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Investor profit-taking leading recent CBOT declines

Agriculture.com Staff 03/20/2008 @ 1:38pm

CHICAGO, Illinois (Agriculture Online)--With Chicago Board of Trade futures prices dropping $4.31 for soybeans and 65 cents per bushel for corn in the past three weeks, farmers looking for a reversal may have to wait until the crops are in the ground, traders say.

On March 3, CBOT soybean futures hit an all-time high of $15.71 per bushel, sharply higher than Thursday's mid-day price for November soybeans at $11.40.

The major reason prices have fallen is a result of fund investors taking their profits out of commodities and placing them into the cash markets. The federal government is propping up the struggling financial sector, which has improved the value of the U.S. dollar.

As a result, large amounts of fund money have exited commodities and created a mentality for other investors to sit on the sidelines short-term.

Carlton Numpkes, a floor trader with K-Commodities, says people want to reduce their positions in commodities, and this includes agriculture.

"Because there are horror stories out there like Bear Stearns and falling stock for MF Global, people just want to be on the sidelines for now," Numpkes says.

Meanwhile, there is a vacuum in the market with funds liquidating, yet the person wanting to buy still doesn't have the most important piece of information he needs, the USDA Planting Intentions numbers.

Fundamentally, it makes more sense to wait until you see what the USDA's report on March 31 does to these markets to stake a position, one trader says.

"Even if you wanted to buy, you can only go so far until you see those numbers," the trader says. I would rather buy limit up corn following that report than try to pick a bottom today not knowing where we’re going to start on March 31."

Farmers waiting for those historic prices to return may have to wait for a while, traders say.

"I think we're going to need a crop failure this summer before we get back to those higher prices," Numpkes says. "Maybe the [USDA] report helps us climb back, but weather will have to become a concern at some point."

Joe Bedore, FC Stone's floor manager, says the return to $6 per bushel corn has been delayed.

"If the eastern Corn Belt stays wet, I certainly think we can find our way back to $6 corn," Bedore says. "But, we are in an area now with the funds liquidating that the higher market has been put on hold."

CHICAGO, Illinois (Agriculture Online)--With Chicago Board of Trade futures prices dropping $4.31 for soybeans and 65 cents per bushel for corn in the past three weeks, farmers looking for a reversal may have to wait until the crops are in the ground, traders say.

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