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Crude as the largest influence

Agriculture.com Staff 05/23/2008 @ 6:35am

As soon as the market breathes a sigh of relief that planting will be accomplished (even though it continues to be 1-2 weeks slow), influences from other commodities return to center stage. So Wednesday's crude oil rally heavily influenced corn and soy prices and yesterday's break in crude had the opposite effect.

Ag's increasing tie to the energy markets can trump the weather forecast on many days. Plus it is hard to avoid the story that is often the lead piece on the network nightly news (crude oil prices today hit a new record of.....). The profitable ethanol market and the biodiesel market also cause corn and soy prices to closely follow crude, especially when there are large $2.50-$3.00 swings like the past few days. Volatility is still a key concept.

Weekly export sales were large and the soy crush number reported by the Census Bureau was larger than expected. These usual fundamental factors had very little positive effect on prices. However, these reports continue to indicate that cutting demand (via $5.50+ corn and $12.00+ beans) has not occurred in a meaningful manner.

The word "demand" in agriculture is usually followed by the word "China." April trade data from the Chinese government reminds everyone that China is the largest importer of soybeans. They have imported over 10 million metric tons of beans just since the first of the year. This is up 22 percent from year ago figures. Seventy percent of these beans came from the US. The USDA export sales report this morning indicates they are still purchasing soybeans-194,000 mt old crop and 429,000 mt new crop.

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.

As soon as the market breathes a sigh of relief that planting will be accomplished (even though it continues to be 1-2 weeks slow), influences from other commodities return to center stage. So Wednesday's crude oil rally heavily influenced corn and soy prices and yesterday's break in crude had the opposite effect.

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