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Merry Christmas from the markets

Agriculture.com Staff 12/21/2007 @ 6:23am

The markets have given us quite a gift this season!

Historically, large price moves are the result of a one short crop in a major producing country. This current rally, however, is the result of many things. Each factor seems to build on another factor, leading prices higher.

This perfect storm started long ago, with farmers hoping for the development of an ethanol industry to absorb some excess corn. Corn price volatility really started in 2006 and soybean and wheat prices were comparatively weak, until the end of the year.

But things got going this year with a small US wheat crop, compounded by a drought reduced wheat crop in Australia. US crop sizes weren't all that big, either. Now add recent developments, including a new US energy bill and a La Nina growing season in South America. There's a combination of supply and demand issues to make the markets jittery!

There is another demand issue which is affecting prices. There has been steady growth in protein demand for many years. This means demand for soybeans is projected to continue to grow in spite of a lower world crop size (the first time that's happened in recent years). This increasing demand puts added pressure on the US and South America to grow a larger soybean crop in the 2008-2009 crop year. The soybean market will be anxious for a year or more until the smaller crop/larger demand issue is resolved.

Merry Christmas from the Mortensens!

We hope you have a wonderful holiday season and are able to share it with family and friends. Our hope is that you share the joy of the season with employees and advisors that contribute to the success of your farming operation.

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.

The markets have given us quite a gift this season!

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