Emotional marketing urges you to wait for $4.50 corn and $13 beans. Intelligent marketing says you have made a handsome profit already and urges you to pull the trigger on any unsold grain. So, how do you create a marketing plan that reconciles those two?

You are in a quandary. You know prices will go up. Your spouse knows prices will go down, and you are both right, but it is just the timing issue that no one has mastered.
Intelligent marketing does not deny those lofty prices might occur, but urges you to reward the market while enroute. Visiting with Extension Outlook Specialists from Purdue and Missouri may help you reconcile your conflicts to the satisfaction of yourself and those around you who depend upon your good judgment.

Chris Hurt’s latest Purdue newsletter on corn marketing reminds us with a nearly 2 billion bushel surplus there is no shortage of corn, and the only reason corn is so high is due to the concerns that 2008 acreage will be too small. Additionally, he says the bullish soybean market, if it moves from the current $11 up to a possible $13, would stimulate 2008 corn prices to move up 50 cents, putting both the new crop and cold crop at $4.50 for March futures.

Hog producers are facing substantial amounts of red ink because of high feed costs, but Hurt says they already have hogs in place that have to be fed. And cattle feedlots will be full in the first quarter of 2008 also consuming a lot of corn. Export buyers represent aggressive world demand, fueled by a weak Dollar that gives them strong buying power. And he says the ethanol industry will begin to slow down, when corn prices rise to the point that high oil prices can no longer make ethanol profitable. Hurt says that corn prices might reach $4.50, but a ceiling may also be hit at lower levels. He is predicting mid to late winter for the corn market to experience a top.

Melvin Brees’ latest Missouri marketing newsletter says the corn basis has recovered remarkably in recent weeks, indicating a strong demand combined with producer reluctance to sell. And he rhetorically asks, “What are you waiting for?” He says corn prices are 60 cents under June, and have only reached this level 5 times previously; prices are in the upper half of USDA’s projected range; the large carryover means upside potential is limited and downside risk is large; seasonal prices indicate a decline is imminent; and current prices have provided strong profits. Brees says if March futures decline below $3.83 the market would see that as a negative signal and a bearish market would develop; but if the March contract penetrates $4.08, the rally would continue. He says while signals are mixed, a majority suggests that producers should add to their corn sales.

Looking at the history of the soybean market, Chris Hurt says in his latest Purdue soybean newsletter that just before the all time record of $12.90 was set in June 1973, the average farm price of soybeans in the previous five crop years from 1967 to 1971 was only $2.63 per bushel, so a nearly $13 price was five fold of what the norm had been. With $6.11 the recent five year average, a parallel five fold increase would put bean prices at $30. However, he is not predicting that will happen. Hurt says a calculation of inflation, yields, and other factors might suggest something over $12, but farmers need to keep in mind that the 1973 mark was achieved without market competition from South America. He says today’s prices are lofty, but there is no certainty that prices are high enough yet to achieve sufficient 2008 acreage and ration the demand. Hurt says soybean prices may need to be above $11, but with more US and South American acreage prices may tilt downward, meaning 2008 could see both $13 beans and $9 beans with high volatility and high risk for producers.

At Missouri, Melvin Brees in his latest newsletter says it is hard to sell soybeans when they are in a strong uptrend as they are now, even if you have always been told that it is hard to be wrong selling soybeans above $9. Brees says soybean cash bids are in the upper half of USDA’s projected range; at current levels prices could fall rapidly and unexpectedly; the seasonal trend is downward; even with a tight carryover next August the basis is quite weak; world supplies are sufficient; and sales would capture profitable prices.

Brees acknowledges that the basis will tighten over time and the market carry will provide a return to storage, but he says risk increases as historical highs are reached and pricing opportunities usually don’t last long, “Waiting for higher prices is one thing, letting current price opportunities slip away as the market declines is something to avoid. Remember, that whatever happens to prices, it is hard to “be wrong” when selling soybeans above $9 and corn in the upper $3 range.”

And Brees offers this strategy:
1) Determine what market signals will trigger sales at higher prices. At the same time, determine what will trigger sales if the uptrend stalls or prices start to decline. In this way you can define what you are waiting for with upside targets or goals if prices continue higher and downside price traps if you are wrong and the market reverses. Once you have determined what you are waiting for, follow through with your decisions.
2) You need to be prepared to act quickly, especially if the market reverses sharply and begins a rapid decline. While this strategy could capture higher prices, it is important to be prepared to accept somewhat lower than currently offered prices if downside traps trigger sales.

Summary:
Although corn and soybean prices are at near record levels, it demonstrates that having a solid marketing strategy is all important. Corn prices could reach well into the $4 range by following beans higher as they buy acres, but with a large surplus those levels cannot be sustained and profits should be captured at every opportunity. Soybean prices could well reach into the mid-teens, but whenever the market is satisfied it has purchased sufficient acres for 2008, the market could rapidly turn on volatility and fall. Producers should establish trigger points for making sales as the market moves higher and then falls.