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Saturday, January 31, 2015

Ag Question: Why are the markets going down?



There are so many factors why the market has gone down since the beginning of 2015.  

March Corn Futures (CH15) have gone down 25 cents
December Corn Futures (CZ15) have gone down 19 cents
March Bean Futures (SH15) have gone down 46 cents
November Bean Futures (SX15) have gone down 48 cents

That is the total loss within 30 days in the futures markets.  To keep things simple for this post, because I don’t want to lose you before I am done explaining myself, let’s start off with the futures month I posted.  March corn and bean futures are the current CME (Chicago Mercantile Exchange) months we are trading.  We are using these future prices to set cash grain prices for the local delivery of grain elevators and processors.  The futures minus the basis level equals the cash price.  The basis level is determined by location and demand for the commodity.  Nearby basis levels are usually higher than basis levels six months away. Processors and elevators will "push" for nearby delivery.  Most elevators are still full from harvest in January, February time frame.  They also know farmers have bills to pay, so space is made for early delivery from the bins in the country.

What are the factors the markets are going down?
Farm Selling: Farmer selling is slow through the corn belt.  The current cash prices are not really catching the farmer's attention.  Because of  the lack of farmer selling, the grain will sit in the bins until they decide what cash price is needed.

Outside Markets: Stay in your seat. Don't go look out the window. The outside markets I am referring to are the Dollar, Crude Oil, Dow.  There is sometimes a correlation of the grain markets to the outside markets, one goes up, the other goes down, but when you throw the funds into the mix, all past rules do not apply.

USDA Report: The monthly USDA can always have a big impact on the trading day, this month, it has just impacted the markets negatively.

South America:  After the first of the year, South America crop enters the system.  The CME and other analysts have been watching the progress of their crop and weather conditions all  year long. This year, South America has had favorable weather. 

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