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Same old, same old!

Agriculture.com Staff 01/04/2008 @ 1:37pm

2008 seems to have started in the same way as most of 2007: With plenty of volatility. Prices have moved sharply higher, with records falling. On Thursday, July soybeans set an all-time high for a futures contract at $12.93. The previous high of $12.90 was set in 1973. Corn futures prices are at 11-year highs and wheat prices are record high by almost $3.00.

Anticipated fund buying after the first of the year is becoming a reality. Other commodities, such as gold, silver and crude oil, have also made moves higher. The fund buying, according to some, will last about two weeks. This could overlap with the USDA reports next Friday, January 11. Will the momentum continue?

2008 has begun with a weather concern in Argentina. The weather has been very hot and recently there is more worry about dryness. It is the timeframe when early pollinating corn may be hurt. It is a little early to be concerned about soybeans, but with La Niña conditions present (there would be a tendency towards below normal precipitation in South America), there's reason to be worried.

If the market is moving this much prior to the U.S. growing season, imagine what could happen this spring and summer. Put options are very expensive, but could easily be part of a marketing plan this year. Forward contracts can only prudently cover a portion of production and futures hedges mean substantial margin requirements. Buying put options can be a first step, giving flexibility to react to market conditions as the season unfolds.

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 seems to have started in the same way as most of 2007: With plenty of volatility. Prices have moved sharply higher, with records falling. On Thursday, July soybeans set an all-time high for a futures contract at $12.93. The previous high of $12.90 was set in 1973. Corn futures prices are at 11-year highs and wheat prices are record high by almost $3.00.

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