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Market flip-flop

Agriculture.com Staff 01/08/2010 @ 12:02pm

This morning the world was just a little bit different than yesterday and it made a big impact on the soybean market. Last night, the Chinese central bank surprised many people by raising interest rates. The announcement must have been around 8 p.m. CST, because that's when soybean prices started tumbling.

Soybean prices are particularly sensitive because the Chinese import so many beans. So their costs go up when interest rates go up and, more importantly, the market worries that credit and lending/repayment conditions will become tighter, reducing the amount of beans imported.

By the end of the day, soybean prices were down over 30 cents in the old crop. The soybean chart does not look nearly as positive as it did to start the year. With only two trading days to go before the USDA reports on Tuesday morning, can the market rebound? Many will still be looking at the index fund rebalancing which may start tomorrow and continue next week.

Large swings in the market tend to also add to the uncertainty surrounding the upcoming reports. The average guesses have started appearing. There are no surprises in these numbers. The corn crop is expected to be around 100 million bushels smaller and the soybean crop is expected to be 15-20 million bushels larger.

The surprises may well come from the stocks report. For example, feed use is so important to the corn market and the only way to calculate it is from the quarterly stocks reports. This could significantly change ending stocks from what analysts have estimated. By the way, apparently crop that is still in the field will be estimated and counted in the stocks report as on-farm stocks.

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.

This morning the world was just a little bit different than yesterday and it made a big impact on the soybean market. Last night, the Chinese central bank surprised many people by raising interest rates. The announcement must have been around 8 p.m. CST, because that's when soybean prices started tumbling.

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