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Market Volatility takes on a new meaning

The week of 14-18 March 2011 had to be the most volatile weeks in the history of agricultural markets—if not all markets. I didn't look backwards to try to find another period of similarly explosive moves first lower and then higher, but it's hard to imagine it could have ever been worse.

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How low can the corn carryout go?

Yesterday's WASDE from USDA sent sort of a shock wave through grain markets. Although there was good reason for USDA to increase estimated corn use from a statistical perspective, traders were nevertheless surprised that USDA chose to do so in February. Most thought that further tightening of the U.S. corn S and D would happen in a later month. On the other hand, we have heard speculation that USDA raised estimated use and dropped ending stocks to a "pipeline" level in February hoping the price reaction would stimulate the necessary demand rationing earlier rather than later. We doubt it is fair or accurate to accuse USDA and the World Board of such a devious approach. It seems much more likely that USDA/WOAB analysts simply called things as they saw them, as they should.

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Outbreak may lead to deficits in beef, pork, and poultry

The Korean Government has ordered the culling of deer, goats, swine and bovines per an outbreak of foot and mount disease. Total cull is more than 1.3 million head. The first case was verified on 29 November and the cull has been taking place for the past 30 days. To date, more than 112 cases have been confirmed. Korea was hit with FMD in 2000, 2002, and two more times in 2010. Before the latest set of outbreaks, Seoul had used vaccines only once, in 2000. Korea starting vaccinating on Christmas Day, 25 December, and has plans to vaccinate 2.15 million head of livestock.

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Brazil's Palm Oil Expansion is set to begin

We have long predicted that Brazil would one day decide to get into palm oil production in a big way. It has a huge amount of land along the Amazon River that is located near the equator and ideally suited for oil palm production. With rising global demand for palm oil for food and biodiesel it made sense for investors to expand palm oil production in Brazil.

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New Pollution Technology Includes Higher Costs

High commodity prices mean farmers have the capital to invest in new equipment. John Deere stock is up 70 percent from its 2010 low and AgCo stock has nearly doubled. But Energy and Environment Daily is reporting that some farmers are being steered toward the used equipment market by EPA's Tier 4 air pollution standard. The agency forced all new, off-road diesel engines to produce fewer nitrous oxides. This is added cost to the tractors; just as consumers balked at low flush toilets and now energy efficient light bulbs, apparently some farmers have decided not to add the risk of the new air pollution technology to their portfolio.

A Debate with Several Potential Outcomes

With a farm bill more than a year away, there is a looming Congressional debate that may pre-empt portions of the farm bill. That debate is the Congressional action needed to raise the debt ceiling; it will come in March 2011.

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