Will corn hit $6.50 a bushel? Some market analysts say so and some Eastern Ontario farmers are sitting tight as they wait for the price to rise.

But there’s no point in thinking about where the price is going because "you can get good profits now, not just skating by, but the highest profits you’ve ever had," said Colorado-based risk manager Steve Barnes, who helped crop farmers with marketing strategies at a recent seminar held at Merrickville, west of Kemptville.

"Forget if it’s going to go to $6. At $5.20 now you are going to make money," Barnes told Farmers Forum on Feb. 4. "We could have $3 corn next fall. We could have $7 corn. You can make a case either way without too much of a stretch."

Doing the calculation by Ontario Corn Producers Association of $450 cost of production per acre, with return on investment already built in, you can lock in at $588 an acre, Barnes said. "If you could lock in at $140 net profit an acre in a worst case scenario, would you be interested in doing that? Would you prefer that or would you rather go naked?"

The March futures price was hovering at $5 per bushel. In eastern Ontario terms, at 39.4 bushels in a tonne, that’s $256.76 per tonne. It wasn’t many months ago when farmers saw prices of $110 per tonne.

Barnes argued that if corn goes to $6 and then drops and you haven’t locked in a contract you could lose big time. "With the highest levels of fertilizer and fuel costs, the farmer that sells at $3 is going to be in a world of hurt."

To lock in a profit now the producer can buy a minimum price contract, which allows them to share in more profit if the price continues to rise, he said.

When do you buy? Traditionally you buy by early spring, although the last two years have blown that theory out the window.

Meantime forecasting where the price will go is like predicting the weather, he said. "I said 10 years ago that it was impossible to predict the market. It was calm and quiet 10 years ago. I think it’s absolutely impossible to predict commodities markets with any degree of regularity. It’s the most volatile we’ve ever seen in history."

Corn demand has changed drastically in the past two years. "If you had one word to explain it, it’s ethanol," he said. It’s evident that Barnes is no stock jockey. He grew up on a farm and manages risk for farmers.

Meantime, in the past two years, Index fund managers have moved into commodities in a big way, he said, creating a kind of hyper demand. On just one day, Feb. 1, commodity fund managers bought up 3,000 contracts, each for 5,000 bushels of corn. They could pull their money out. No one knows yet how many acres will be planted for the big three commodities – corn, soybeans and wheat. We also don’t know the future price of oil or where we’ll see drought or bumper crops or neither. Barnes doesn’t want to predict price with all those variables. "If we knew (corn) was going to be $6, we’d mortgage everything we had to buy corn now and we’d sell it when it hit $6."

Corn buyer David Gordon, at London Agricultural Commodities, sees room for higher prices: "There’s no reason these markets haven’t got a ways to go."

Question is when will prices move? It all depends on product in the United States. Canada’s corn yield equals that of the state of Michigan, so Chicago’s board of Trade prices mean everything. While ethanol pushed prices last year, this year’s U.S. exports are creating the high demand for corn, Gordon said. "Typically at this time of year, 50 to 55 per cent of U.S. exports are sold or booked. That’s at 74 per cent now."

Compounding the issue, is that the "U.S. will not get enough acres in the ground" this year, said Gordon.

"I have no idea what the ultimate top is," he added. "This will give producers a good profitable year unless they get drought. Eastern Ontario has had some very good yields."

Rule of thumb? Eighty per cent of old crop should already be sold, while 50 to 75 per cent of the new crop should be locked in. Why not wait and hope you catch the price if it goes up? Says Moose Creek crop farmer Alain Leduc, who watches the markets closely: "What goes up, goes down."

You also want to sell when you know you can find a buyer and you’ll be hard pressed to find one when you wait too long, he said. As for $256/per tonne corn, Leduc says that after transport fees and other discounts, farmers are looking at $226 per tonne.

Analysts are also bracing for wild price swings. Price swings that we’ve never seen before.

Consult FC Stone advisor Steve Barnes directly at 1-866-705-4683.