It started over three months ago - and you had better have plenty of Excedrin on hand over the next few months. From July of 1996 to August of 1999, grain marketing was relatively simple because the trend was going in one direction - straight down. But that has changed. This is now a market torn between some very significant fundamentals, on both the bullish and bearish sides, that will keep prices extremely erratic over the next few months. Trends will likely be very short-lived and will also result in many people making emotional decisions.
On the bullish side, consider the following:
1) Subsoil moisture throughout the U.S. is at the lowest levels in recent history. That's why we started to see price strength very early this year.
2) Demand is continuing to increase. Exports of both corn and soybeans should exceed year-ago levels. Domestic soybean crush should reach a record high as should the domestic use of corn.
3) Even though supplies are large, prices are still low relative to historical stocks-to-usage ratios.
On the bear side, the claws are scraping because of the following:
1) The majority of the corn and soybean crop has been LDP'd. While much of the grain has already been moved to the marketplace, it still hasn't been priced. A tremendous amount of grain has to be sold yet, and that's going to put some pressure on the market.
2) Supplies of corn and soybeans, while not excessive, are still the largest since 1992. We don't have a shortage of either in the old crop specifically as compared to 1996.
3) With normal weather, this market is overpriced. If you plant 77 million acres of corn and 74.3 million acres of beans, which we think will be close, good weather conditions after planting will push carryover supplies to much higher levels.
What's A Person To Do? Compared to marketing strategies the last 2 1/2 years, it's time to shift gears. Here are some thoughts on marketing for the spring and summer:
* Sell in smaller increments than you normally do. You don't need to sell the entire crop in one day. There isn't a truck around that holds 100,000 bu. Recognize that you and everyone else will be making a lot of mistakes over the coming six months. And we can all afford to do that as long as the mistakes are small. Consequently, make several 10% sales rather than two 50% sales.
* Follow technical signals to help control your emotions. Over 50% of marketing decisions are still based on emotion, and charts help control some of that process.
* Don't make this year's decisions based on what you did wrong or right last year. Too many producers have learned that the way to market now is to sell early because storing grain didn't work the last two years. What they have learned is that selling early worked great the last two years. In 25 years in this business, I've seen the same marketing strategy work many times two years in a row but seldom three in a row. This will most likely be a year to sell late.
Parting Thoughts
A year ago as I traveled on the seminar circuit, most people were bullish and not making sales. Obviously, that turned out to be wrong. In the last month, I have found the opposite attitude. Many farmers are negative on the market, and those who didn't make any sales early in the last two years have already started booking new crop. That scares me. History tells us that, in a year like this, the market highs should come late in the growing season.
My gut feeling: We'll have one good opportunity to sell this market on weather rallies during the planting season. The rest will depend on the growing season. If problems persist, we're obviously going higher. That's why on sharp price moves this spring it will pay to at least sell something.