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Markets sideways one more month

Agriculture.com Staff 05/30/2008 @ 8:11am

The forecast contains normal or slightly above normal temperatures and that is all it takes to distract the grain markets from the cool, wet (bullish) forecasts of the past several weeks. Plus there is some relief that planting is basically completed.

The markets have also been nervous about the recent focus on the potential "evils" of speculative trading, especially in the energy markets. Since corn and soybeans act like crude oil every so often, a liquidation in crude futures often sparks a liquidation in corn and soybean contracts. Such was the case yesterday.

The CFTC was recently pressured by Congress to investigate or curb speculative trading. To a trader, this translates into "what if they make us get out of our positions?" Then the next leap is “I need to get to get out before I'm forced out." Plus it's the end of the month, which has generated more profit taking.

Between the fundamental weather factor and the speculative outside market factor, the net result is sideways trading (for old crop corn and soybeans and new crop corn) in the same range for April and May. Only the chart of new crop beans looks more like an uptrend in the past two months.

On the demand front, there are positive news nuggets all around. The ethanol production numbers for March were just released and were large. With many additional plants coming on line, the USDA's estimate of 3 billion bushels of corn for ethanol may be low.

Plus soybean exports are still zipping along, with rumors this week of sales out of Argentina being switched to the US. In addition, China (and unknown destinations) has bought substantial quantities of new crop beans.

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.

The forecast contains normal or slightly above normal temperatures and that is all it takes to distract the grain markets from the cool, wet (bullish) forecasts of the past several weeks. Plus there is some relief that planting is basically completed.

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