Melvin Brees
Farm Management Specialist
University of Missouri Extension




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February 16, 2001

Bears vs. Bulls

The markets are often described as a battle between the bears (those expecting lower prices) and the bulls (those anticipating higher prices). When comparing private marketing newsletters this past week, it was apparent that both bearish and bullish opinions still exist in the markets.

Bearish news has dominated recently. USDA continues to lower corn export expectations. Even with the lower predictions, analysts believe that USDA's export numbers are still too high and that further reductions will occur. The bears also discount World corn stocks that are lower than last year and point out the current World ending stocks estimate is higher than the previous estimate. Early summer weather forecasts suggest good weather and the possibility that corn supplies will continue to increase.

The soybean supply and demand situation appears even more bearish than corn. The last four years have produced the four largest U.S. soybean crops ever. Estimates for record sized crops in Argentina and Brazil continue to get bigger. While soybean use is projected at record levels, it is being overwhelmed by supply and USDA just lowered the export estimate. This all leads to increasing World carryover supplies and some analysts believe soybean prices could drop as much as another fifty cents.

While market bulls agree the news has been bad, they remember that "markets tend to bottom when the bad news is at it's worst!" When the news quits getting worse or starts getting better, the markets may recover. In spite of lower export estimates, the bulls point out that these are the best corn exports in five years. The South African corn crop appears to be suffering from dry weather and, while the South American crop has received attention, it quickly being booked for sale while U.S. sales continue at a strong pace. In addition, World ending stocks are lower than last year and this usually only happens when the U.S. corn crop is short, not when we produce a large crop! The bulls observe that continuing forecasts of a South American crop that is getting bigger causes declining soybean prices. With strong demand, they ask what happens when the crop stops getting bigger? In summary, the bulls believe that most of the "bad news" is already in the market and the "good news" is being overlooked.

Eventually, both the bears and bulls will win in the markets. They will also both lose because prices eventually reverse whatever trend they are in. Currently the bears are winning, but prices will recover sometime. One of the bearish analysts agreed that the situation could be much different by mid-summer. Can you, or should you, wait that long? Maybe, but probably not. For now, your marketing strategy for both remaining old crop and new crop production will depend upon whether you accept the bear's or the bull's opinion. Bear or bull, you also need to consider what happens if the other side wins. It's a difficult, but not impossible, task requiring a flexible plan and probably multiple marketing tools to accomplish. --Melvin

University of Missouri ExtensionDecisive Marketing - February 16, 2001 -- Revised: April 20, 2004