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Answers coming soon

Agriculture.com Staff 01/08/2009 @ 2:35pm

When the calendar flipped to 2009, the markets realized there were a whole host of issues to confront. Of course, there's the usual farmer selling and the weather in South America.

But with the price shocks of the last half of the year, the USDA reports on Monday are gathering more importance. The market seems to crave a touch of reality, instead of simply imagining small supplies and smaller demand, as has been the case since harvest.

There are some themes. First, estimates for the 2008 crop size are generally slightly smaller than the last set of USDA estimates in November. (Of course, there is always one that goes against the grain--reportedly Informa Economics put out a larger soybean crop at 2.951 billion bushels.)

There are many indications that demand has been lackluster, with the exception of soybean exports (thank you, China). Soy crush, meal demand, corn exports, ethanol use-monthly data suggest these categories have all suffered since the summer. The grain stocks report will shed some light on the categories that are hard to measure-especially feed use.

If carryout is perceived as adequate, then the market will pay increasing attention to prospects for 2009 crops. Granted, it's early, but planted acreage will be more important as planting begins in the South in February and March. The South American crops will continue to be important. The market needs to figure out once again whether there is a reasonable chance the US will grow enough corn and soybeans. These crops will be consumed at the end of 2009 and 2010, and most are willing to pencil in better demand as the economy slowly heals itself.

Finally, the unknown of index fund rebalancing adds a little spice to the mix. Investments in index funds have been halved in the past six months, but the funds are still of massive important. Re-allocating is scheduled to happen starting today. The indications are that a small amount of bean futures will need to be liquidated, but guesses on the corn futures are that somewhere around 20,000 contracts will be sold.

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.

When the calendar flipped to 2009, the markets realized there were a whole host of issues to confront. Of course, there's the usual farmer selling and the weather in South America.

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