First, hog prices dropped to the lowest price level since the 1940s, then wheat prices collapsed to the lowest level since 1977. Also, corn dropped down to test the 1987 PIK low, and cash soybeans fell to levels not seen since 1972.

Increases in farm technology and good growing conditions around the world have created huge surpluses and lower prices than most analysts would have forecast two to four years ago. Remember, it was just over three years ago (July 1996) that corn prices rallied to over $5/bu.

While no one I know (myself included) was able to anticipate the collapse in commodity prices, trend watchers did become concerned with the overall direction of commodity prices as represented by the Commodity Research Bureau (CRB) index in the fall of 1996.

The CRB can be described as the Dow Jones of Agriculture. This index of 20 commodities shows the overall direction of farm prices.

This index started trending lower in the summer of 1996, with prices falling below the 40-week (200-day) moving average that fall, suggesting lower prices ahead.

In May 1998, the index fell below the long-term uptrend, suggesting still lower prices ahead.

The overall index of commodities has a pattern of making major lows every 30 years and six years. The 30-year cycle shows that major lows occurred in the commodity markets in 1938 and 1968, so a major low was due in the 1998-1999 period.

The six-year price cycle shows the most recent lows in 1987, 1992 and February 1999. The timing of this year's low wasn't a surprise, but the magnitude of the decline was.

This CRB chart (see printed article) now shows a potential double bottom at 182, with trend-line resistance at 200.

Looking ahead. If the CRB index has two consecutive higher monthly closes above 200 in the fourth quarter of 1999 or the first quarter of 2000, a major low in commodity prices will be confirmed. This may change how you manage your inventory.

For the last three years, selling crops ahead and wrapping up sales early in the marketing year has made the most money.

With the CRB signaling a major low, here are three suggested changes you should consider.

First, odds are good that storing grain into next spring and summer will pay.

Second, take the LDP this fall. Even if futures do not rally, expected price increases plus better basis bids for next summer make taking the LDP this fall and selling next spring the best profit combination.

Third, be ready to lock in inputs on price reductions. Since last September, we've watched long-term mortgage rates jump by over one percentage point and energy costs soar higher by over 40%. As the long-term trend changes, when and how you sell your farm products and lock in input costs needs to change as well.