12/18/07 The new commodity markets

Farm and Ranch December 18, 2007 The markets are no longer ours but we still have to use them. That is what grain producers attending the recent Pacific Northwest Grains Conference were told by market analyst Mike Krueger of the Money Farm of Fargo, North Dakota. One thing Krueger was referring to in regard to the commodity futures markets is the influence of outside money, the investment funds. He said five or six years ago those funds had 40-50 billion dollars invested in commodities. Through the second quarter of 2007 that figure was nearly 200 billion dollars. Krueger: "So people ask me what is wheat going to do today. I don't have an idea. I don't have a clue. I can't tell you between 10:30 and 10:35 in the morning some days what any of these markets are going to do because the volatility and the movements are phenomenal. And here is a reason why. Like everything else on earth, people are just pouring massive amounts of money into commodities." And while those billions are a lot of money in commodities Krueger says it is isn't' when compared to other markets where trillions are involved. And Krueger says that outside money is not going to go away. Another factor in market volatility said Krueger is electronic trading which is replacing open outcry and allows for futures contracts to rapidly trade up and down. Krueger: "In fact there is no way these markets could handle the amount of dollars, the amount of volume, and all those things the old fashion way. It's impossible." It is all part of why Krueger said the markets are no longer ours. I'm Bob Hoff and that's the Northwest Farm and Ranch Report on the Northwest Ag Information Network.