Hitting the Nail on the Head

Article in WSJ this morning hits the nail on the head. The money flow into commodities is playing havoc with prices as producers attempt to manage supply in response to market signals. That money though is fickle, triggering higher volatility. Some excerpts:

Matthew Maloney, a corn trader with R.J. O'Brien & Associates, who called the reaction to the Jan. 12 crop report "one of the most dramatic changes of fortune" he has seen in 19 years on the trading floor.

Takai, general manager of financial services at Sumitomo Corp., said the amount of money wagered on commodities has risen sharply in the past decade and likely will keep climbing.

The number of open contracts to buy or sell copper has dropped by more than 7% since the end of last year, according to the Commodity Futures Trading Commission.

"The high prices of a year ago are still having their effect," [Dan Basse of AgResource] said. "The market does its job."

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