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Ron and Sue Mortensen: What happened?

03/10/2011 @ 4:45pm

It’s one of those weeks where the market has spent most of its time questioning the value of corn (and wheat and beans).  Corn clearly had the most bullish fundamentals behind it going into Monday.  

Now, after a dollar break in beans and wheat and about a 50-60 cent break in corn, market participants will need to figure out what has changed.  Did high prices reduce demand or is it money flow, speculative liquidation, a general economic slowdown or something else?  China reported a trade deficit for the first time in 7 years—does that affect Chinese corn prices or supply/demand trends?   

This morning’s USDA supply/demand report did not have any new information in the US corn supply/demand table.  In the world numbers, the USDA did raise the Brazilian corn crop by 2 million metric tons, but they lowered Mexico by a like amount.  The changes made to the wheat balance sheets (more carryout in the US and the world) did not help either.

Most seem to be suddenly dealing with the thought that old crop corn stocks (to be reported by USDA on March 31st) will be larger than previously assumed.  Also, adding to the pessimism is the thought that acreage will be large (93-94 million acres?).  

Do attitudes shift before the March 31st reports?  Anxiety could certainly return at any point in time, due to economic conditions, weather, the value of the dollar or energy prices.  Pre-report estimates will also begin surfacing around the end of next week.  Stay tuned.  

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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