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Senior Contributor

Market Musings

Lets throw out the idea that in a "normal"  environment, with the crop problems around the world, the good, but quite average , American production and the devalued dollar, that the conditions warrant $5 corn and $12 soybeans at the farm gate. With possibly 80% of the production presold at sub $4 corn and $10 soybeans, what price does the remaing 20% of open supplies have to be sold at to get a $5 corn average and a $12 soybean average?

 

And what about 2011 and 2012...what if the USA has not a "normal" crop, but an actual short crop? What is the risk premium that the world market will put in?

 

My math in the first case comes up with $9 corn and $20 soybeans. I have heard calls for $8.50 corn, and beans close to the $20 mark if the right circumstances happen. Fantastic prices for anyone that has not sold eveything  yet.

 

I would not even venture a guess as to what price 2011 crops will fetch if a full born weather market develops next summer. Maybe a good time to market with puts and not get locked into actual physical sales until all of this plays out.

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Contributor

Re: Market Musings

Hi Red,  Listing to the Cambridge Singers, but wil respond to your question, All experienced farmer traders know you make mistakes in marketing, The trick is to correct it before it gets to you. As far as your stradgy , I would not set goals to correct past mistakes. you may be correct but that last dime may be a killer. When a neighbor asked what I thought tonight, I said I have not seen markets this complicated, My strategy is to go no further than 30 days out with no goals in mind, its just to tricky. Things that I am looking at is the pig crop report at the end of the month, it will tell me if these guys are hurting or just bluffing. I believe their cost is at the low end of the range so no liquidation in the herd. With the southern hempishere and Chinese buying we could see an explosive situation. As far as an embargo- I never could tell a banker to kiss my ( you get the idea). Like I told my neighbor just go have a cup of hot chocalate and listen to the music of John Rutter on Pandora.com. Its great.

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Senior Contributor

Re: Market Musings

I would guess that most of the larger livestock operations will be feeding hedged $3.50 corn for all or most of 2011. I have a friend that is a grain buyer for an ethanol plant, and they bought up a lot of cheap corn, too. This is what makes the markets so potentially explosive. The corn is going to rapidly disappear....the amount of unpriced corn is a statistic that I would love to know, both for the 2010 crop, and also how much potential 2011 crop has already been hedged.

 

This market had a breather, gave the shorts some time to buy their way out at a buck less than today's price on corn, and also on the soybeans, but I pity anyone that shorted corn or soybeans at that time, thinking it was going down, down, down. This is a merciless market and not for the faint of heart.

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Senior Contributor

Re: Market Musings

I absoluteluy LOVE these markets!!!!  It does not get better than this as a grain producer.

 

Keep it simple and stay informed of global production trends.

 

Here's an example. I had some lightly sprouted wheat from two harests ago about two weeks ago. Sold it for January delivery after positioning it at a terminal before harvest. Falling numbers were not good originally. No problems this time. No FN deductions. No sprout deductions. Binning in our climate often improves quality. Gained a minimum of $1.35/bu over sales made in 2009 by avoiding deductions, and the price improvement since. When they want wheat and are making $1.50 (or more?) at the port then wheat is wheat.

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Advisor

Re: Market Musings

Red this is a small sliver of the overall market but it's what the local elevator told me.  45% of beans and 40% of corn was either forward priced or sold when it came in at harvest.

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