By Melvin Brees
The grain price outlook appears bullish, and prices remain in an uptrend. You may not want to sell yet, but you have got to sell sometime. Based on the USDA Jan. 12, 2011, reports, U.S. corn stocks-to-use ratio will be the lowest since 1995-96. If this carryover is realized, corn 2010-11 ending stocks will represent less than a three-weeks’ supply at the end of the marketing year.
Besides tight carryovers, domestic and foreign demand is strong, there have been foreign production concerns, and increased U.S. acreage with large production is needed in 2011. The technical (chart) price trend is up. Until the uptrend is broken, this is a technical signal that prices should move higher.
What May Send Prices Lower?
The initial reaction is probably to delay any additional sales of both old crop and new crop production. This is not an unusual reaction, especially following last year’s price pattern that rewarded those who delayed sales until harvest or later. No one wants to make sales if prices are going higher, but the markets are volatile and full of uncertainty. There is risk of waiting too long.
Outside factors such as energy prices, dollar value, the economy and fund trading add to market volatility and could turn negative, sending prices lower. Favorable weather, improved foreign production and politics are among many other factors that could contribute to a market turnaround.
Have A Plan In Place
With prices currently in an uptrend and pointed higher, you are likely reluctant to sell right now. However, you should have a plan. Current prices offer profit opportunities that are well above typical break-even prices. You should not allow profitable prices to slip away. It is one thing to pass up a price on the way up, but don’t miss it on the way down.
It is a complicated marketing situation, but it can be managed by using a variety of marketing strategies and selling tools. The objective is not to get the highest price – that depends heavily on luck and is nearly impossible to do. The objective should be to capture profitable prices in the upper portion of the year’s price range. Many marketing stra-tegies can be used to do this. A few examples include setting upside and downside price objectives to target sales, using a “trailing stop” to trigger sales and using options.
The price outlook seems bullish, and prices remain in an uptrend, suggesting that higher prices are possible. You may not want to sell yet, but you have got to sell sometime. It is important to be ready to do that.
Read “Decisive Marketing” in its entirety at www.agebb.missouri.edu.