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The big picture in commodities

Agriculture.com Staff 04/25/2008 @ 7:23am

The sharp rally in grain and soy prices is well known and well advertised (for example, two hours of coverage yesterday morning on CNBC). Commodities, $120 crude oil, food versus fuel, rice rationing-all are hot topics. Add in the weak dollar and an increase in speculative money to invest in these markets.

It's a bigger set of fundamentals than the market is used to absorbing in the middle of planting season. So if price action is not making sense, look at these other factors. For example, market action today suggested profit-taking in many commodities spurred by the sharp two day rally in the value of the dollar.

There have been days to plant corn in some of the Corn Belt. Plus the forecast is mixed enough in the future to give hope of additional planting. Last year, the planting pace had begun to pick up at this time, with the greatest amount of corn planted in the first two weeks of May. Although better yields than last year are needed to satisfy demand, the market is not particularly on edge. It may take wetter forecasts for the first part of May before there is any price reaction.

Watch the news from Argentina next week. The farmers strike may be revived if progress is not made in talks with the government. Exactly what form this would take and soy buyers’ reactions could mean sharp moves in the market as the calendar turns to May.

The risk of loss in trading commodities can be substantial. You should therefore carefully consider whether such trading in suitable for you in light of your financial situation.

The sharp rally in grain and soy prices is well known and well advertised (for example, two hours of coverage yesterday morning on CNBC). Commodities, $120 crude oil, food versus fuel, rice rationing-all are hot topics. Add in the weak dollar and an increase in speculative money to invest in these markets.

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