It may be a wild guess, but probably half of the Cornbelt farmers are already sold out of most of their 2006 production, if not all, and the other half have sold very little of their grain, if any. There are a few in the middle who have made scaled up marketings and are following their marketing plan as religiously as the good book on Sundays. To continue with that analogy, there are a couple Cornbelt preachers whose sermon is directed at those whose grain bin doors have either rusted shut or the key has been lost for the lock. If that describes you, listen up and take note.

At the University of Missouri, Melvin Brees acknowledges that markets have been in strong uptrends, that better prices may appear to be ahead, that you may want to avoid sales for tax purposes, but he says, “Locking the bin doors” without a disciplined marketing plan is risky.”

Brees understands that you don’t want to sell corn for $3 if you have a chance to sell it at $4 or $5. And he says it is easy to get caught up in the bullish soybean market and hold for $7 or more as beans and corn bid for acres in 2007. Brees says, “This seems fine until prices drop 20 cents or more in a couple of days, like they did following the USDA reports. “The markets were overdue for a correction,” many analysts quickly point out. However, past history shows that markets often reverse when least expected and these market “corrections” can sometimes become the beginning of a downtrend in prices.”

One of his colleagues, Allan May of South Dakota State University, doesn’t beat around the bush when it comes to telling farmers what he thinks about marketing opportunities, “there has been only one year in the last sixteen years (1995) when the price of corn in South Dakota was at this level at harvest…one year in the last sixteen. No matter how you look at it, this price level is unprecedented at this time of year.

Although there is certainly the possibility that corn prices could move higher in the weeks ahead, don’t sit on your 2006 corn assuming that $4-5.00 corn is just around the corner and that 2007 corn will reach that price level as well. Now is the time to look at making sales of both old and new crop corn.”

The opportunity available to Cornbelt farmers has been spurred on by the increasing demand for corn to be refined into ethanol. But money behind the market has been provided by speculators, and Brees says that money can be fickle, “Fund trading has brought money to the market, helping to push prices higher, but some worry about what will happen if the funds decide to take money out of the futures markets to invest elsewhere. As always there are two sides to every market. A number of factors support higher prices, but eventually prices will probably reverse. Good marketing decisions in volatile markets require a disciplined approach to making sales. That is easy to say, but not so easy to accomplish!”

May and Brees both see the potential for a downturn and both advocate the use of a wide variety of marketing tools. Their basic message is the sports motto “Just do it.” Allan May emphasizes, “There is no reason that a variety of sales methods could be employed to take advantage of current price levels and setting price targets for both higher and lower prices at which to make sales to insure you have a chance to take advantage of further price rallies or to protect yourself against a price downturn.” Melvin Brees adds, “Corn and soybean cash prices have been in the upper half to near the top of the projected price ranges at elevators throughout the state. Bids at some locations with strong basis have even exceeded USDA’s projected price ranges. It’s usually not a good idea to sell everything at once, but adding to previous sales or beginning to make disciplined sales of a portion of stored grain at these prices may be a place to start. While prices may go higher, sales at the upper end of USDA’s projected price range are usually not bad mistakes.”

Now that they have beaten you into submission about the need for rewarding the market, since it has provided higher prices, let’s take a look at some ideas on how to accomplish the task. Brees has a number of suggestions based on technical marketing strategies, such as scaling up your marketing while you ride the friendly uptrend. A second technical signal is the use of support and resistance levels in the market, which either support or resist price movement at historically important levels. And a third concept is that of moving averages which are measures of momentum of markets. In an uptrending market, when the current day’s price is lower than the short term moving average, it signals the trend is slowing. If both current prices and short-term moving average move below the longer-term moving average, it becomes an even stronger signal that the trend may be changing. These can be used as signals to make sales before prices decline further.

May’s philosophy is “Think about strategies that can take advantage of current price levels and protect you from falling prices.
• You might consider selling some corn now, and place a storage hedge on the rest you have in the bin.
• You might consider selling all your corn and stay out of the storage business the rest of the winter.
• You might consider selling your corn and re-own the crop on paper, either through the futures market or the options market.
• If you do decide to take the risk of storing corn with no price protection, at least keep in mind a “backstop” price; one in which you will begin making sales if prices should fall below current levels.

Regarding soybeans, his message is similar, “No matter why soybeans have moved over $1.00 higher in the last six weeks, the positive nature of this market should not be ignored.” And his suggested marketing tools include:
• Sell soybeans at harvest. While this is certainly not a price range in the upper levels of the historical price range for soybeans, it certainly beats the cash price offers of just a few weeks ago.
• Put soybeans into storage at harvest with no price protection. If the final selling price of your soybeans exceeds the breakeven price after storage costs, this strategy is viable.
• Store soybeans; enter into a cash forward contract that sets a price for future delivery of the soybeans. The futures carry and/or potential basis improvement must be sufficient to pay costs of storage during the storage period.
• Store soybeans, use a hedge-to-arrive (HTA) contract to establish price for future delivery. This strategy allows you to set a futures price but leave the basis open until a later date.

Summary:
If your grain bin door has been locked until you believe the market is just about to hit the top, will it remain locked as the market peaks before you realize and plummets downward as speculators retrieve their funds? Farmers with unsold crops should have a marketing plan that allows them to capture the bullishness in the market. Extension outlook specialists highly recommend the use of numerous marketing tools, and while it doesn’t really matter which one, the point is to find marketing tools with which you are comfortable and use them now to avoid a tragic loss of a great revenue opportunity.