BOTTOM LINE

Are you ready for the next bull market in corn? If you need time to prepare, I believe you can take your time. Everything points to the next major bull market in corn occurring in 2012.

While some of your neighbors may still think corn prices are just in a correction phase of the current long-term bull market, long-term cycles in corn should have a sobering impact on most bulls.

First of all, let's take a look at the long-term corn chart of cash prices in Central Illinois below. There's been a very dominant cycle since the early 1900s. The first major top occurred in 1917 at $2.21/bu. Then 31 years later the high occurred in 1948. Twenty-six years later the next major top occurred in 1974 followed by another top in 1996 at $5.25/bu. The bull market of 2004 barely took us over the $3/bu. mark.

Each time the cycle high has occurred it's been slightly shorter than the previous high. Let's assume that the next cycle high in corn comes 16-20 years after the last cycle high in 1996. That would occur somewhere between 2012 and 2016.

Now let's take a look at a shorter cycle in corn prices — and this one should be readily remembered by almost all readers. Corn prices have had major tops in 1980, 1988, 1996 and 2004. All the tops were eight years apart. Another eight years from 2004 puts us smack dab on 2012.

FACTS VS. WANTS

Unfortunately, this is probably not the news that most readers want to hear. Some of you may ask the question, “Whatever happened to all the demand everyone was talking about?”

As I have reiterated in this column many times, the laws of economics have not been repealed. Keep any commodity price high enough and long enough and someone will find a way to grow more of it, use less of it and/or find a substitute for it.

Case in point: Corn acreage in the U.S. is up more than 2 million acres from last year and about the only usage increases are the result of ethanol plants being built in the U.S. With high corn prices, certain grain companies have found that it's cheaper to import ethanol made from sugarcane in South America than it is to produce ethanol made from corn in the U.S. None of this is good news, but that's why markets continue to go up and down.

What Does This Market Mean?

The 2004 bull market came and went so fast that many people missed the whole thing. In my opinion, we'll look back at 2004 corn and soybean prices as the best marketing opportunity for at least the next three to five years.

Remember that markets give you six minutes to sell the top and six months to sell the bottom.

In reality, it's more like six weeks to sell the top and six years to sell the bottom. We now have to enter a new base-building phase for any significant upward price moves that are going to occur.

Marketing is only easy with 20-20 hindsight. Some producers handle bear markets better than others, while most would prefer a bull market where you can just sit back and watch.

Year 2004 has been a bear marketer's paradise. For those of you who were aggressive sellers and have big crops, 2004 will likely be the most profitable farming year ever. For others, it is time to start planning LDP strategies. Big production with LDPs will still result in profitable farming in the year ahead.


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 www.brockreport.com.