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Bulls Predict Repeat Performance for Crop Prices in 2013

November 29, 2012
By: Ed Clark, Top Producer Business and Issues Editor
bull bear
  

In the first of our three-party series, bullish marketers discuss the forces that they think will keep prices high in 2013

The nation’s top crop analysts are spread across the marketing map, from extremely bullish to  extremely bearish, when it comes to corn and soybean prices. Opinions vary on how producers should protect themselves from market fluctuation, although many suggest using put and call options as an insurance policy on both ends of the price spectrum.

In the first our three-part series, let's look at what the bulls have to say. This faction generally believes that grain stocks will remain tight next year and that should keep prices high. If that's what you believe, then holding on to your crop for a while makes sense.

Click below to read the other installments in this series.

Moderates: Prepare for Upside Profits and Downside Risks

Bears Expect Rising Grain Stocks to Depress 2013 Prices

Tale of Two Markets 

jeff beal

Jeff Beal
Gulke Group

Grains will be a tale of two markets. This year’s historic drought resulted in extremely tight  2012/13 corn and bean stocks, which should provide underlying support as we move into the new year.

A subpar soybean harvest earlier this year left South Americans with fewer exports. Support for soybeans should last into the first quarter, when—barring a major South American weather  event—a record crop will hit export markets.

Corn has the tightest stocks-to-use ratio since 1995/96, which likely means big swings in cash and basis markets as end users scramble to get physical commodities. This could last until we are  confident of trend-line production for next year’s corn crop or more evidence of demand  destruction surfaces.

Old crop corn and soybeans will see extreme volatility in the months ahead.

For those who are willing to hold their crop for basis gains, hedging futures and waiting for the tight stock basis situation to play out will offer decent profit potential.

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