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Prices still adjusting

Agriculture.com Staff 04/07/2006 @ 7:26am

The price relationship between corn and soybeans has shifted in the week following the surprising USDA Prospective Plantings report, with its major changes in acreage. Many in the market are hoping the improved profitability of growing corn in the upcoming summer will encourage a shift in acres. Many are willing to shift about 1 million acres right now.

Planting weather will increase in importance as April progresses. For right now, everyone is familiar with the improvement in soil moisture in many areas of the Corn Belt, which had a bearish influence on the market during March. Rain will become more of a bullish factor, if planting looks at all delayed. It's sort of an annual "dance of uncertainty."

Even in the soybean market, it is obvious the focus is squarely on US crop prospects and the potential for mammoth supplies. With Brazilian soybeans half harvested, not even a lower crop estimate (55.7 million metric tons) from the Brazilian government on Wednesday could provide much of a lift to soybean prices.

Today's rally had little to do with the above factors and a lot to do with the rally in gold, silver, copper and energy prices. The past week has seen resurgence in the buying of many commodities by the speculative index-type funds. The power of these funds must continue to be respected, as many investors are convinced commodities need to be a part of their overall investment strategy, along side stocks, bonds and real estate.

Next week, market participants will have the April supply/demand report to digest and then traders will face a holiday-shortened trading week (no markets on Friday). The shuffle in corn and soybean prices could finish after the supply/demand reports, especially if these reports are as expected. Many analysts are looking for the USDA to cut corn carryout, raise bean carryout and not do much to the overall wheat situation.

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 price relationship between corn and soybeans has shifted in the week following the surprising USDA Prospective Plantings report, with its major changes in acreage. Many in the market are hoping the improved profitability of growing corn in the upcoming summer will encourage a shift in acres. Many are willing to shift about 1 million acres right now.

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