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The selling wave

Agriculture.com Staff 03/06/2008 @ 3:03pm

A wave of broad based commodity selling has engulfed soybean oil and soybeans in recent days. This has come despite record crude oil prices. The break in soybean prices since last Friday has been around 80 cents. Corn has been relatively firm this week and prices are up 10 cents from last Friday.

The market seems to still be concerned with low corn acreage estimates which started filtering into the market at the end of last week. The market feels corn plantings of 85-87 million acres are too low. Therefore, the soybean acreage may be large enough to make market participants uncomfortable. This early in the game, it is hard to imagine the soybean crop will be "too large."

There has been news out of China recently as well. The US attaché now says the 2007 Chinese corn crop was not as large as previously thought. The attaché put the crop at 137 million metric tons. The last supply/demand tables had 145 mmt. Apparently last summer's drought did affect the crop. For the 08-09 crop year, the attaché has estimated the crop to be grown at 143 mmt. Although it might seem China would consider imports, the attaché believes the high international price of corn would discourage that possibility.

There have also been comments in recent Chinese government meetings about providing adequate supplies of basic commodities (generally wheat, corn and rice) for the people. That statement does not sound at all remarkable, however, previous similar statements have been more like China will be self-sufficient in wheat, corn and rice. Providing adequate supplies seems to acknowledge that imports may be necessary in the future, especially if development continues to shrink the amount of agricultural land at the present pace.

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.

A wave of broad based commodity selling has engulfed soybean oil and soybeans in recent days. This has come despite record crude oil prices. The break in soybean prices since last Friday has been around 80 cents. Corn has been relatively firm this week and prices are up 10 cents from last Friday.

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