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Where's this market going?

12/03/2010 @ 4:14pm

CHICAGO, Illinois (Agriculture.com)--Where's this market going? Perhaps that is the question on many farmers’ minds this weekend.  Considering that corn jumped 20 cents this week, soybeans surged 60 cents, and wheat exploded 90 cents, market analysts are surprisingly willing to say this market has even more upside.

CME Group soybean prices finished the week at the rare level of $13.00 per bushel, corn at a firm $5.73, and wheat $7.79.

Don Roose, market analyst and president of West Des Moines, Iowa-based U.S. Commodities, says holiday markets are typically not explosive, but there could be more fireworks next week. “I think those same prices are possible next week, and maybe even higher, as the weather continues to threaten crops and demand stays strong.”

Clearly the market will be watching the skies, this weekend, overhead Australia, Argentina, and the U.S. Plains, Roose says.

“We’re moving into that timeframe when the global weather is taking center-stage. In Argentina, 50% of the corn/soybean Belt is dry, and a hot week on-tap. An already drenched Australia is expecting more big rains, hurting wheat quality.”

On the demand-side, the market is eyeing next week’s export sales for continued strength. On Friday, December, 10, the USDA will update its carryout numbers in its Crop Report. Market participants expect already-tight corn and soybean stocks to get even tighter, creating more market nervousness. “There’s a lot of pressure building and globally commodities are attractive,” Roose says.

Rationing Supply

The next shoe to drop is for the market to figure out at what price level does the U.S. begin to ration supply. “We probably have to ration supplies at the world supply levels we are at right now. We don’t need further shortfalls, that some of this world weather is threatening, to exemplify that,” Roose says.

A Wheat Leader

Wheat seems to be the driver of this weather-backed rally. Next week, the market will start at price levels that really can't say anything other than own it, Tom Barry, Linn Group wheat options trader wrote in a customer newsletter. "Buying breaks is recommended, but selling into rallies might not be too wise unless you're covering longs for short term profits," Barry says. 

This global commodities environment is supporting ideas that the buying momentum is going to continue not dissipate, the trader says. "Sure, we could break 30 cents on Monday, but don't you think we'll find a fresh grouping of hungry buyers to scoop it up? Definitely," Barry says.

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