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Commodity liquidation strikes

The stronger dollar in the past few days has certainly caused weakness in commodities-metals, crude oil, grains and soy.

While commodities were seen as valuable in the weak dollar environment, the thought the dollar is done falling (and the Fed is done lowering interest rates) has completely reversed this idea.

Agriculturally oriented fundamentals seem to take a back seat in this environment, as it is difficult to step in front of the commodity fund liquidation freight train. The speculative/hedge fund community is dumping hard assets for financial assets (stocks) which may perform better with a strengthening dollar.

Corn futures prices bucked the trend both yesterday and today. The wet forecast provides a constant bullish drum beat in this market. So far, 2008 is the third slowest corn planting season in recent history, with 1993 and 1995 being slower. The five year averages show corn planting has come earlier and earlier over time, with planting now progressing about a week faster than 20 years ago.

It's a week away, but the market has a lot of important information to digest in the USDA reports on Friday, May 9th. It will be the first survey-based look at the winter wheat crop, plus supply/demand tables for new crop wheat, corn and soybeans.

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 stronger dollar in the past few days has certainly caused weakness in commodities-metals, crude oil, grains and soy.

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