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Elections sagging stocks, and commodities

Agriculture.com Staff 11/07/2008 @ 9:43am

We've completed our elections in the US and made history, and now resume the day to day activities of the world. Stocks and the economy, though, remains in the doldrums and the world needs to discover again what brings value to our economy and what has value in our world.

Once again, we turn to the stock market for direction, and stocks just seem unable to vary more than 1000 points from the 8400 DOW mark, with stocks rallying to 9400 or so for a while and making people optimistic again, and then stocks selling off to less than 8400 for a time, only to find bargain hunters who see a value buy. We seem to be at some type of stalemate as far as stock prices go, and commodities thus are in about the same mode.

While new elections bring the possibility of an entire new policy direction in the world, that still doesn't change much the dynamic that prices are still determined in a large part by private individuals. These private individuals across the US (and world) are who really set prices, and governments certainly can impact those decisions, but in the end, private individuals make most of the decisions in a market economy. All those private decisions (mostly to buy or not to buy) sum up the whole of the world economic picture, and if the US consumer is not buying, mostly the world consumer is not buying as well since the US makes up over 20% of the world economy. As the US goes, so does the rest of the world.

And the US right now is seeing a retrenchment of sorts, where people are more cautious with their money. When the US consumer becomes cautious, the world consumer becomes the same. So here we are, with the history of a very wild commodity market which took prices to heights unimaginable just a year or two ago. Even now, with prices down considerable from June/July it's hard to believe, after the fact, that we had $147 crude, $8 corn, $16 soybeans, and $13-$24 wheat. But have it we did! Now we are looking up at these numbers, wondering if it really indeed did happen, or was it just a dream?

So what's next for the market? While some doom and gloomers are expecting things to pile into a depression like situation, it doesn't appear at this point that will happen. Instead, it looks like things are finally starting to stabilize in current price levels. We may not go above some of these recent price levels for the next 20 years or more, as they were indeed lofty levels. But we could see some spike back in some grains to some previous resistance areas. Could we see $5.40 corn, $7.50 wheat, and $12.80 soybeans again in the coming year?

The one market that has outstanding export sales yet is soybeans, a crop that also had disappointing yields in northern areas. It will be interesting to see the next USDA yield estimate in soybeans, as some southern areas had a very good soybean crop. Did the good yielding soybeans in the south make up for the poor beans up north? This could be a major question for the soybean market coming up. With harvest nearly done, soybeans could finally turn the corner from their current downtrend. Snow is also hampering the completion of harvest in the northern Corn Belt, and that combined with later than normal harvest progress could push prices higher in the near term.

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