As I write this article in mid-February, soybeans have all the characteristics of a market ready to make an exhaustion bottom. What happened in 1996 proved the laws of economics had not been repealed, and 1999 will further prove that the laws of supply and demand still work.

What do I mean by that? In 1996, we had a shortage of $2 corn, but a surplus of the $5 variety. In 1999, we'll discover we've had a surplus of the $6 variety of soybeans - not the $4.50 variety.

As agriculture has changed, the factors affecting prices have changed as well. But people have not changed. Remember that it's not the facts that affect prices, but how people interpret the facts. That's why markets are emotional and swing up and down as much as they do.

Here are two old rules of thumb I find applicable to this year's market:

* Major bulls are followed by major bears. In 1996, we saw the biggest bull market in feed grains of all time, and now we're at the tail end of the bear following that bull.

* Markets bottom on bearish news and peak on bullish news. We have a large South American crop, economic weakness in Asia and Brazil, an expected sharp increase in U.S. planted acreage and, to top it all off, the largest worldwide soybean supplies of the last 20 years. That's the bad news. The good news is everyone knows the bad news.

Of the three most common emotions in marketing - greed, hope and fear - the majority of producers are now entering the fear stage, which is what makes markets bottom.

Bear markets in a specific futures contract rarely last much more than a year. November 1999 soybeans have been in a bear market since November 1997.

Gaps left in soybean charts on Jan. 25 appear to be fairly logical measuring gaps pointing to a downside objective in November futures between $4.50 and $4.60. Since everybody knows that's where it is, the market will either not quite get there or it will cut through that price area like a hot knife through butter.

Here is why cash soybean prices will likely bottom before spring planting is over:

* Too many producers collected their LDPs in soybeans way too early. They saw enough money to buy a pickup truck and should have been waiting for a semi. They now realize they played this market incorrectly (see my mid-February article) with no protection for prices under those bushels, so panic selling will likely occur.

* Many producers need to raise more cash between now and springtime, which will force the sale of LDP grain.

* Grain elevators have started offering "free" deferred pricing. Remember, nothing in life is free. All this does is extend the problem. It will result in a widening of the basis since grain merchandisers will no longer have to bid up to get this grain. Free deferred pricing is like throwing gasoline on a blazing fire.

Also, let's not forget La Nina. El Nino years like 1998 are characterized by above-normal rainfall and above-normal yields. It happened. La Nina years, on the other hand, have a higher probability of droughts. Watch out for August!

Parting Thoughts: It used to be that grain markets made sharp narrow peaks and long flat bottoms. The long flat bottoms were traditionally caused by large surpluses of grain. When prices went under loan rate, the market needed to rally back to loan rate, plus release, to get grain moving again. Because we now have "marketing" loans, that mechanism is no longer applicable. I t is now possible soybeans could make a V-bottom and rally sharply after springtime.