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A bear bounce

Agriculture.com Staff 02/12/2010 @ 9:37am

This is apparently "short covering week" in several ag commodities. The break in the markets since the surprisingly bearish January crop report has been substantial. Not only have longs liquidated, but new selling has occurred in the grain and soy markets.

The past few days, there seems to be an effort to shake some of these new short positions out of the market. Corn and soybean futures seemed content to pause at some major psychological price points--$3.50 and $9.00.

There is not necessarily any bullish news to rally prices, but rather it's a feeling that the break has lasted long enough. Outside markets such as the crude oil and the stock market have provided support as well. The US dollar, usually an influence, has been trapped in a narrow range this week and has not been much of a factor.

Despite the snowstorms which shut the government down in Washington, D.C., the USDA did put out the monthly supply/demand reports on Tuesday. There were some expected changes-for soybeans especially. Exports (think China) and crush were both increased. For corn, use of ethanol was increased 100 million bushels. This change was not so expected. The USDA said it was due to good industry profitability and strong production numbers in the last EIA report.

The government also put out its annual baseline projections today. These are projections regarding acreage, supply and demand that were developed back in October and just now published, a week before the USDA's annual Outlook Conference. While they go out ten years, they are real "yawners" with only very small incremental changes from year to year.

The risk of loss in trading commodities can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial situation.

This is apparently "short covering week" in several ag commodities. The break in the markets since the surprisingly bearish January crop report has been substantial. Not only have longs liquidated, but new selling has occurred in the grain and soy markets.

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