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Exciting non-agricultural markets

Agriculture.com Staff 02/08/2016 @ 6:30am

This is the time of year when the grain markets normally are exciting. April and the first half of May are traditionally good times to make sales in all of the grains.

This year, there is even more excitement in other markets. Two that I like to watch are unleaded gasoline and silver. I watch unleaded gas because all of us have to buy this product as part of our farm businesses and for personal use. When prices get high, they attract media attention because the public uses more than farmers do. Gasoline prices are much more of a political issue than the price of grains.

I like to watch silver prices because silver is a favorite of speculators. Besides being a precious metal and an indicator of economic conditions, there are many industrial uses for silver.

For price comparisons, I went back to December 1, 2005. On that day the price for May unleaded gasoline futures was $1.73. From then until April 21, the price rallied 29 percent to $2.24. In the next four days the price dropped eight percent back to $2.07. Anyone trying to speculate by being long futures in the last week would be getting a huge margin call headache now! Between the above dates the price dropped as low as $1.54 in February. That is a total trading range of 45 percent since December 1. It is probably a good thing most of us buy fuel for our vehicles a tank full at a time, because most people cannot make good decisions in such a volatile price environment.

Compared to the silver market, gasoline has been relatively flat. May silver futures were $8.65 on December 1. The high was reached on April 19 at $14.52. That is an increase of 68 percent. From then until Thursday, April 27, the price dropped 14 percent to $12.72. Even these wild moves pale in comparison to the all time high in silver futures in the early 1980's when the price went over $40. The move included 13 consecutive days limit up, followed by even more days limit down. The chart of that move should be familiar to anyone who opens a futures account!

In comparison to those two commodities, grain futures have been relatively calm. May soybeans moved 12 percent from $5.73 to $6.41 between December 1 and January 4. Since January 4 the price has traded inside of that range. While there have some interesting moves, prices have traded within parameters that could be expected in a normal year.

Does this mean that the excitement in the grain markets is still ahead? If I knew that I could become rich being on the right side of a big price move. The potential is certainly there. There are some factors that make the grains different. There are still huge supplies available that can be sold into any big price move. Grain is a renewable resource. More grain will be available when this year's crop is harvested. Old crop and new crop price moves are not necessarily parallel. Weather affects grain supply and demand more than it does gasoline or precious metals.

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