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By Alan Brugler, Ag Market Professional

Corn: There is huge speculative participation in this market, anticipating that 2006 production will not grow as much as ethanol and export demand. That market has been de facto bidding for more acreage, or at least persuading producers to not cut back in the face of higher fuel and fertilizer costs. However, once the corn is planted, we’re vulnerable to a "gotcha." Once you are committed to the acreage, the market doesn’t have to maintain the price.

Strategy: Those with May storage hedges and bull call spreads to protect the upside can continue holding old crop cash grain in the bin. Basis will improve somewhat if/when futures break down. We’re forward selling new crop every dime higher, with the latest increment done at $2.64 December 2006 futures.

Soybeans: Futures have been moving sideways since last fall. Record large U.S. ending stocks and a larger South American crop present a bearish picture. However, speculators have been reluctant to sell because they remember last spring’s rally, and because of the potential for some sort of La Nina driven weather market this summer. Export sales to China and Europe continue to lag because of avian flu related demand losses. Technically, a breakout of a triangle formation is due in the next week or two, with a larger price move to follow.

Strategy: Reward any speculator driven rally with additional old crop cash sales. We favor forward pricing 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: Futures have staged a huge rally, led by the Kansas City Hard Red Wheat contracts. Southern Plains dryness has resulted in more than 90% of the Texas crop being rated poor or very poor. However, Kansas is the largest production state, and April rainfall has the strongest correlation to final yield. The rally has likely bought additional spring wheat acreage and additional imports from Canada for next year. The bull is getting old.

Strategy: Plan on selling all remaining old crop before the end of the month. You should have some forward contracts against insured bushels in place for harvest delivery, as we’ve already met the Price & Probability objectives for July Chicago Board of Trade wheat in this time period. Use July put options to protect your less certain production.

Livestock: The avian flu crisis is depressing world poultry demand and backing up export chicken into the U.S. market. Here it’s competing with pork and beef. Beef is also under pressure from the largest feedlot inventory since 1996, with production for the year to date up 2.9 percent. Hogs typically rally seasonally into June or July, but futures have already built in a $16 rally from the winter low. Further gains will be more difficult.

Strategy: We are fully hedged in cattle until the boxed beef and cash markets show some sign of a bottom. Look to add bear put spreads on summer hog futures in that $68 to $72 zone.