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Ron and Sue Mortensen: Soybeans take the lead

11/12/2010 @ 6:56am

The USDA always seems to manage a surprise!  On Tuesday morning, beans took the bull leader position, with the lower soy crop estimate as the reason.  Backed up by strong demand from China, the bean market rallied to new highs as the supply/demand situation becomes so tight that rationing may be required.    


The corn and wheat data were much more humdrum.  The grain market realized after about an hour of trading on Tuesday morning that the next round of meaningful data was a long way off—the January reports in two months.  With that long to wait for more news, a profit-taking mentality developed that is still pervading the corn and wheat markets.    


Never fail, the market did not lack fresh data to trade for long.  A widely watched private analyst released acreage numbers this morning during market hours.  The estimate featured not many bean acres and plenty of corn acres.  Wheat acres were perhaps less than initially forecast by many analysts, but still adequate.  By the way, the corn and bean estimates were not apparently based on surveys. 


The lesson from today may be simple.  The grain market will not simply chop around in the same small range for two months.  The situation is too tight.  Demand is too strong. The market has reason to be on edge, sensitive to any news nugget.  This will not change until someone (South America perhaps) proves that a decent crop can be grown.


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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