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Traders seem to be done for year

12/21/2012 @ 10:19am

The corn, soybean and wheat markets have all suffered a round of speculative selling this week.  The liquidation has been generally triggered by poor corn exports, cancellations of soybeans purchases by China, and the winter storm in the wheat/corn belt.  There was also a private estimate of 2013 acreage, featuring 99 million acres of corn. 

It’s almost a classic case of speculators running out of patience as prices couldn’t rally further.  Think of the expressions “what goes up must come down” and “a bull needs to be fed everyday.”

Now what?

Many traders are simply done for the year.  They may jump back in the markets in January as the focus turns to the January crop reports.  Market participants who are still keeping an eye on the news and prices in the next few days will look to see if demand picks up with this decline in price.  

The other, uncomfortable answer has to do with the 99 million acres of corn.  Not that exact number, but more the idea that high prices have caused farmers to think about planting more corn (and also more beans) next year.  If everything goes smoothly, crop sizes will be very large and ending stocks will balloon.  The frustration is that none of this is written in stone but, with normal conditions, prices will be lower in the fall.  For a little dark humor, it’s not the fiscal cliff, it’s the grain cliff.    

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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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