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What fundamentals?-Ron and Sue Mortensen

05/19/2011 @ 3:32pm

Today the corn market, despite the weather forecasts, showed that it is still tied to other markets.  Several gloomy economic data points and indicators put gold, silver, crude oil and other commodities on the defensive.  The weather forecast didn’t change, but after yesterday’s sharp rally, prices were lower.

It could also be that today there was simply no new news to discuss.  So, with no news tidbit to move prices higher, the market tried lower.  After a strong rally early in the week, traders will look at market action tomorrow and wonder if today was the pause that refreshes or a bigger signal of lower prices to come.  

Despite the fact that the weather forecast has been a major driver of price action, it is the old crop July corn contract that has had the most bullish move.  Of course, there is the tendency for speculators to simply buy the front month and July does have the most volume and open interest.  

However, there are also underlying cash market reasons for July to be strong.  For quite a while this spring, the cash market seemed to be adequately supplied.  However, there has been a dramatic shift this week.  Basis levels, especially in the eastern Corn Belt, have moved quite a bit higher.    

With states like Indiana and Ohio making so little progress planting corn, farmer selling has dried up.  Even with sharply higher prices this week, farmers are reluctant to sell out their remaining inventories if they believe they will not grow a full crop. 

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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