.04 Up 18%

This year, large yields are hiding many marketing mistakes. Large yields with good marketing this past year resulted in enormous financial profits.

While I suppose it's always nice to have something to complain about, complaints about agriculture in 2004 should be small. 2004 will go down in the history books as one of the most financially rewarding corn and soybean producers have ever enjoyed.

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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