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By Alan Brugler, Ag Market Professional

Corn: Futures have completed an average rally from where they were on Nov. 1 to a winter high. Index fund buying provides an overall lift to the market, but each fund purchase is a one time shot. They buy and then they hold. Projected ending stocks are burdensome, but the market will err on the high price side for new crop as long as the National Oceanic and Atmospheric Administration's prediction for La Niña weather conditions this spring is in effect. Soil moisture is limited in some key producing areas, and a short fall from La Niña would threaten lower yields.

Strategy: Some old crop sales should be made here, since the market has achieved a "normal" winter high. Forward contracts for March or later may be better than spot sales, due to large storage premiums. Those with storage hedges and long calls to protect the upside can continue holding cash grain in the bin. Any short March futures storage hedges should be rolled to May or July contract. The spread usually goes the wrong way after late February.

Soybeans: Brazilian production estimates are being reduced slightly, to the 57 to 58 million metric ton range. That’s still at least 183 million bushels above last year, while the United States also has several hundred million more. Soy oil stocks have built to burdensome levels, with long term bulls noting ‘still strong’ diesel prices as an eventual solution to the stocks problem (use it all as biodiesel).

Strategy: Reward the speculator driven rally with additional old crop cash sales. We favor forward pricing (if basis is OK) or using hedge-to-arrive contracts on 25 percent of the 2006 crop in the $6.25 November futures area. We want to make another sale if November trades in the $6.40 to 6.60 range.

Wheat: July futures are at price levels which the market exceeds less than 25 percent of the time, and winter wheat acreage will be larger in 2006 than in 2005. Speculative open interest for the 3 wheat futures markets is larger (2.5 billion bushels plus) than the size of the U.S. wheat crop. Drought is a concern for winter wheat production, but a downward correction is inevitable, even if it isn’t immediate.

Strategy: Plan on selling all remaining old crop by March. Light new crop forward contracts or put option floors make sense for 20 to 25 percent of expected production. Think of it as rewarding the market for the rally.

Livestock: Meat supplies are rising, thanks to both expansion and cheap feed. Poultry meat (particularly dark meat) is piling up in the United States market due to substantial avian flu related cuts in world poultry consumption. That’s pressuring pork and beef prices. There is usually a spring rally in hogs of about $10, but it may be muted a bit by the cyclical downturn in cattle prices, and by the competition from chicken.

Strategy: We are fully hedged in both cattle and hogs until the cash market shows some sign of a bottom. Back month futures premiums will continue to erode until that cash market rebound occurs.

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.

Brugler Marketing & Management LLC is a registered Commodity Trading Advisor and member of the National Futures Association. Brugler Marketing offers sophisticated analysis and daily risk management advice to Ohio producers through its Ag Market Professional and Special Research Reports publications. For additional information, call 402-697-3623, or visit the Web site at www.bruglermktg.com.