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Report catches ag markets off-guard

Agriculture.com Staff 04/03/2009 @ 9:23am

It's been a few days since the USDA numbers were released and the market is still trying to get a handle on the long-term implications. With the corn and soy acres so far from the average guess, no one has been happy, except maybe the USDA folks who long ago forecast no material shift in acres in 2009.

The head scratcher is that so many acres disappeared this year-over 7 million across the country. These are mostly acres in the fringe states, with Texas and North Dakota showing the two largest declines. The other great reduction in acres comes from double-crop soybeans. That certainly makes sense-less wheat means less double-crop beans.

So why did this happen? Profitability is an obvious issue. Farmers had a negative reaction to higher input prices and some farmers simply had no desire to take risk in this uncertain economic environment. If farmers feel more optimistic in April/May than in February, when the survey was taken, do more acres get planted?

The substantial rally off the February/March lows, if it lasts, could also calm nerves. Given the massive drop in prices, many spent time this winter wondering if the other shoe was about to drop. Could corn return to below $3.00? Now, the question to answer is "how much should I sell during this spring rally?"

With the Tuesday stocks numbers, the market has a solid handle on the demand side of the current marketing year. Possible variations in exports, feed use, ethanol and soy crush become smaller and smaller. Therefore, discussions will increasingly shift to supply questions with weather and planting conditions being the most important.

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's been a few days since the USDA numbers were released and the market is still trying to get a handle on the long-term implications. With the corn and soy acres so far from the average guess, no one has been happy, except maybe the USDA folks who long ago forecast no material shift in acres in 2009.

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