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Fund-selling drops farm markets

03/09/2011 @ 10:10am

CHICAGO, Illinois (Agriculture.com)--Fund-selling and positioning ahead of Thursday's USDA Supply/Demand Report dropped CME Group grain and soybean prices Wednesday. 

The May corn futures settled 4 1/2 cents lower at $7.01. The May soybean contract closed 33 cents lower at $13.49.  The May wheat futures settled 21 1/2 cents lower at $7.58 1/2. The May soymeal futures settled $7.50 lower per short ton at $352.90. The May soyoil futures closed $1.36 lower at $57.12.

In the outside markets, the NYMEX crude oil is $1.02 per barrel lower, the dollar is lower, and the Dow Jones Industrials are down 1 point.

More market reaction to this weaker trade Wednesday. One analyst says, "Defensive posturing in wheat and soybeans continue in front to tomorrow's USDA report. Expectation for increased soybean production world wide (South America) and conformation of adequate world wheat supplies are keeping those two commodities on the defensive. As for corn - expect a confirmation of tight stocks.

Meanwhile, traders say the funds are selling their long positions in corn, soybeans and wheat. And it's not just a move ahead of the report Thursday. No, they are trimming the 'fat' because their psychology is changing. The funds are saying, okay, we've overpriced, overbought, over everything this 2010 crop, and now it's all about the new crop. Well, that new crop isn't in the ground and not even spelled out yet. So, the funds are pulling back, one analyst says.

Tim Hannagan, PFGBest.com senior grain analyst, says profit-taking ahead of tomorrow's USDA report is pulling down the market.

"After a higher overnight and higher day open, funds were sellers and that was a surprise. But, they don't fear Thursday's crop report, with the pre-report estimates being conservative," Hannagan says. 

So, we're seeing continuation of a bigger pre-planting growing season correction, he says. "That mindset could change for the next report, the March 31 Planting Intention Report, which should be feared to be bullish."

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