Bob Utterback: Prepare for 1970s Market Volatility

February 13, 2014 11:00 PM
Bob Utterback: Prepare for 1970s Market Volatility

While corn and soybean prices are lower than they have been in years, the market won’t be resting on its laurels over the next decade, says Farm Journal economist Bob Utterback.

"It’s going to be a relatively active market," said Utterback during a presentation at the 2014 National Farm Machinery Show. Unlike the 1980s, which saw a very flat period, the market in years to come will be more akin to that of the 1970s.

Seasonals will remain positive heading into the May-June timeframe. In the long term, though, the burden of proof will be on the bulls. Weather volatility will characterize the period, which likely will bottom out in the 2022-23 timeframe.

"When prices get low, what do we do? We get more aggressive because we need the same amount of revenue dollars," Utterback notes. "I am a supply bear. I think this is the bear’s biggest strength. He knows how producers domestically and globally are going to operate. We are not going to curtail our operational practices."

Click here for complete coverage of the 2014 National Farm Machinery Show. And don't miss these three free Farm Journal Media events featuring Greg "Machinery Pete" Peterson, Bob Utterback and more! 

With that in mind, Utterback shared several observations about the commodities market and how producers can act to maximize profitability.

Corn: Utterback fears there’s a lot of old-crop corn in the bin. For producers in that situation, now is probably not the time to sell old-crop corn. At the same time, don’t carry inventory much into the June-July timeframe. Realize that old-crop corn probably won’t rise above $4.75.

Looking aheaIf trendline corn yields exceed 158 by the June-July period, prices likely will trend lower. Sell May 2015 corn at $4.70+ but defend in July 2014 calls from April to July, he says. If stocks build with a large amount of unpriced producer inventory, expect extensive cash risk in the last half of 2014.

Soybeans: The highs appear to be in for beans, Utterback says, so producers should be selling their old crop. On the new-crop front, sell aggressively above $11.20 to $11.60, and expect fall lows of $9.50 with wide basis. Brazil will remain a strong exporter of beans

Wheat: This crop is seasonally bearish, Utterback says. He advises selling $6 wheat right now.

Hogs: High summer prices are expected this year, but Utterback’s outlook is long-term bearish heading into 2015. Come August of this year, producers will need to begin thinking like corn growers in anticipation of narrower margins.

Cattle: Prices will remain strong well into August.


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Spell Check

2/20/2014 04:50 PM

  Sell, sell, sell. Always the same advise from this advisor. Zzzz.


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