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Market gains come and go

03/23/2012 @ 6:43am

This week, the markets are down approximately the same amount that they were up last week.  For corn and soybeans, last week’s higher prices did finally stimulate some movement and the cash market is more adequately supplied.  This has taken some of the bullish sentiment out of the market.    

The market has also had difficulty with a lack of new fundamental grain news.  There are no stories regarding Chinese purchases, no new acreage guesses, etc.  Given the lack of news at the beginning of the week, it was natural the next direction was down.  Sometimes the explanation is simple-if prices can’t move higher, they move lower.  The desire to take profits on long positions was too great. 

Actually, the news out of China has been a little negative this week.  In the bigger picture, there have been economic statistics released that indicate the Chinese economy is slowing down. Thursday morning it was a Purchasing Managers Index (PMI).  When Chinese manufacturing looks slower, traders naturally feel imports of raw materials, even corn and soybeans, will slow.   

Towards the end of yesterday’s trading, the Argentine Ag Minister did release new estimates of crop size:  44 mmt (million metric tons) of soybeans and 21.2 mmt of corn.  Previous Ag Ministry crop sizes were ranges, not precise numbers.  Thursday’s figures were about the middle of the previous ranges.  As such, they don’t seem like much of a surprise.  However, the soy crop number is small compared to some recent private estimates and indicates the rain that Argentina got probably arrived too late. 

Whatever the news, the clock is ticking towards the release at the end of the month of USDA’s grain stocks and acreage reports.  This is definitely at the front of everyone’s minds and, given the historical volatility on report days, it is natural that traders want to even up their positions.  Look for estimates to start surfacing at the beginning of the week.  Traders continue to be wary about the corn data, both acres and stocks, looking for bearish numbers. 

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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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