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Old -Fashioned volatility!

Agriculture.com Staff 09/14/2007 @ 8:39am

Wednesday was just a good, old-fashioned volatile trading day! The USDA reports produced wild reactions in many markets and whatever prices were on the open, they were decidedly different by the close.

The corn crop number of 13.3 billion bushels may have looked large compared to the pre-report estimate. However, the market had been bombarded by huge yield reports in recent days, so many market participants were anticipating a large number. With no additional selling in the market on Wednesday morning, the market was ripe for a rally.

The corn market has rejected many stabs at lower prices for the last month, so its next job may be to break out of the 45 cent trading range that has been present since the end of June. Will this be on the lower end of the range, perhaps during harvest pressure, or will it be on the top end, as the market grapples with more bullish demand, South American weather issues or some other issue?

Wednesday, the opposite situation occurred with the soybean crop number. The crop estimate was small and demand is good. The soyoil balance sheet looks tighter, too, since the biodiesel industry has been a larger consumer of oil than many thought. Plus this is the crop that goes from over-abundance to tight during this marketing year. Soybean prices started strong and finished stronger.

The cycle might suggest that corn could be the next crop with a tightening balance sheet. This certainly could be the case next crop year, as wheat, beans and corn compete for acres. The increasing cost of corn production could easily mean beans and wheat win the "acre wars." Whereas the large number of acres this year often reduced volatility, the opposite could be true in 2008.

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.

Wednesday was just a good, old-fashioned volatile trading day! The USDA reports produced wild reactions in many markets and whatever prices were on the open, they were decidedly different by the close.

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