Barley replacement stategy

[willg]

Is there more upside in the barley market? Any thoughts about replacement strategies for recent sales?

[bbrindle]

I'm not very comfortable commenting on this since I don't watch the market on a day to day basis anymore. There's nothing worse than taking advice from someone who shouldn't be giving it! Since you can't do a replacement strategy without working with a broker, I'll outline what you might want to talk to them about. 1. In my opinion, reownership should be discussed with a market advisor or broker who watches the market closely and who is also familiar with your overall marketing plan for all your crops. Why would you talk to a market advisor in addition to a broker? Because a broker has a vested interest in you doing something in the futures market. Depending on the amount you've sold, sometimes your energies are better spent in the cash market on staging in more barley sales if the market is moving up, or selling some feed wheat or taking a look at next year's opportunities for feedgrains. 2. Charts and technical analysis are absolutely essential for a reownership strategy. Weekly continuaiton charts give a sense of the trend and levels of resistance and support. Then the charts of the month you might consider reowning in, must also be examined. You don't need to necessarily have these but if your advisor or broker doesn't refer to things like resistance and support -- then find someone who does! It may seem greek to you but it is vital! 3. It isn't enough to know if there is upside. Ask if there is enough upside to warrant doing the strategy. The trend might be up but for how long and to what level? 4. From the technical analysis they should be able to guide you in where to enter and where to exit. People generally just focus on entry and leave the exit to 'come what may'. That's often a huge mistake. Have a plan for exiting, before you enter into the position. Again, that point must be picked based on technical analysis. 5. What's the contingency plan? What are the levels above and below that might cause you to review your plan? Should you use a stop below for protection on the reownership? Normally stops aren't used on hedging positions but they can be a good idea on reownership. Technical analysis can provide some insight as to where the stops should be placed. The main part of this message is, reownership has very little to do with fundamentals of the market and everything to do with the technical side.

[shelka]

There's definately an upside to barley this year. Very narrow basis levels in the spring and summer equals more money in the producer's pocket. But, don't wait too long to take advantage of these basis levels. The closer we get to the futures months, the wider the basis will become (as a general rule). You might also want to consider selling now and replacing your physical barley with paper.