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Money and market fundamentals

Agriculture.com Staff 11/20/2009 @ 7:25am

It is hard to be a fundamental-style grain trader! Some days the markets make sense and other days the price moves seem to be driven by a strange force from outer space.

Today, some fundamentals were important. Thursday morning's USDA export sales report showed continued strong sales to China for soybeans. In addition, there were sales to several other countries, bringing the grand total to basically 50 million bushels. Soymeal sales were also large. It was hard to traders to ignore such numbers and this fact propelled soy futures higher in the face of negative outside markets.

Corn and wheat futures were not so lucky. Export sales for both of these commodities have been small for the past several weeks. Today, they had no trouble following the "outside" markets and trading lower. Plus harvest (and off-the-combine selling) continues.

But the big news continues to be the investment of all kinds of new money in the commodity space. Many Mondays have turned out to feature massive buying of all sorts of commodities, with corn, soybeans and wheat leading the charge. The thought continues to be that these are "value" types of commodities, with prices that are significantly off of their highs. No supply/demand fundamentals, no weather, no spread relationships are considered.

These forces have been important at various times in the grain markets over the past few years, and the recent rally in prices highlights what impact the flow of money can have. Volatility, once present only during the dog days of summer, can rear its head at any time.

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 is hard to be a fundamental-style grain trader! Some days the markets make sense and other days the price moves seem to be driven by a strange force from outer space.

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