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Corn: Prices have a firm tone due to rising export sales and the idea we’ll need that corn next year for ethanol. The U.S. Department of Agriculture will give us an updated estimate of 2006 acreage on June 30, with some expecting 1 to 2 million more than shown in the March intentions report.

Strategy: We’re forward selling 10 percent of expected new crop every dime higher. With the lousy basis, hedgers will be better off buying at-the-money puts, which leave the upside open. We are still opposed to making any 2007 or 2008 sales due to strong price charts and the ethanol frenzy.

Soybeans: Ending stocks are still expected to be record large, and to grow larger in 2007 with a normal crop. However, financial woes for Brazilian producers are expected to result in an acreage reduction there for 2006/07, so the market wants assurance that the big U.S. crop will make it to the bin. Use of soy oil for biodiesel will clear up the oversupply in 2 to 3 years, but that demand requires 1) processing plants to be built and 2) high diesel prices to continue.

Strategy: Some forward contracts should be in place on new crop, with November 620 puts or bear put spreads purchased to protect the downside of the rest of the crop.

Wheat: Futures have rallied sharply on myriad problems with the HRW crop, and some potential disease issues with SRW. Technically, the market looks toppy, and seasonally, it should be headed down. Basis is poor as futures have pulled ahead of cash. Short falls in world acreage (Australia is worrying about drought) or more fund buying could still provoke another swing at the highs. Without them, a convergence of futures and cash (likely weaker futures) near July futures deliveries would appear likely.

Strategy: Forward sold on about half of the crop due to cash flow and storage considerations. Buy September or December bear put spreads to put a floor under the rest of the wheat while waiting for basis to improve.

Livestock: Cattle have rallied despite weak U.S. demand and larger slaughter numbers. Optimism about re-opening trade with South Korea and Japan is aiding the cash market, along with firm prices for grilling cuts. Speculative shorts in cattle are being forced to buy back at a loss due to the upcoming June contract expiration and the firm cash cattle market. Hogs are seeing good retail demand for pork, and packers have managed their inventories well. The seasonal peak is frequently in June or early July. Pay close attention!

Strategy: All short futures and long puts for June cattle were lifted a few weeks ago. September feeder cattle futures were bought to protect input costs. The average 12-month move in cattle prices is $17, so late 2006 contracts near $90 would be a definite selling opportunity. Hogs have chart resistance just above recent prices. We’ve sold call options above contract highs as a light hedge (strike price + premium received = hedged price).