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Caution needed for USDA Report, analyst says

This is one week when this commentary should be scheduled for Friday, not Thursday.  There will be a whole lot more to comment on after the Stocks and Acreage reports!  Monday through Thursday seem to be leading up to volatile trade on Friday.  

New crop prices have come off the highs made in the first half of the month.  For old crop and for cash corn or beans, the market continues to be very strong.  Soy processors and ethanol plants, for example, still have trouble every so often at accumulating enough inventory.  Before, it was a question of “is the inventory out there?”  Now, there is an additional question, “will the farmer sell any inventory before his new crop prospects are known?”  

Regarding trading Friday’s report, caution must be used. Previous stocks and/or acreage reports have caused limit moves in prices.  For farmers considering selling cash grain (old or new crop), the simplest thing is to leave a price offer at your elevator or processor.  Always ask what their policies are regarding selling grain during the report timeframe.  Some have adopted an “out of the market” approach, for example, for a specified time period after the numbers are released.     

It is simply prudent to assume some number will surprise the market. In any case, the high frequency traders who make up so much of the volume these days will be creating some volatility.  For example, the first news headlines could be the acreage numbers, moving prices sharply in one direction.  The next set of headlines could be the stocks numbers, causing another move in the same or opposite direction.  Hang on to your hats!

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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. 

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