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By Alan Brugler
Ag Market Professional

Corn
Traders came back from Labor Day to find no freeze risk in the extended forecasts, and USDA projecting a 10.9 billion bushel crop. With adequate old crop carry-in and a record new crop, buyers are going hand-to-mouth with export sales suffering. Feed wheat competition is a problem, and USDA is projecting the first rise in world ending stocks since 1998/99.

Strategy: Downside risk is $2 to $2.10 for futures, and loan deficiency payments (LDP) are a definite possibility in late September and October if there are no big freeze losses in the Corn Belt. Poor harvest basis and LDP potential suggest no outright cash sales during this period. Keep short July futures or short calls to guarantee returns to storage in your home bins. Look to re-own those forward contracts from last spring later in the fall via futures or call spreads.

Soybeans
USDA showed us a smaller U.S. crop on Sept. 10, and there is still some risk of yield reductions if a freeze hits the northern U.S. before Oct. 10. If we dodge the bullet, lower prices are definitely ahead. USDA is forecasting record 2004 and 2005 world soybean ending stocks of 51.5 million metric tons. If accurate, that could mean sub-$5 soybeans by next summer. Right now, we need lower prices to discourage Brazilian expansion.

Strategy: New crop is 100 percent priced via a combination of forward contacts and November bear put spreads. With another dollar or more of downside risk if USDA is right about ending stocks, we’ve forward contracted 15 percent of estimated 2005 production, and hedged more in November 2005 futures.

Wheat
We're in the right time window for a seasonal bottom. Export sales are running above a year ago, but USDA is projecting record world wheat production for 2004 and 2005. Quality problems with Canadian wheat and harvest delays are giving the United States a short term opportunity to make some more sales. Winter wheat planting progress has been excellent thus far, with much better moisture conditions than in recent years.

Strategy: Up to 50 percent cash sold at much higher prices. Look to regain pricing control of those bushels with Dec 340/380 or 360/400 bull call spreads. Basis and flat price usually improve in Ohio from July to early December, with the average cash price gain from the harvest low more than 30 cents.

Livestock
The decision not to impose a countervailing tariff on hog imports provoked speculative fund selling. Slaughter is running more than 2 million head per week, with some believing the peak may be 2.2 million. Futures are finding support because they are below the Chicago Mercantile Exchange Hog Index, but can retail demand absorb those big weekly kills without packers having to substantially lower wholesale and cash hog prices? Cattle are benefiting from a reduced third quarter tonnage estimate from USDA, but rising average carcass weight is also hurting feedlot negotiating leverage.

Strategy: Bear put spreads allow you to lock in current profitable prices relatively inexpensively, while giving you profit potential if the markets move higher. Hog prices are still substantially above year ago.

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 Advisor 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.