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New year's thoughts

Agriculture.com Staff 12/28/2007 @ 6:24am

2008 will be a volatile year. This may be an understatement! Volatility will be present regardless of whether the year turns out to be bullish or bearish. The necessity of a decent sized harvest around the world for all three principal crops means the market will be sensitive to any news item.

The USDA reports on January 11 will help set the tone for the beginning of 2008, at least until the growing season begins. Final production numbers for 2007, first quarter use from the grains stocks report, and a winter wheat acreage number will give the market a base to work from as the final fight of acres begins.

Armed with more information, after a few days market participants could become comfortable with the guidance from the USDA and volatility could diminish. If, however, there are any bullish surprises, the reports could provoke anxiety about the necessity of growing large crops and cause sharper reactions especially in new crop prices.

Farmers will be able to reduce stress and risk when the crop insurance situation becomes more defined. With so many using the RA, CRC and GRIP products, new crop futures prices in February become increasingly important. Although the price is based on the average futures prices for the entire month of February, by about the 19th, farmers will have a good idea about the level of price protection possible.

The USDA’s quarterly report showed all hogs at 104%, kept for breeding at 101% and kept for marketing at 105%. Using the weight breakdowns and the pig crop data in the report, as well as these basic numbers, the report has a bearish feel to it. There's certainly no sign of production cutbacks yet. With higher than expected numbers of lightweight pigs, there will be strong feed demand through the summer months.

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.

2008 will be a volatile year. This may be an understatement! Volatility will be present regardless of whether the year turns out to be bullish or bearish. The necessity of a decent sized harvest around the world for all three principal crops means the market will be sensitive to any news item.

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