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By Alan Brugler, Ag Market Professional

Corn: The U.S. Department of Agriculture (USDA) showed producer planting intentions of only 78 million acres. With expanding ethanol and export demand, that puts too much emphasis on getting record yields in 2006, and risks substantially higher prices if we don’t. The market is in the process of persuading producers to plant more corn by offering the chance to lock in higher prices.

Strategy: We’re forward selling 10 percent of expected new crop every dime higher, with the latest increment done at $2.64 Dec 2006 futures and another one due in the $2.73-$2.75 area. With all the speculative interest, hedgers will be better off buying at-the-money puts or spreads to create a price floor, while leaving the upside open. We are still opposed to making any 2007 or 2008 sales due to strong charts and insufficient carrying charges.

Soybeans: Futures may be starting to break down. Record large U.S. ending stocks and a larger South American crop present a bearish picture. USDA also showed record intended acreage in the March 31 report. Speculators have been slow sellers due to soybean rust and drought risk. Technically, a downside breakout of a triangle formation predicts November futures will eventually drop to $5.50.

Strategy: Old crop beans should be gone; except for "gambling stocks" you will hold into summer. Some forward contracts should be in place on new crop, with November 600 puts purchased to protect the downside of the rest of the crop. Selling November 640 or 660 calls is also an attractive hedging opportunity during up weeks.

Wheat: The market sold off as we anticipated in last month’s column, due to rainfall in the Southern Plains and improving crop ratings for Hard Red Winter wheat. USDA showed smaller than expected spring wheat acreage intentions, and some of those are being threatened by flooding in the Red River Valley. Soft red wheat is still in surplus, and the European Union has resumed subsidizing exports because they fear being stuck with inventory.

Strategy: Old crop wheat should be gone. You should have some forward contracts in place for harvest delivery, as we’ve already met the Price & Probability objectives for July Chicago Board of Trade wheat. Use July put options to protect your less certain production.

Livestock: Nearby cattle futures have dropped more than $15 since January. It will soon be time for a $3-4 corrective rally in futures. Cash cattle may not bottom until July due to large slaughter numbers ahead. Meat prices are still under pressure because of increased supplies of all meats, and constraints on our ability to export. Imports of Canadian feeder pigs are up more than 12 percent this year due to the punitive duties on imported U.S. corn. They can’t afford to feed those hogs at home.

Strategy: We must remain fully hedged in cattle until the boxed beef and cash markets show some sign of a bottom. That’s also true for hogs. Retailers have massive promo campaigns for cheap chicken planned between Easter and Memorial Day, in an attempt to clean out the backlog of inventory. That could slow grilling season sales of beef and pork.

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.