The market tone is changing!

The market tone is changing slightly, from expecting lower price action, then moving higher to expecting higher price action and then moving lower again. I have to say the market is now getting adjusted to the problems it may be facing it next year, specifically, the sharp jump in demand.

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In talking to a lot of livestock producers, I feel they missed getting long this fall. By the conversations I'm having with end users, I believe they are more than likely protected to about March but not much further. Everybody that's got upside risk is waiting for the cash flow movement in old crop between late December and early February to be a buyer.

</br> While I don't take pleasure in pouring cold water on everyone's expectations, I have to remind them the last time we had a strong demand push was in the fall of 2003 to early 2004 when China had the short fall in production. Then, there was no December to February correction.

</br> I see an interesting situation developing in the May to July time period. The end user has already priced a significant higher percent of his crop than normal and the end user is buying his needs hand to mouth.

</br> If correct, it will be difficult to get much more than 7 million more acres to shift to corn next year and things will get down right explosive in May to July if we see any delay in getting the crop planted. We need every acre, at least a 152 yield, and we will still need to see prices move sharply higher to ration usage to keep carryover above 750 million bushel.

</br> Summary: As producers we do need to sell our crop but now is not the time to be "overly' aggressive in selling. I would not be against a 30% to 40% sold level but much more is pushing it. As for protection there is still clear significant upside price risk and all end users and producers who have sold inventory are encouraged to consider strategies to defend upside risk exposure by no later than the second week of January.

</br> Give us a call at 1-800-832-1488 if you are interested in developing a long term marketing strategy. If you have any questions or would like to read more of my daily recommendations regarding reownership or marketing strategies for the 2006 marketing season, email me at laura@utterbackmarketing.com.

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