Trading volume at the Chicago Board of Trade has soared in recent weeks, as money flows into the red-hot commodities markets. From March 2003 to March of this year, trading of all agricultural futures and options contracts was up 98 percent.
Not surprisingly, soybeans led the way. Trading in soybean futures contracts was up 96 percent, while trading in soybean options jumped 199 percent.
This week there was further evidence that the most basic of fundamentals is driving the ramped-up trading activity, namely supply and demand.
Under attack from Asian rust and drought the USDA is predicting the Brazilian soybean crop will be off about 6% over last month's estimate, settling at around 56 million metric tons. Even so, this amount is still 3.5 million metric tons larger than last years harvest. Despite the bullish news, and a USDA prediction for the highest prices in 20 years, the market closed below $10, the lowest in three weeks. The cause of the decline may be connected to lower import prices at some domestic coastal ports, the prospect of a late August crop out of the Southern US, and the apparent self-rationing being conducted by many of the countries that usually export beans.
The outlook for corn and wheat remained bullish as predicted ending stocks shrank. Corn numbers are expected to be down by 5% to nearly 21 and 3/4 million metric tons while wheat is expected to drop 2%, settling at almost 14 and a half million metric tons, the lowest since 1972. The market responded by remaining steady.
This report well may have US farmers considering a change in what they plant this year. At the same time, US animal producers may be faced with the question of what feeding regimen will allow them to stay competitive.