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Market confusion

We have bulls in the marketplace who point out how aggressively China has been
buying corn, almost all for immediate delivery, and start making computations
based upon the speed of purchases so far about just how much China could buy
year to year over the coming few crop years. The numbers get quite large, and
one can hardly be anything but bullish when you hear the 500 mb+ demand factors
per year out there for the China market.

There are market bears who point out the early planting of corn and excellent
conditions of the wheat crops (both HRS and winter wheat), and therefore plug in
some big yield and acreage numbers for these two crops and come up with some
large carryout figures for both.

Perhaps there is a little truth in both these points of view, as the bearish
side of the market is the large potential crop size of the US crop, while the
bull side is the large potential purchases and importance of the emergence of
the Chinese as US corn importers. After all, the only real corn exporter in the
world is the US, and we seem to have an interest in exporting corn to the
Chinese (as we certainly import enough Chinese items to the US via Walmart!).

What really matters is the sheer bushels in each category, and what ultimately
will we end up with on the crop size for US corn (163 bu as USDA now asserts, or
larger or will some weather come along this summer that will trim the crop size
somewhat?). And how much corn will China ultimately purchase. Currently USDA
projects some Chinese corn purchases as they upped exports in the last report.
They also have built into the 1.8 billion bushel carryout a yield about 3 bu
above trend. So already, USDA is starting to play these numbers out as they are
trying to guess what the ultimate numbers will be in both categories.

Wheat needs a 'China' buyer as well, with nearly 1 billion bushel carryout
projected in US wheat to end the coming year, a very large number that is in
desperate need of a 'China' surprise buyer to boost the exports of that market.
Technically, wheat prices are struggling more with the large carryout figures,
and threatening to push to new lows again on the recent round of selling.

Soybeans also are under some pressure, with soybeans testing recent lows as
well. The corn is holding up somewhat better, but with the other two grains
threatening new lows it might be just a struggle for corn as well to hold recent
strength. But at least in corn there is optimism that China can bail us out of
large carryout stocks, even if we have a large crop size in the end for corn.

Corn is definitely the crop with the earliest planting, in fact, this year is
the earliest planting on record. And the history of early planting with
adequate moisture levels in soils is strong for a above average crop size.

Be best way to describe the market, in the end, is market confusion. Even the
stock market seems confused by what is playing out, as first it appeared the
stock market collapsed without reason, with people blaming computers or a 'fat
finger' for pressuring stocks to a nearly 1000 point loss in one day a few weeks
back. Turns out stocks over the next few weeks tumbled right back down to those
levels below 10,000 Dow, and here we sit for now. But stocks might be finding a
bottom at that level, and hope springs eternal for another rally in the stock
market.

So here we have a market stuck between the confusion of the bullish China corn
purchases, and the bearish early planted, excellent potential crop conditions
and ultimately large potential crop size of US 2010 crops. What wins in the end
will be the actual measuring of these two giant fundamental factors as we move
forward in this marketing year.

The information contained, while not guaranteed as to accuracy or
completeness, has been obtained from sources we believe to be reliable.
The opinions and recommendations contained are based on our judgement
and do not guarantee profits will be achieved or that losses will not
be incurred. Recommendations should not be construed as an offer to
buy or sell commodities. There is substantial risk of loss in trading
futures and options on futures.

Ray Grabanski is President of Progressive Ag, a marketing and risk
management firm for farmers located in Fargo, ND. For questions or
comments, or if you are interested in more information about
Progressive Ag's common sense marketing services, call 1-800-450-1404
or email Kristi@progressiveag.com.

We have bulls in the marketplace who point out how aggressively China has been buying corn, almost all for immediate delivery, and start making computations based upon the speed of purchases so far about just how much China could buy year to year over the coming few crop years. The numbers get quite large, and one can hardly be anything but bullish when you hear the 500 mb+ demand factors per year out there for the China market.

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