Hello from Chicago!
Dec 04, 2009
Hello from Chicago! I’ve been participating in two-day Farm Journal Marketing Rally, featuring 16 of the leading ag analysts in the country. One would suspect at such an event there would be a wide divergence of opinion simply to set one apart from the crowd. I have to say the majority of the analysts suggested that the profit being offered for 2010 corn and beans requires some steps to be taken to protect profits. The way that one should protect and how aggressive one should protect is where the great divergence in opinion developed.
There was some concern about a first-of-the-year event when many large trading funds must realign their positions. The implication was this could lead to significant market bullish expectation. I tend to side with the crowd that believes most of this bullishness has been anticipated and many of the longs that are in good profits will be looking to sell into the new long position. I suggest if a first of year event does occur, producers should use it to make catch-up sales, especially if November 2010 is above $10.50 and July 2011 is above $4.70.
It seems of those attending are quite aware that the profit potential needs to be sold. The problem is the fear of selling and being wrong. All I can say is there is no magic bullet; but here are some suggestions to aid producers in getting inventory sold:
(1) Focus on locking up as much of the estimated 2010 production “costs” now. One of the biggest lessons I’ve learned from 2008 and 2009 is if you don’t have your input costs locked up, it is difficult to sell. This means fertilizer, seed, fuel and interest.
(2) Be realistic in the price you want from the market. We all want to sell the high and waiting and watching the market go up is exciting, but all I can say is when this market tops, the downside is not going to be slow; I think it could fall off the cliff and the last step is a LULU. In my 28+ years in the market, I’ve meet very few producers who can sell a large percentage of their crop “after” the high is in. We always want last week’s high and, if not careful, end up holding it all the way down.
(3) The better the financing, the better the results. If limits are put on costs and cash flow, it may work; but the odds of success are reduced. Essentially, it has been my experience that those who embrace margin calls will long-term be a winner. And I would venture a guess and say that most producers will only sell 100% of their average crop, which almost always leaves bushels to sell. So, if short at a good profit and prices go higher, simply improve the average as prices rally.
(4) My final suggestion—when you wake up tomorrow, look in the mirror and say this to yourself at least three times: I LOVE THE BEAR AND I WANT MORE MARGIN CALLS SO I CAN SELL MORE AT A HIGHER PRICE!
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BEFORE TRADING, ONE SHOULD BE AWARE THAT WITH POTENTIAL PROFITS THERE IS ALSO POTENTIAL FOR LOSSES, WHICH MAY BE VERY LARGE. YOU SHOULD READ THE “RISK DISCLOSURE STATEMENT” AND “OPTION DISCLOSURE STATEMENT” AND SHOULD UNDERSTAND THE RISKS BEFORE TRADING. COMMODITY TRADING MAY NOT BE SUITABLE FOR RECIPIENTS OF THIS PUBLICATION. THOSE ACTING ON THIS INFORMATION ARE RESPONSIBLE FOR THEIR OWN ACTIONS. ALTHOUGH EVERY REASONABLE ATTEMPT HAS BEEN MADE TO ENSURE THE ACCURACY OF THE INFORMATION PROVIDED, UTTERBACK MARKETING SERVICES INC. ASSUMES NO RESPONSIBILITY FOR ANY ERRORS OR OMISSIONS. ANY REPUBLICATION OR OTHER USE OF THIS INFORMATION AND THOUGHTS EXPRESSED HEREIN WITHOUT THE WRITTEN PERMISSION OF UTTERBACK MARKETING SERVICES INC. IS STRICTLY PROHIBITED. COPYRIGHT UTTERBACK MARKETING SERVICES INC. 2009.