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Pretty Crops Sparks Spec Selling

06/06/2014 @ 7:39am

Concerns about timely planting and acreage have receded this week and thoughts of how beautiful the fields look right now are at the forefront.  For example, Monday’s corn crop condition was 76 percent good to excellent.  This is a very high number and above what traders were thinking. 

In this case, it appears the speculator, having built up sizable long positions in corn, wheat and beans, is slowly selling out of these trades.  Although farmers may understand a long growing season is ahead, speculators are not waiting around for any potential issues.  Each day down reinforces the need to exit any bullish bets. 

There is not much new information for the market to chew on right now.  Sure, the USDA will issue an updated crop production (wheat) and supply/demand report next Wednesday.  It doesn’t seem like many changes are expected.  However, some may be on the lookout for changes in corn or soybean yields given the improved weather. 

The real fireworks could come at the end of the month, with the stocks and acreage reports.  But instead of worrying about a lack of acres, the market now seems to think the report will show more corn acres.  Really, the market is wondering if the total acreage pie won’t be bigger.  There is certainly the potential for failed wheat to become soybeans or milo, for example, given the rain that has fallen in the Southern Plains.  These shifts in market sentiment, even though the report isn’t for several weeks, add to the bearish mindset of traders. 

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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