|Commodities ride the roller coaster in SD|
|Sunday, 28 October 2012 16:37|
Since the beginning of October, Corn prices have fallen nearly 2.4%. Wheat is down 3.9%. Soybeans are down 2.3%. Those falling prices have puzzled some observers because of the reduced production caused by this year's drought. An additional cause for confusion was the recent round of quantitative easing from the Federal Reserve, called QE 3, which it was assumed, would keep a bull market rolling in the stock and commodities markets, it hasn't happened in commodities.
But two more immediate factors have begun to have a negative effect on grain prices in spite of the money-printing operation at the Fed and the drought. In spite of that drought this year, even more land will be planted into the major grains next year, especially corn, which will see the highest planting rate since the late 1930s.
The other big factor causing commodity prices downward is the softening economy in China. China expert Mick Weinstein of Covestor Limited says China won't be buying U.S. grain at the impressive rates it did in recent years. Falling grain prices have had the effect of bring cattle prices back up. So cattlemen are feeling more confident about buying grain to feed livestock.
The other component of the commodity markets that been dropping lately is the price of crude oil. Oil is down 6.5%t in the past month, and it's derivative, gasoline has dropped even further. The price of wholesale gasoline has dropped a whopping 14% in the past month although the price at the pump has not dropped as much. In Rapid City the retail price of gasoline is now ranging from a $3.69 gallon down to $3.44 a gallon for unleaded regular.
Al Van Zee