Volatility Here to Stay in the Markets

Volatility Here to Stay in the Markets

I'm KayDee Gilkey with the Market Line Report for February 21, 2012.

Markets were closed yesterday for Presidents’ Day, so there are no market prices to report.

I recently spoke with Mike Krueger, Owner of the Money Farm, a grain marketing advisory service in North Dakota that works with individual farmers, country elevators and others associated with agriculture.

Krueger says that volatility has made the commodity markets much more unpredictable than they ever been because in addition to supply and demand there is increased influence of outside factors affecting market prices -- for example the European debt crisis, what is happening in China and Mid-East.

He mentions the price swings will most likely continue for at least the next several years.

So what is a farmer to do with all the volatility in the market?

Krueger: “You know one thing we’ve stressed with our customers is when the market gives us these unexpectedly large gains -- big rallies for no real obvious reason related to supply and demand, you have to sell something. You use those big price increases to get something sold. On the other hand, when the market crashes for reasons that have nothing to do with supply and demand, maybe it is a political event in North Africa or China or where ever. At that point in time we are telling our people, don’t panic and sell stuff at those lows. Maybe use those big breaks, steeper than what they should be, to maybe get some coverage against what they already sold, call options or other market strategies to take advantages of the big crashes in prices .”

I'm KayDee Gilkey with the Market Line Report on the Northwest Ag Information Network.