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Supply and Demand, flood style

Agriculture.com Staff 06/20/2008 @ 6:17am

The supply issues are at the top of everyone's mind this week, as every few minutes there is a new report of acres, flooding, poor crop conditions, etc.

Today, there was a break from these stories. Friday, however, there may be a reminder, as private analyst Informa will apparently release their updated acreage and crop forecasts.

With no new flooding stories, the market finally embraced the warmer and drier weather forecast. And with no really bullish news (exports were just OK-and definitely lower than last week), a round of profit-taking ensued. A sell-off in crude and other commodity markets didn't help.

Demand as an issue has gotten left behind, but with calmer weather, that topic can be evaluated. There is demand rationing (or the more forceful demand destruction) occurring at these prices. The ethanol industry is apparently cutting back on production at existing plants. New plants are being completed and not opened (Verasun announced a few days ago two 110 million gallon plants would not open).

Flooding effects export demand, too, as grain transportation is difficult. This means the export shipping pace is slow, especially out of the Gulf as the Mississippi River can not handle barge traffic.

Remember to talk to your crop insurance agent about any replant issues you have!

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 supply issues are at the top of everyone's mind this week, as every few minutes there is a new report of acres, flooding, poor crop conditions, etc.

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