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By Alan Brugler
Ag Market Professional

Corn: The potential crop size has been reduced by dryness in the Eastern Corn Belt. The extent will be determined by this month’s weather (pollination). To get new crop prices much above $2.55, it will take crop projections below 10 billion bushels. Our current projection is 10.4 billion bushels.

Strategy: Maintain December bear put spreads or elevator variants to keep a floor on new crop that is comfortably above loan rate. Increase cash sales and forward contracts on 10 to 20 cent rallies. Try to move the old cash corn on basis improvements of 3 to 5 cents that occur on futures market pull backs.

Soybeans: We reached our $7.50 objective as dryness in Illinois and Northwest Ohio continues to threaten yields. New crop prices vary sharply day to day based on spec fund activity. The market dropped $.80 in two days. Daily advisory services like Ag Market Professional are cheap if they help you avoid those kinds of losses! The United States Department of Agriculture (USDA) put June 1 soybean stocks at 700 million bushels. They may have to cut the 2004 crop production estimate to make the numbers fit.

Strategy: Clean out the bins. Replace those bushels with August bull call spreads if you are still inclined to gamble. Keep the two legs of the spread at least 80 cents apart. Cash basis will weaken if the market rallies from here. November 700 or higher puts continue to make sense to put a price floor under new crop. Pay the money to roll them to higher strike prices as the market allows you.

Wheat: USDA showed smaller U.S. acreage than expected in the June 30 report. However, spring wheat condition ratings are excellent, and yield reports for soft red wheat and hard red wheat have been running on the high end of expectations. Wheat futures can rally, but only on the coattails of corn. Basis should improve as we come out of the harvest pressure.

Strategy: We recommended heavy new crop forward sales and put options in March. Consider adding bear put spreads (or minimum price contracts if basis is OK) to protect cash wheat that you intend to store for post-harvest basis gains. These create a floor but not a ceiling. You can earn about 4 cents per month on storage hedges for March delivery. That’s attractive if you have "paid for" bins.

Livestock: Cattle prices have broken their three year uptrend, signaling weaker prices ahead. The market handled the BSE finding well, but beef production is running a little higher than consumer demand. Hogs were discounted sharply in June, and the price cuts are starting to work. Cold Storage inventories appear to be shrinking, and wholesale pork prices have stabilized.

Strategy: Based on the post 1996 average annual trading range, nearby hog futures could go as low as $48 by next spring. A $3 to $4 bounce from the June lows is likely, particularly in the fall contracts. Maintain those profitable cattle crush spreads for Aug to Nov placements, and look for a place to lock in breakevens on December and later placements.

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 results are not necessarily indicative of future results. Opinions expressed are those of Brugler Marketing & Management LLC, which is solely responsible for the content.