Grains fundamental outlook

I talked to a few farmers the other night about recent grain markets. Note that I am just a speculator, so please read the disclaimer before you do anything.

While they are expecting a really good year from grains making all time high, they soon have to make a critical decision about planting by end of this month or so. (March crop report will be really huge because it'll tell us how much shortage/excessity we'll having for this year's crop.)

In short, many people are planning to put beans this year ($14 /b is just nuts), which will lead to too much of beans and a possible shortage in corns. People who put corns are a bit nervous because corns are not appreciating as good as beans or wheats, so they are changing to beans or even wheats. (Farmers whom I talk to, don't usually do wheat in that area, but they are considering to change.) They said corns must hold its price or they'll lose money. Of course, that doesn't mean corn won't go lower, but if that's the case they will highly likely change to beans. I guess after all the bio-desel thing, people put too much corns.

One thing you need to know is you can do beans back to back or a few years in a row (This is how I understood, but double check it). It has something to do with soil being used up. Hope you get the idea from here.

Where am I going here? I'm not saying it'll, but it seems that corn will appreciate quite a bit in the year of 2008-09. Farmers are very smart. They've using futures to lock in their profits 2-3 years ahead and the quantities they are trading is a few thounds contracts at a time easy scaling in! One of the biggest farmer said, while others put beans, he'll put corns. This guy has a specific level to buy futures on the white board in his home office. By the time, there are too much beans from other farmers, he'll be one of few suppliers who sell corns. This has been doing this for years!

This is also a good news to me because I have a spread trading that's going through $5K drawdown and as I stated earlier I'll scale in every $5K. The spread will get smaller as beans price drop, so I like that idea, but I need to make sure I'm not over-leveraged. I may even do beans - corn spread.

I've been trading grains since Q4 of 2008, so I'm curious about how much volatile markets are going to be during planting / harvesting seasons.