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Strong markets in spite of wheat

Agriculture.com Staff 10/25/2007 @ 2:08pm

The wheat market is still an influence on corn and soybean prices, but not to the extent it was in previous months. Sometimes, the first 10 minutes of trade look virtually the same in all three markets. Then, slowly, separate market influences take over. For example, today, after the market felt comfortable with only slightly lower wheat prices, corn and soybean prices move strongly higher on their own fundamentals-strong exports, strong crude prices, weak dollar, etc.

The strong prices are more apparent in the cash market. Basis levels continue their post-harvest rally, improving 20 cents or more in soybeans and 10-20 cents in corn. Farmers still harvesting corn after last week's unwelcome rains may think 'post-harvest' is wishful thinking, but the slower pace of harvest has caused elevators and processors to be more aggressive in trying to accumulate grain.

For soybeans, there is a little extra twist, with November option expiration on Friday. There is a decided tendency for futures prices to gravitate to a particular strike price, especially if open interest in that strike is large. For the past two weeks, it looked like that would be either the $9.60 or $9.80 area. Traders who had sold $10.00 calls thought these options would expire worthless.

Today's rally to the top end of the recent price range ($9.96 3/4 high) is making those sellers of $10.00 calls a little more nervous. Option traders probably bought a few futures contracts to offset their risk as prices rallied. Any moves over $10.00 would cause additional purchases as the call options go from out-of-the-money to in-the-money and exercised at the end of the day.

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 wheat market is still an influence on corn and soybean prices, but not to the extent it was in previous months. Sometimes, the first 10 minutes of trade look virtually the same in all three markets. Then, slowly, separate market influences take over. For example, today, after the market felt comfortable with only slightly lower wheat prices, corn and soybean prices move strongly higher on their own fundamentals-strong exports, strong crude prices, weak dollar, etc.

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Soybeans Rally on Demand, Weather