"Should Have Sold. Is It Too Late?"

When markets are in an uptrend, doing nothing (not selling) seems to be the "right thing" to do. For example, not selling new crop soybeans at $7 and watching them go toward $8 increases the value of what you have to sell and you need all you can get-right? However, at some point, sales must be made because doing nothing in uptrending markets can result in missed opportunities. In recent months the following new crop (2004-05) pricing opportunities were offered.

• November soybean futures prices closed above $7.80 on 8 days from late March to early May. Soybean prices at these levels occurred lest than 15% of the time during the past 20 years!
• Closing prices December corn futures were above $3.25 for 7 days in early to mid-April, a time period that historically offers seasonally high new crop corn prices. Corn prices above $3.25 have been offered less than 10% of the time in the last 20 years!
• There have been 24 days (late March through early May) when July CBOT wheat futures closed above $4. Wheat prices above $4 occur only about 25% of the time.

For those who made new crop sales, the sales now appear to be excellent sales at prices well above USDA's June projected average price ranges for 2004 produced crops. For those who did not make sales or need to make additional sales, previous high prices are missed opportunities and the may be wishing that they had sold. Is it too late or will there be other opportunities?

Market advisors sometimes describe producer responses to the markets as Greed, Hope and Fear. The Greed response occurs during sharp market uptrends with prices exceeding earlier expectations. Producers avoid selling today because higher prices tomorrow will return even more. This expectation of ever higher returns and the chance to "strike it big" (greed) causes them to pass up profitable prices. When the market peaks, it often reacts with sharply lower prices. At this point producers begin to realize they have missed the highest prices, but Hope prices will return to the highs. During this hope response they may avoid sales, passing up what may still be profitable and historically good prices, in hopes that they will get "just one more chance at high prices." If prices continue to decline, the Fear begins. Prices have now declined considerably from the highs and producers begin to fear unprofitable prices that are well below breakeven. This fear often triggers sales near the market lows.

While there are other reasons for not making sales (production risks, etc.), it is important to avoid greed, hope and fear reactions and base market strategies on capturing profitable marketing opportunities. Many analysts now believe that the "market highs" are in, but not all agree and there is enough uncertainty to expect volatile market action in the coming weeks. Even if the highs are in and the Greed phase of the market is over, the key is to not get caught up in Hope or Fear when making marketing decisions. The objective should still be recognizing and taking advantage of whatever opportunities the market may still have to offer.

Soybeans: New crop (November) futures prices are in a downtrend. USDA's projected planted acreage and trend yields in the United States, along with increased acreage and production in South America, will lead to sizeable domestic and world supply increases. This situation points to lower prices. While plenty of uncertainty exists about acreage, weather and tight old crop supplies that could turn prices higher, the downside price risk for soybeans is significant. Current November soybean futures represent prices that are in the upper one-half of USDA's projected new crop price range-suggesting the market may still be offering price opportunities for hedging or forward contracting for fall delivery.

Corn: New crop prices have declined, but December corn futures appear to be in a trading range of about $2.78 to $3.22. USDA projects record production and record use along with expectations for lower ending stocks. World supplies are also tight with ending stocks expected to decline. However, early planting and good crop condition reports seem to overshadow other negative news of too wet conditions and replanting. Good production is needed to meet expected demand and any production concerns could result in sharply higher prices in a volatile market. Current December futures represent prices in the lower one-half of USDA's projected price range. For some Missouri locations, current new crop bids are even lower than the $2.55 bottom end of the projected price range. While there is risk in waiting, current prices suggest that there may be better pricing opportunities sometime during the marketing year if USDA's demand projections hold up. For those needing to deliver corn that is yet unpriced at harvest time, you may want to target prices near the upper end of the current trading range.

Wheat: New crop wheat prices have been in a seasonal downtrend since the early April high. USDA projects lower U.S. production and lower ending stocks. World ending stocks are expected to decline, but world production is expected to increase and current world ending stocks projections are higher than previous estimates. Fundamentals are supportive of wheat prices, but increasing production could result in negative price impacts. Current July CBOT wheat futures prices result in cash prices in the lower one-half of or below USDA's projected average price range. Harvest pressure may limit opportunities for prices in the upper portion of the range until after harvest is complete. However, typical wheat basis patterns in Missouri suggest harvest sales and re-owning with futures or call options is often a good alternative strategy to storing cash wheat.

Expect market conditions to remain volatile as considerable supply/demand uncertainty remains. The USDA Planted Acreage and Grain Stocks Reports on June 30 will provide more solid crop acreage information and clues about grain demand. The idea that "rain makes grain," uncertainties about Chinese demand and the possibility of large increases in soybean supply are among factors currently weighing on the markets. Too wet conditions, replanting, strong demand and tight grain supplies provide some of the underlying bullish fundamentals. It is important to have market strategies in place in order to make selling decisions as the markets react to changes in these and other marketing factors.