Home / Markets / Markets Analysis / No ordinary year

No ordinary year

Agriculture.com Staff 11/14/2008 @ 6:34am

In an ordinary year, the harvest lows would be place and demand would be of primary importance to market participants. Fieldwork would be winding down and farmers would be starting to evaluate cash flows, needed sales and income tax issues.

This year, there is no harvest low. There is a broad low that is remarkably like the stock market lows. It has lasted for about a month. A chart of corn or soybeans looks remarkably like a chart of S&P futures. Crude oil is also a big factor in market performance. And there is no evidence that the market is just about to rally.

Considering "old style" grain fundamentals, there are many positive things to discuss. The USDA crop report on Monday had slightly smaller crop sizes. The corn crop is certainly smaller than many traders feared. And corn harvest is still behind by two weeks or more. Around the world, southern hemisphere crops are being planted in the middle of uncertain economic times. Anxiety and tight credit conditions have caused Argentine and Brazilian farmers to hunker down, reducing spending on fertilizer and other inputs.

Trumping all of this is deep-rooted fear. Until it no longer feels like the end of the world is near, ag futures will have a hard time making a meaningful rally.

The cash market operates with the objective to create an adequate flow of grain. As such, there have been substantial improvements in basis levels to stimulate some grain movement. The cash market is trying to overcome the negativity of the futures market. With storage space a non-issue for this crop, basis levels may have more work to do in order to pry bushels out of farmers' hands.

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.

In an ordinary year, the harvest lows would be place and demand would be of primary importance to market participants. Fieldwork would be winding down and farmers would be starting to evaluate cash flows, needed sales and income tax issues.

CancelPost Comment
MORE FROM AGRICULTURE.COM STAFF more +

Farm and ranch risk management resources By: 07/07/2010 @ 9:10am Government resources USDA Risk Management Agency Download free insurance program and…

Major types of crop insurance policies By: 07/07/2010 @ 9:10am Crop insurance for major field crops comes in two types: yield-based coverage that pays an…

Marketing 101 - Are options the right tool… By: 07/07/2010 @ 9:10am "If you are looking for a low risk way to protect yourself against prices moving either higher or…

MEDIA CENTERmore +
This container should display a .swf file. If not, you may need to upgrade your Flash player.
Markets Trade in Narrow Range