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Futures	MO	Last	Chg
Corn	December	391'0	-4'0
Soybeans	January	1046'0	7'0
Wheat	December	559'6	-2'6
Milk	November	14.06	0.00
Feeder Cattle	January	92.675	0.850
Live Cattle	December	83.950	0.275
Lean Hogs	December	57.600	1.625
Cotton	December	70.41	1.59

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Time to start thinking about next year

8/6/2007
Bob Utterback
Looking back on the 2007, I missed the mark because I felt farmers previously concerned over crop rotation would trump short term profit incentives. We now know spring premiums were enough to attract 3 million more acres (most in the prime production regions).

The question now is how secure these acres are. With wheat prices above $5.60 in July 2008 and November 2008 beans above $8.94 and July 2008 cotton above 70¢, will corn acres be secure with December 2008 corn trading at more than $3.90?

So far there seems to be a lot of head scratching. I don’t sense many farmers want to go fencerow to fencerow corn mainly because of increased fertilization and seed costs. I believe what they are saying is the increased cash flow and risk may not be worth the effort when compared to beans and wheat.

So what do I expect? I sense many of the acres picked up in the fringe areas in the south this year are swaying back to wheat/bean double crop or even cotton. This would imply for corn to keep its more than 93 million acres it is going to have to see more acres shifted in the Midwest. Over the next two weeks, this is going to be the question around the country. If you have an opinion, e-mail me.

Response:

Bob, Maybe you need to get through 2007 before you start to second-guess yourself on what has happened. The trade seems stuck on the idea that the corn crop is "made" since pollination in their minds was a smooth event. Not so fast. The rows are there in our counts, but the ear length is below standard and the pollination in my fields has been very erratic (southwest Minnesota). Today I watched the market plunge and I knew they had a better handle on weather than I did, given their track record on the last two or three so-called rain events.

Tonight I gauged 2/10” and watched it all pass and turned on the night trade only to find it up as much as it was down during the day.

Every year seems to hold some unknowns that all us experienced ag people think we have figured out for next year. So my point is that just because we were faked out in 2003 and landed a great corn crop and not so good bean crop, we can't draw parallels based on that premise. My point is that I'm no longer willing to go with the trade's ideas that the corn crop is made. All we have been doing with the rains is to keep the crop alive and well until the next saving downpour.

To get back to your question on 2008, I'm not ready to write off more corn acres again. It may still be the best investment for one more year. I only averaged 3.10 for this year's forward pricing, and I can still average 3.50 for 2008—50¢ better than this year if I want to start in....now. That will make up for the up tick in fertilizer and seed, and maybe some rent. Beans have been real disappointing over the last 10 years. The seed companies keep raising their prices and don't deliver any more yield for the dollar. Corn, on the other hand at least shows improvement in yield and less yield risk up to this point. I'll opt for corn over beans and our country wants to burn gas at any price. They don't seem to care about soybean consumption yet. I guess we'll be leaving that to South America for a while. Will they decide to raise more corn? That might be when we get interested in raising beans again, when biodiesel takes a bite out of our food supply.

Everyone seems interested in our new farm program, but few ask the question of whether it will provide food before fuel. What you are seeing is the transition from farming for food to farming for fuel. We are turning the corner of a real ugly point in time for humanity, and the American society as we currently know it. Men like you and I will not be able to predict how the market or farmers will react to the signals that are being sent. It will be day by day and month by month I am afraid. Look at the huge position the investment funds have in the corn market. A friend of mine in investment funds tells me it is a safer bet than stocks.

Don't second-guess yourself; we can no longer raise more than what will be consumed for food. Shortages are sure to happen and we will only react to short-term signals. I farmed for 30 years now and have been brainwashed into thinking we will always raise more corn than we can consume or sell. All my friends in dairy have either taken the buyout or have had to quit because they were tired or too big. Now it is so sad that the cost of milk is approaching $4 to $5 a gallon in some locations, and they are no longer in business to take advantage of this great price. We can't ramp up milk production fast enough to meet demand for milk and cheese, and unfortunately ethanol is getting the bad rap for increased food costs.

Maybe we should have been establishing a grain reserve instead of paying me 50¢ a bushel LDP in 2005 for my corn; and maybe we should have been paying my friends a little extra to stay in business to have a "dairy reserve".

The shortfall in corn production (and soybeans) will come sooner than later, and farmers will not prosper because they will not have the bushels to sell, just like my friends in the dairy industry.

I hate to forward such a negative letter to you on this subject, but I feel more "forced " to raise corn than "blessed". Thank you for your question.

A concerned farmer

If you are having difficulty with your hedging program or are interested in more day trading activities, give us a call at (800) 832-1488 or e-mail us at bob@utterbackmarketing.com.

The recommendations and opinions contained herein are based upon information from sources believed to be reliable. However, that information may be incomplete and unverified. There are numerous factors that can affect the markets, which cannot be fully accounted for in the preparation of these recommendations. Those following these recommendations do so at their own risk. The firm and/or customers of the firm may take a position that may not be consistent with the recommendations herein. Any recommendation does not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any commodity interest. Commodity trading involves risks, and you should fully understand those risks before trading.

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