Markets are continually changing, but one thing rarely changes - people. The most important aspect in understanding market price swings is to understand how people react and overreact to changing news. Markets are not always predictable - people are much more predictable.

Emotions are now playing a major role in decision-making as grain prices have just gone through one of the biggest bear markets in history. It started in June 1996 and, in my opinion, ended in July 1999.

As I travel around the country speaking, I hear comments such as, "I LDP'd early last year. I learned my lesson and I'll never do that again." Or, "The only game in town this year is to seal the corn and soybeans."

These and other comments are being made, unfortunately, by people who are going to make even more mistakes this coming year. To base this year's decisions on last year's mistakes, which is not uncommon, typically only leads to even more mistakes.

This leads me to the diagram above, outlining the seven major phases of marketing. After a market has peaked (phase four), producers have a tendency in phases five and six to hope that the market gets back to where it was in phase four. In my opinion, corn and soybean prices were in phase four in early December 1998.

In phase seven, producers are normally mad at the world. Those who have stored all the way down are about ready to shoot every market analyst or government employee they think may have caused the market's decline.

Then we start over again in phase one. People can't understand why the markets are going higher. In phase two, many mistakes are made because prices are compared to those of phase seven.

Everything is cyclical. One of the negatives of both commodity prices and farming is that good times don't last forever. The good thing is the bad times don't last forever either!

In 1996, many people in the coffee shop thought we would never again see $3 corn. Some still feel that way - only now we're looking up instead of down. Moods and attitudes in marketing vary so much from year to year that you would think people would learn from mistakes made in the past.

After 24 years in this business, I have finally concluded that that's never going to happen for the majority. But I do believe if we keep in mind which one of the phases of the marketing cycle we are in, we can avoid making some major mistakes in the future.

Parting thoughts. Avoid the emotional trap that many will fall into this year - assuming that the loan program is the only game in town, or more importantly that there is no way to win in the marketing game. The last two years have created many opportunities - and the next 12 months will create even more opportunities.

Timing of grain sales this year will depend significantly on where prices are as harvest comes to an end. If prices are above loan rate, the same strategy that worked last year will likely work this year - one of forward contracting and LDPing late. Conversely, if by chance prices are still very low,this will be a year to LDP early and sell late. Don't make any major decisions until then