Melvin Brees
Farm Management Specialist
University of Missouri Extension

 

 

 

Decisive Marketing

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Please send your comments and send suggestions to Melvin Brees, Farm Management Specialist, University of Missouri Extension, #1 Courthouse Square,  Fayette, MO 65248, call 660-248-2272, or send messages by e-mail to: breesm@missouri.edu.
January 5, 2001

Market Signals

Most of us are now faced with the task of analyzing last year's business records, preparing financial information and making production and business decisions for the coming year. This is also a good time to reevaluate grain marketing plans and sales objectives for the remaining winter months and early spring.

The supply and demand situation is unclear. On the positive side, grain supplies appear to be tightening somewhat and demand (use) is strong. Many also expect next week's USDA Supply and Demand Report to show some additional reductions in 2000 production. On the negative side, recent export numbers have been disappointing and grain supplies are still large. Large South American production is expected and the U.S. 2001 production potential will be considered large as we approach the planting season. In addition, worries about next summer's weather always add uncertainty and risk. Perhaps the best way to deal with this uncertainty and accomplish our marketing goals is to look at market signals for when to make sales.

Market Trends: The old saying that "the trend is your friend" relates to the idea that trends signal the current market direction. In addition, when a trend is broken, it often signals a change in market price direction. Delaying sales while the trend is up and then making a sale, when the trend is broken, illustrates how following the trend allows you to capture higher prices and sell before prices collapse (that is how it can be your "friend"). Both corn and soybeans have been trending upward since harvest time. Uncertainty about exports and recent weakness in soybeans suggests that these trends need to be watched closely. If the up trend is broken, this may signal a change in price direction and suggest it is time to make sales.

Basis: Central Missouri corn and soybean basis (difference between cash and futures price) has been very weak (wide) during the fall and into winter. A weak basis usually signals weak cash demand--the market is discouraging cash sales. A narrow (strong) basis usually signals that the market wants cash grain. In the last couple of weeks, both corn and soybean basis in Central Missouri have begun to show signs of improvement. As basis strengthens, making cash sales captures the gains the improved basis offers.

Market signals, like those above and others, can help make sales decisions or determine how marketing strategies should be modified. While they aren't always reliable, they often provide the best clues as to what the "market is telling us." Pay close attention to the current price trends and what happens with basis, they may soon tell us what to do! --Melvin

**Market Outlook Conference**

7:00 p.m., Tuesday, January 9, Fayette Branch of Glasgow Cooperative, Fayette. This conference is an excellent opportunity to get both crop and livestock outlook information from University of MO marketing specialists that you can use to update your marketing strategies and plans.

 


University of Missouri ExtensionDecisive Marketing - January 5, 2001
http://outreach.missouri.edu/agconnection/DCT/DM010105.html -- Revised: April 20, 2004
breesm@missouri.edu