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Ron and Sue Mortensen: Switch focus

01/27/2011 @ 3:51pm

It is a calm period right now for US crop fundamentals.  With the January reports digested, the focus has started to shift to 2011 crops.  The acreage debate-the mix of crops and the acres planted to each-seems to be gaining in importance.  The next very important data will be released March 31st-the prospective plantings reports and the next set of grain stocks data.  That’s a long way off for a market that needs fresh news every day!  

The ag news media, analysts and traders will pay attention to the USDA’s Outlook Conference, which this year is February 24-25.  The USDA will release baseline data and then more up-to-date thoughts about the supply and demand situation for the major crops.  This could give the market some tidbits to trade, but beware-much is based on historical data and is not based on survey data.

There are still issues around the world to be considered.  South American crop sizes are very important, so weather and estimates of the soybean and corn crops in Brazil and Argentina are key.  The condition of the wheat crop in Russia and other parts of the FSU is also being watched.  

There are also waves of cash selling to be monitored.  After the first of the year, and mainly after the USDA reports, farmer selling was quite heavy.  Basis levels weakened for both corn and soybeans.  Now the situation has reversed, especially for soybeans.  Cash basis levels are quite firm, especially at the Gulf.  China appears to be working through excess soybean inventory and is buying additional beans.  Exports for US beans look like they will continue strong through spring.

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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