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The holidays have started

Agriculture.com Staff 12/04/2008 @ 9:18am

December is often a light volume trading period, with everyone more focused on the holidays, rather than work.

In the ag markets, December also has a problem with lack of news. The fall harvest is complete, with apologies to farmers in the Dakotas. The growing season in South America is just getting started. The USDA will not have any major news until the January 12 reports (final crop production and December stocks).

Many can just imagine the decline in financial markets and crude oil will continue to affect corn and soybean prices -- it's certainly been the easy story.

There is also a "demand destruction" problem. Economic uncertainty causes reduced feed use, reduced exports and reduced ethanol demand. For soybeans, the crush numbers have been reduced. The longer the recession goes on, the longer demand destruction can last. This means many analysts can not see reasons for price rallies when they do not even have a handle on how much demand there will be.

The only sparkling demand category is soybean exports, thanks to strong sales to China. The Chinese government has been buying domestic beans at higher prices than imported beans to put in government reserves. With imports cheaper, crush plants have shunned domestic supplies. The government has continued to announce plans to increase reserves, with the hope higher prices will keep rural residents happy.

How long does the current ugly drift in prices last? The market will need something else to occupy its attention. It could be a serious weather situation, an acreage battle (do people really believe corn acres will be significantly higher?) or, best of all, some indication that demand is better than imagined.

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.

December is often a light volume trading period, with everyone more focused on the holidays, rather than work.

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