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The state of the market

04/12/2013 @ 8:38am

A lot of issues regarding old crop supply, demand and prices have been answered in the past few weeks.  Now, farmers and traders are waiting for main Corn Belt planting season and a shift in attention to new crop. 

The market realizes that weather is still an issue.  There are still long term concerns regarding drought in several western states.  However, there is an increasing shorter term concern regarding the cold and wet weather that has slowed early fieldwork and planting.  Next Monday, the USDA will issue a corn planting progress report for the first time in 2013.    

Several southern states have started reporting their corn planting on weekly reports.  It’s generally been slow going and may influence the amount of new crop corn available in August.  That’s one reason September corn futures have performed better than December in the past week or two.  Further north, this week’s rain and snow have helped restore soil moisture, but have also set back planting in the main areas of the Corn Belt. 

The market got the USDA’s response to the Grain Stocks report yesterday with the release of updated supply/demand tables.  The volatility surrounding these reports certainly showed.  Latching on to the first numbers to cross the news wire (smaller than expected carry-outs for old crop corn and soybeans), prices shot up 20 cents. 

Then, realizing that world carry-outs were increased, prices plummeted.  So from 11:00 a.m. to 11:02 a.m., there was a 35 cent trading range in May soybeans and a 32 cent trading range in May corn.  Surely this is not healthy for the market.  Surely the USDA and the CME need to take a look at this.  The suggestion has been to move USDA reports to 8 a.m.  All in favor, say “AYE”!

So the market is back to the realization that old crop supplies are still tight (not squeaky tight, but tight).    Very strong cash prices suggest to producers that remaining old crop inventory should be sold now, rather than later.  These cash prices are also higher than the delivery value against the May futures.  This encourages May futures to rally and the bull spreads (long May and short July) to continue to widen.  When will the next round of farmer cash sales occur?

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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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