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Why are corn traders screaming "get me out or this market"?

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Suddenly, like lightening, the corn market drops to limit down. "Limit down" is the maximum the corn market can drop in one day. For corn it is 30 cents or ($1500.00 (each penny equals $50.00.) December corn traded at $3.6725 per bushel down the limit.

Why did this happen? Berry and Rees reported that today the Agriculture Department released its report on corn plantings which forecast 87.035 million acres up from 85.982 million acres planted in 2008. More acres mean more corn and more corn means lower prices.


Analysts had expected just the opposite i.e. for the department to cut acreage. Now all these guys are scrambling to cover themselves. Mike Zuzola claims that the March numbers were not accurate. USDA Chief Economist, Joseph Glauber, said that he was surprised by the numbers adding that the March numbers reflected planting intentions not actual plantings.

What does all of this mean? First of all here is a cardinal rule: "never take a position ahead of a key government report." No matter how good you are, you can never outguess the numbers. Stay out of the market when these reports come out. Finally, the increase in corn production should keep a lid on corn prices for the remainder of the year.

Will the drop in the futures market for corn keep prices down at the supermarket?

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Last updated: November 25, 2009: 09:03 AM

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