Expert: Embrace market volatility
Krueger expects China to increasingly rely on imports
By MATTHEW WEAVER
AIRWAY HEIGHTS, Wash. -- Commodity markets will remain volatile for the foreseeable future, an agricultural business expert predicts.
The Money Farm founder Mike Krueger advised commodity farmers to take advantage when prices move higher. It's a good time to make some sales and buy some put options, he said.
Conversely, farmers should also look at using options strategies as opportunities to provide protection against what they've sold, minimizing their risk.
"Everyone says, 'Oh they're expensive,'" he said. "Yes, they are. The markets are expensive these days."
Krueger also urged farmers to be cautious when selling their 2011 or 2012 crops.
"You don't know what you're going to have in 2011 or 2012," he said. "We know those conditions can change extremely quickly."
Looking at supply and demand on the horizon, Krueger anticipates any drops back to $3 per bushel corn, $5 per bushel wheat or the like will be brief.
"More people have gotten hurt in the last few years selling way too much way too early than they have exercising a little bit of patience," he said.
Krueger described the markets as fragile and wild. He expects the volatility will remain.
High demand for corn, soybeans and wheat is the new issue, Krueger said, particularly from China. China will likely increase corn imports; soybean imports are rapidly increasing.
U.S. and world supply stocks of corn and soybeans are near record lows, Krueger said.
Positive signs for the soft white wheat industry include:
* Problems with the crop in Australia.
* Continued drought problems in Russia.
* Fewer soft red winter wheat acres.
* Dry conditions in roughly 40 percent to 50 percent of the hard red wheat-growing regions.
* A bullish corn and soybean outlook.
* Increased demand.
* Potential weakening of the dollar.
Events that could affect the market negatively include a decline in demand from China, currency wars and another economic downward slope.