The USDA provided much anticipated updates to market fundamental information in their January 12, 2011 reports. The numbers were nearly all within the ranges of pre-report trade expectations, so they probably shouldn’t be called surprising. However, the corn and soybean carryovers are somewhat less than average pre-report expectation. The US corn stocks to use ratio will be the lowest since 1995-96 and soybean stocks to use ratio will also be the lowest in recent years. If these carryovers are realized, corn 2010-11 ending stocks will represent less than a three weeks supply at the end of the marketing year. Soybean carryover will represent slightly more than a two weeks supply. Global wheat, coarse grain and oilseed ending stocks are projected to decline from last year as well. This led nearly everyone to conclude that the reports were bullish with higher prices needed to ration tight supplies and encourage production.

The corn, soybean and wheat futures markets responded to the USDA reports with higher prices that set new highs. Besides tight carryovers, domestic and foreign demand is strong, there have been foreign production concerns and increased US acreage with large production is needed in 2011. The technical (chart) price trend is up. Until the uptrend is broken, this is a technical signal that prices should move higher. It seems like everything is bullish with prices pointed higher.

Although most of the current information seems to be good news for corn and soybean prices as well as wheat prices, it is not necessarily an easy situation for making selling decisions. The initial reaction is probably to delay any additional sales of both old crop and new crop production. This is not an unusual reaction, especially following last year’s price pattern that rewarded those who delayed sales until harvest or later. A recent survey by a private market advisory service confirms that a large majority of producers continue to worry more about selling too much too early rather than waiting too long to make sales. No one wants to make sales if prices are going higher, but the markets are volatile and full of uncertainty. There is risk of waiting too long. Remember, you also cannot delay sales forever; you have got to sell it sometime!

A number of factors could eventually turn prices lower. Higher prices can be expected to slow use, which is usually followed by lower prices. Outside factors such as energy prices, dollar value, the economy and fund trading add to market volatility and could turn negative, sending prices lower. Favorable weather, improved foreign production, and politics are among many other factors that could contribute to a market turn around. Just this past week, reports of Chinese buying of Argentine feed wheat instead of corn resulted in a sharply lower corn futures prices. Prices recovered much of the decline before the end of trading on the following day, but the action illustrates the volatility and uncertainty in the markets.

All price uptrends eventually end. During the past forty years, most major grain price uptrends and the following price downtrends have taken place in about twelve months or less. The current corn, soybean and wheat price uptrends began in late June of 2010. That means prices have been in an uptrend for nearly seven months. Expecting these price levels to last until harvest time might be asking a lot!

With prices currently in an uptrend and pointed higher, you are likely reluctant to sell right now. However, you should have a plan now! Current prices offer profit opportunities that are well above typical break-even prices. You should not allow profitable prices to slip away. It is one thing to pass up a price on the way up, but don’t miss it on the way down.

It is a complicated marketing situation, but it can be managed. A variety of marketing strategies and selling tools can be used. The objective is not to get the highest price—that depends heavily on luck and is nearly impossible to do. Instead, the objective should be to capture profitable prices in the upper portion of the year’s price range. Many different marketing strategies can be used to do this. A few examples are:

• Set upside and downside price objectives to target sales. Setting upside price objectives is difficult in an uptrend, but with prices at historically high levels targeting a higher price is almost sure to lock-in a “good” sale. Downside price objectives are easier to target, but difficult to follow through on because it requires selling at a lower price. The downside objective can be the breaking of the chart trend line, breaking of technical chart support levels or simply a price objective below current prices that will trigger a sale before prices decline further.

• Use a “trailing stop” to trigger sales. This is similar to setting downside price objectives. Select a price objective below current prices to trigger sales or “stop” you out of the market. If prices move higher, increase the downside price objective in order to “trail” the market higher. As long as prices move higher, you avoid making sales and the downside price objective continues to get higher. If the market reverses, it “triggers’ your latest or highest downside price objective.

• Use options. Yes, option premiums make them expensive to use. But they are flexible and can be used to protect or “insure” very profitable prices while still allowing you to sell the cash grain at higher prices if the uptrend continues.

The price outlook seems bullish and prices remain in an uptrend. This suggests that higher prices are possible. You may not want to sell yet, but you have got to sell sometime. It is important to be ready to do that.

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