What has changed in the market?

[FarmForProfit]

I've been lurking for a long time but
have a question.
No argument that Japan is a tragedy but
what has fundamentally changed in the
market? Short term demand will drop
(the Japanese people are hungry but the
infrastructure to unload boats is messed
up). Longer term, with the markets drop
production will drop as well. $10
canola doesn't warrant the same
fertility/fungicide program as $13
canola. Not that there isn't a profit
at $10 but its not worth stealing rental
land from a neighbor for (I am using
canola as a product just because it is
our easiest priced commodity. This
should relate to grains also).
So production should not be pushed to
the extreme we expected a couple weeks
ago.
But I thought supply would barely meet
demand? People still have to eat and
will this drop in price not discourage
rationing leaving us with a larger
shortfall in 6, 12 or 18 months when
demand straightens out?

[lesm]

When speculators back away from the market, prices tend to free fall until eventually demand will exceed supply. Our health care is a good example of that. As much as some of the socialists dislike speculators, they are absolutely necessary to make the capitalist system work. Today's loses are a good example.

[agstar77]

Nothing, even with record corn production ,ending stocks for 2011 will be as tight as this year. What are there odds of a record crop?

[charliep]

Markets are rebounding slightly this morning.

[URL="http://farms.com/FarmsPages/Markets/tabid/214/Default.aspx"]futures quotes[/URL]

Japan is a major buyer. Buyer 600 mln bushels of corn (15 MMT) per year or 1.25 MMT/month.

Wheat imports are about 5 MMT per year or 400,000 tonnes per month.

Canola - 2 MMT per year Canada (150,000 tonnes/month).

Soybeans - 3.5 MMT per year or 300,000 tonnes per month.

Not having Japan in the market short term (or even confusion about how much they can logistically handle) will cause a market setback.

[crusher]

Charlie,

What would you look at for options? Are some contracts more liquid? Use soyoil for canola? Minnie wheat for HRS? Which months? Are there rules of thumb for premium rates? I assume premiums would be more epensive than norm because of very high volatility.

[buzz]

I agree with Farmforprofit.
Nothing has fundamentally changed etc maybe the hedge funds moving money around.
I am interested to hear what others are thinking about regarding the spec moving back in as fast as they dumped their positions.

[charliep]

crusher

Puts or calls. Insurance against lower prices or higher ones.

Getting ready for a presentation tomorrow for AFSC with the topic market outlook and what to do in market plan including use of contracts. nervous about what to say. Not a simple world anymore (not that it ever has been).

In the real short term, suspect prices will remain volatile. Next couple of months suspect the market will move sideways in the trading range we have seen although may struggle to push back to the top end - too much uncertainty around Japan. Also have to give credence to the fact prices are historically high.

As we push into May (US corn and soybean acreage) and summer (Northern hemisphere yields) will return to the forefront. Wheat is the least optistic of the crops - will increase production the fastest assuming mother nature cooperates.

would likely push to September/December realizing lots of time value/expensive. Like your markets although would do some fishing in canola options. Also would consider CBT corn calls if your angle is a weather issue in the midwest - a lottery ticket if you like. Checked a December 750 call and the cost was about 26 1/2 cent/bu. $1300 for a contract.

[charliep]

buzz

Watch open interest.

Don't ignore the commercials either. If you were a flour mill, feed lot, soybean/canola crusher, etc, you were aware of the fundamentals, you saw profit on you business activities, etc, would you be locking in futures to capture margins?

[charliep]

More information about Japan.

[URL="http://www.agweb.com/article/uncertainty_after_quake_throws_us_markets/"]quake impact[/URL]