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by Alan Brugler
Ag Market Professional

Corn
USDA estimated the crop at 11.613 billion bushels, an all time record. Ohio’s average yield was put at 160 bushels per acre. Corn ending stocks of 1.691 billion would be the worst since 2000-20001. Projected demand is at 10.9 billion. We need 148 bushels per acre next year to break even, and above 133 to avoid dropping stocks below pipeline levels. Or, the market has to rally before spring to attract more acres and build in a cushion!

Strategy: We got the anticipated loan deficiency payments, and suggest taking them in increments of 25 to 35 percent of production. If futures are turning higher and your corn is still in the field, consider buying December call spreads to hedge those LDPs. Roll short December futures to March at 11 to 12 cents to guarantee storage income from your bins.

Soybeans
USDA raised projected United States production to 3.106 billion bushels, with ending stocks a burdensome 405 million. While USDA cut projected Brazilian production to 64.5 million metric tons, world ending stocks are still seen growing to an astronomical 57.5 MMT. USDA’s cash average price at $5.10 will permit $4.50 or lower nearby futures at some point in the marketing year. Low prices are stimulating export sales somewhat, but more are needed.

Strategy: Roll expiring long November puts to January or March and keep a price floor. With the world situation, we’ve also made forward contract sales and selective hedges of 2005 production. Look to take LDPs on at least 60 percent of the crop this fall. A potential second period for high LDPs is around the South American harvest in the spring if they have no major crop problems.

Wheat
Long term chart support at $2.97 halted recent weakness. More than half of all annual highs in wheat occur between November and February. USDA sees comfortable ending stocks of 569 million bushels with exports constrained by all time record large world wheat production.

Strategy: Up to 50 percent of the new wheat crop sold at much higher prices. Look to regain pricing control of those bushels with December 340/380 or 360/400 bull call spreads.

Livestock
Red meat production for the year is down 4 percent, with beef off 9 percent and pork up 3 percent. The Commerce Department imposed anti-dumping duties on Canadian hog imports, averaging 14 percent. This is expected to raise the cost of feeder pigs considerably, while providing a short term boost to U.S. hog prices by artificially raising the price of the competition. In the long run, Canadian producers are likely to absorb the charges, slowing expansion via reduced profitability.

Strategy: Bear put spreads allow you to lock in currently profitable hog prices, while giving you potential on the cash hogs if the markets move higher. Some seasonal strength is expected in cattle prices toward year end, but it likely won’t be enough to make $114 feeders ‘work.’ If you can get some that break even or better, buy live cattle puts to put in a price floor.

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.