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By Alan Brugler
Ag Market Professional

Corn
There is great uncertainty about final planted acreage due to extremely wet May weather within the Corn Belt. In the past 10 years, the largest increase from USDA’s "March 31 Intentions" to "June 30 Planted Acreage" has been 1.698 million acres. If achieved, that would just barely cover anticipated demand at trendline national yields. The market needs to maintain a risk premium for both reduced acreage and summer yield threats.

Strategy: Hold a small part of your old crop production in reserve, as it should become more valuable if there are problems with the new crop. Make light forward sales for harvest delivery to reward market rallies, and maintain a price floor on at least 3/4 of expected production with put spreads, three-ways, minimum price agreements or other tools. These are excellent prices, historically speaking, and the number one marketing objective has to be making sure they don't get away from us.

Soybeans
United States export shipments have dropped well below the 6 million bushels per week needed to hit USDA projections. Crush use also dropped sharply in April (May figures aren't yet available) and implied use of soybean meal has declined. Some Chinese crushers are in financial trouble and are both reducing import purchases and trying to renegotiate contracts to lower prices. On the bull side, wet weather is slowing planting and causing drowned out spots that will likely lower final yield. If final corn planting is prevented, soybeans will likely see some additional acres.

Strategy: Old crop beans are gone, except "gambling stocks" being held in case of a summer squeeze play fueled by tight supplies. Boost fall forward contract sales on rallies, and keep bear put spreads or three-ways in place on the rest, to ensure at least $7 on 2004 production.

Wheat
The annual low is frequently between May and September. World production for 2004-2005 is expected to increase 38 to 40 million metric tons, reducing U.S. export potential. However, the smaller U.S. crop (likely just more than 2 billion bushels) implies tightening U.S. supplies as the year progresses. The December Wheat Price and Probability© forecast calls for a post-harvest rally to at least $4.49 futures before Dec. 1. Chinese and Egyptian buying could be the mechanism.

Strategy: New crop forward contracts should be in place for most of what you intend to deliver at harvest. In these volatile markets, we favor put spreads and other strategies that put a floor under the price for the remaining bushels, yet allow your net selling price to rise if demand is better than expected.

Livestock
Strong export demand for pork, and smaller beef supplies, are absorbing the excess pork production for 2004 over 2003. U.S. consumers are also buying readily to fulfill diet requirements. Re-imposition of Japanese safeguard tariffs could cut pork exports by mid-summer, as the cap is quickly being reached.

Strategy: There is limited hedge coverage due to strength in the cash market. Be ready to move quickly on signs that meat exports might be slowing, or additional supplies of fed cattle from Canada might be heading into the United States. Cattle crush spreads have been very profitable, but aren't feasible at current price relationships.

Disclaimer: There is a risk of loss in futures and options trading, and losses may exceed the initial investment. This article should not be seen as a solicitation to trade futures or options. Not all risk management tools are appropriate for all producers. Past performance is not necessarily an indicator of future success. Opinions expressed are those of Brugler Marketing & Management LLC, which is solely responsible for the content.

Brugler Marketing & Management LLC is a registered Commodity Trading Adviser and member of the National Futures Association. It offers sophisticated marketing analysis and risk management strategies to agricultural producers through its daily Ag Market Professional and Special Research Reports publications. For additional information, call 402-697-0657, or visit the company Web site at www.bruglermktg.com