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by Alan Brugler
Ag Market Professional

Corn: The crop is expected to be a little smaller in 2005, despite a likely increase in acres. Analysts expect a retreat back toward trend line yields. World stocks are growing, but so is demand. U.S. stocks are becoming burdensome as we keep missing export sales projections. The market is putting corn "on sale" until we start seeing the consumption pace needed to halt stocks accumulation.

Strategy: Reward the market for basis improvement with cash sales. Maintain short futures and short call option hedges until we either 1) see a clear chart bottom or 2) bad and unanticipated news fails to make the market move lower. Expect a 15- to 20-cent rally (or more) once we find a plausible seasonal low.

Soybeans: Large world stocks are a reality. A U.S. shortfall next summer is a possibility. The market is taking the bird in the hand, and will consider those in the bush later. Nobody wants to store the 735 million bushels of surplus world production USDA currently anticipates. Weekly chart closes below $5 will tell the market bears to try for $4.75 in old crop and $4.95 in new crop.

Strategy: Sell cash beans on basis pushes, particularly if you already took the LDP. Be aware of the tendency for a February Break, and preserve that government put (LDP) until you sell the cash beans, or have a concrete bottom on the price charts.

Wheat: USDA showed us the smallest soft red wheat plantings in 40 years or more, so soft red wheat production is very likely to decline in 2005. The larger question is whether world production drops back below 600 million metric tons, which would cause us to revert to a stocks drawdown scenario. That would allow higher prices down the road.

Strategy: Last month, we said that our Price & Probability Forecast showed downside risk for March wheat to $2.82. We’re just about there. We’re maintaining bear put spreads to protect prices until we’re cleaned out on the cash. Do that on strong basis days.

Livestock: The re-opening of the Canadian border, and the timing thereof, continues to be a market feature. Without the Canadians, we’re already building up slaughter numbers over last year, and simultaneously building up the cow-calf herd. Initially, the border opening would mean some cheap steers coming across, but the Canadians have increased domestic kill capacity 22 percent in the past year and are now shipping the beef across instead, wherever possible. The pork market has seen pressure on wholesale values, partly due to the cattle situation. Signs of expansion in production are still spotty.

Strategy: Cattle futures are in a long-term uptrend, with support near $82. Back month futures are too cheap, IF there are border opening delays. We’ve recommended cattle crush spreads every time they have hit profitable levels, as a way to ride out the uncertainty. The Head & Shoulders top in April hogs points to some spec fund selling, but could easily be overdone. Keep those long April 76 puts for hedge protection.

Disclaimer: There is a substantial risk of loss in futures and options trading, and losses may exceed the initial investment. Not all risk management tools are appropriate for all producers. This article should not be seen as a solicitation to trade futures or options. 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 daily risk management advice to agricultural producers through its Ag Market Professional and Special Research Reports publications. For additional information, call 402-697-0657, or visit the Web site at www.bruglermktg.com.