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It's a weather market

Agriculture.com Staff 06/14/2007 @ 3:29pm

It's the first hot weather market of the summer for corn and soybeans, as the market waits to see if, and when, it will rain in the eastern Corn Belt. This spell of dry weather comes right at the same time wheat prices closed over $6.00 at fresh 11-year highs.

The wheat market has reason to be concerned, as there are reports of disappointing yields, quality problems and slow harvest due to the storms in the Plains. The remarkable run-up in prices-almost a dollar in four days-began with the smaller than expected wheat crop size released by the USDA on Monday.

Analysts have also cut the European, Ukrainian and Russian wheat crop sizes due to drought, meaning the global wheat situation gets tighter and tighter. With supplies of all types of wheat (from high quality US milling wheat to cheap Russian feed wheat) shrinking, end users are scrambling. This will be the third year in a row global ending stocks are projected to decline and ending stocks as a percent of use are estimated at 18 percent. Looking at data back to 1960, that number has never been lower.

This has an obvious impact on the corn market as well. First, wheat and corn prices must stay in some sort of relationship, as the competition for acres will continue for years. Second, tight wheat supplies substantially reduce the amount of wheat for feed, meaning corn feeding will not be reduced as much as thought earlier in the year. Around the world, the small wheat supplies mean increased use for feed grains.

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.

It's the first hot weather market of the summer for corn and soybeans, as the market waits to see if, and when, it will rain in the eastern Corn Belt. This spell of dry weather comes right at the same time wheat prices closed over $6.00 at fresh 11-year highs.

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