Grain Marketing Highlights

Carl German, Extension Crops Marketing Specialist;

March Madness Hits Commodities Market
Nearby crude closed at $105.90 per barrel in yesterday’s trading, within a few dollars of the recent high. The U.S. dollar index closed at 71.95, within .75 of the recent low. Nearby corn closed at $5.52, soybeans at $13.52, and nearby soft red winter wheat at $10.33 per bushel in yesterday’s trading. Speculative funds may be pulling back on some of their commodity trading as the credit crunch and bargain stock prices dictate. Volatility in commodity prices remains at extremely high levels, with limit up and down price swings common of late. Corn and soybean futures contracts will join the ranks of wheat in tomorrow’s trading (March 28th) with increases in the daily trading limits taking effect coupled with expanded limits of plus 50% in the event that the market closes at the limit on a given day. With the new daily trading limits for corn (30 cents per bushel); soybeans (70 cents per bushel); and wheat (already at 60 cents per bushel), the expanded limits then become 45 cents/bushel for corn; $1.05 per bushel for soybeans; and 90 cents per bushel for wheat. The new expanded limits amounts to a daily limit of $2,250 for a 5,000 bushel corn contract; $5,250 for a soybean contract; and $4,500 for a 5,000 bushel wheat contract.

The cost of using commodity futures for price risk management strategies down on the farm has become unacceptable and cost prohibitive to farmers and the agricultural industry (merchandisers). Hearings to that effect will soon be held on Capitol Hill to address the concerns that agriculture has with unlimited trading activity and the effect this is having on traditional price discovery mechanisms. More information will follow on the hearing date, scheduled for the later part of April.

In the meantime, expect these markets to remain quite volatile. The March 31st Planting Intentions report to be issued on Monday may or may not portend to price expectations for the near future. In other words, will commodity traders, other than farmers and the commercial traders even care about the numbers in the report? For that matter, will the planting intentions report line up with what actually gets planted this year? The Southern Hemisphere is currently in the process of harvesting what promises to be their largest crop on record while ’07/’08 U.S. soybean ending stocks are projected at 140 million bushels.

A late spring to early summer Options on Agricultural Futures webinar is being planned. Details to follow concerning the airing date. For technical assistance on making grain marketing decisions contact: Carl L. German, Extension Crops Marketing Specialist.

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