Grain markets have been on a roller coaster since the summer, when Russia banned exports due to drought conditions. Friday, the United States Department of Agriculture (USDA) cut its projection for this year's corn harvest by 3.8%, as reported in the Wall Street Journal.

That news was like pouring gasoline on a fire. The grain markets exploded to the upside, closing limit up. Some exchanges place a limit on how high or low prices can trade on a given day. The limit for corn is 30 cents, for wheat 60 cents and for soybeans 70 cents (each penny equals $50).

Rumors move markets, especially the commodity markets. The story of the day is a rumor that corn yields will be lower than forecast. The United States Department of Agriculture (USDA) originally forecast corn yields to be 165 bushels per acre. However, with the weather being hotter and drier east of the Mississippi, yields could come in lower, as reported by the Associated Press.

That sparked a rally in corn futures with the December contract up 17 cents to $4.64 per bushel (each one cent equals $50). Wheat prices are benefiting from the drought in Russia and Russia's export ban. December wheat futures shot up 27.5 cents to $7.41 per bushel. Soybeans also were higher by 26 cents to $10.35 per bushel for the November contract.

Why worry about the corn market, you say? Well corn cereals, corn oil and corn products that depend on corn are sensitive to the price of corn. Add to this mix the fact that we still have an ethanol program in place that is taking 15% of the crop, and you have the hair trigger that drove corn and grain prices sharply higher yesterday.

There was a rumor that we are having an early frost next week. That's number one. Now, add to this the fact that only 12% of the corn crop is "mature" compared to 37% last year and off we go. Then, too, you've had big speculators that have been short for some time.