Wow. It has been a year of records. Record high corn prices, record high hog prices, record high cattle prices, and record high land prices. And it wasn’t just because I forecast all of those things! (If only it were that easy.) This has also been a very volatile year. As I write this in late October, corn futures have traded up or down the limit a record 36 times this year... so far. For farmers who had a trendline or better crop this has been another very profitable year. For those who could not get the crop planted, and those customers in the central and southern plains who had another year of drought, high prices did not help much.

This was a challenging year to be in the commodity business. The USDA threw us some curve balls. We saw inconsistent corn stocks reports, and the July and August heat took a toll on corn and soybean yields throughout the Corn Belt. Add in European debt problems and we had a corn and soybean market that rallied up to the August highs, and then collapsed lower as we headed for November lows. The farmers who were disciplined seasonal sellers came out ahead again.

What did I learn this year? I learned that producers who stayed with my three-step marketing plan came out well, even in the areas that had a total crop disaster. Here, in a nutshell, is the three-step plan: (1) Get the right crop insurance plan bought, (2) Place scale-up hedges against your insured bushels, and (3) Cover the rest of them with puts. For farmers who had a crop disaster, the insurance check will keep them on the farm again next year. For the farmers with a good crop to sell, the hedges and puts looked smart at harvest. A disciplined plan beats using a crystal ball, every time.

The majority of my 2011 Fearless Forecasts worked. Farmland prices went to new all-time highs, we had record pork exports, and the US housing market finally bounced back. I was wrong on expecting the US stock market to out-perform bonds, and that crude oil would stay below $100 per barrel. I have made my Fearless Forecasts for 2012 and my forecast is that the majority of the Forecasts will be right again.

One of these years, I will stop forecasting crude oil prices, which I have yet to get right. But that wouldn’t be any fun. It certainly seems to give people a reason to write to me. Besides, like you, I enjoy the challenge of making a decision that, right or wrong, I will have to live with for the coming year... and that the neighbors will be able to see.

I hope you enjoy our 2012 Farmers Almanac. I think it is our best yet.

Sincerely,

Alan Kluis
Chandler, Minnesota