Posted by: usset001 | July 7, 2009

Sharp price declines in corn, soybeans and wheat

downtrendMarket opinions are a dime a dozen, and sometimes I feel a little out of the loop for not cultivating and selling my own price opinions (and I have opinions, really!). Instead, I tell farmers to quit looking “outward” for marketing advice (What do the pros think I should be doing?) and  look inward to their own operation for marketing actions that make sense for their business. This is the approach I took four weeks ago. Based on my analysis of production costs in 2010 and the opportunity to lock in an impressive margin over one year out, I made 2010 new crop sales of corn at $4.55 Dec’10 , $9.99 Nov’10 and $7.45 Sep’10 spring wheat futures. I had no idea that just four weeks later these prices would be 70 cents lower in corn, and more than $1 lower in soybeans and spring wheat.

And that’s just the 2010 contracts – new crop prices for 2009 are down even more.

Dec’09 corn futures are trading under $3.50 per bushel, lower than early December and back to levels last seen in January of 2007 (life-of-contract lows still seem far away at close to the $3 mark set in September of 2006). Nov’09 soybean futures are having a bad day – down 43 cents as of midday on Tuesday and close to the $9.20 mark. That’s over $1.50 lower than levels seen in the middle of June. Sep’09 spring wheat futures closed at $8 on June 1 and trade today close to $6.13 per bushel. All of these markets are “oversold” and have been for about two weeks.

Look inward. Have a marketing plan based on your business needs and not on the noise around you. Execute the plan with discipline. This is the only approach I know that gives you half a chance of taming the markets and not letting the markets tame you.

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