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Grains separate from financials

Agriculture.com Staff 10/09/2008 @ 2:05pm

For two days, the grain markets have been able to divorce themselves from the turmoil on Wall Street. Grain market fundamentals, including wet weather delaying harvest, good export sales, tight farmer holding and short covering before Friday morning's USDA report have been featured topics of discussion. It is a welcome change from talks about hedge and index fund liquidation.

While American farmers are in the heart of soybean harvest, Brazilian farmers are starting to plant. Planting starts first in the northern areas of Mato Grosso and will continue into December as planting moves south.

The global financial crisis is affecting Brazilian farmers by making credit more difficult to obtain, similar to the US situation. With soy prices below their breakeven, there are questions about Brazilian fertilizer usage and acreage. While there's a chance acreage will increase slightly, yields might be lower, due to decreased input spending. So crop estimates are sliding down close to last year's 60 million metric tons.

While the Brazilian crop is not front and center in traders' minds, it will become more and more important after harvest. A small US soy crop could make international buyers concerned about supply later in the crop year.

Tomorrow morning's USDA crop estimates may focus attention on crop fundamentals at least for a few moments. The average guess for the corn crop is 12.07 billion bushels, virtually the same as the September number. For soybeans, the average guess is 2.92 billion bushels, perhaps 15 million bushels lower than the previous estimate.

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.

For two days, the grain markets have been able to divorce themselves from the turmoil on Wall Street. Grain market fundamentals, including wet weather delaying harvest, good export sales, tight farmer holding and short covering before Friday morning's USDA report have been featured topics of discussion. It is a welcome change from talks about hedge and index fund liquidation.

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