By Robert Pore
robert.pore@theindependent.com

Like oil, gold and other commodities, corn, soybeans and wheat prices have all seen a decline, some by as much as $3.50 per bushel locally during the last three weeks.

Starting out the month, corn prices were $5.42 per bushel; wheat, $11.31 per bushel; and soybeans, $14.29 per bushel at the Aurora Co-op.

But by March 20, corn prices were $4.78 per bushel; wheat, $9.92 per bushel; and soybeans, $10.72 per bushel, with no bids being taken.

With tight corn and soybean stocks and strong demand, Farm Futures Market analyst Arlan Suderman looks for a long and volatile growing season in the commodity markets. Wide price swings will become the norm until supply and demand are brought into balance.

Nebraska Farm Bureau President Keith Olsen said volatile grain markets make it imperative for farmers to limit their risks for not-yet-planted 2008 crops.

But that same volatility, Olsen said, is making it nearly impossible for them to participate in the futures markets for grains.

He said soaring grain prices since the first of the year have attracted index funds and other speculators to the futures markets.

Olsen said those entities do not actually own grain, but their involvement in the market is pushing out producers, elevators, farm cooperatives and grain merchandisers who can't deal with the volatility.

"It may be appropriate to have different rules for players in the market who do not actually own grain," he said.

Olsen noted that futures prices for certain grains and soybeans can change between 40 and 60 cents or more per bushel a day.

"A lot of the grain merchandisers on which farmers depend have been 'maxed out' by margin calls, so they have made a decision to not take new positions in the market right now," he said.

Olsen said farmers' only choice is to open their own commodity brokerage account or do nothing at all.

"Right now, 'doing nothing' is the strategy of choice because most farmers do not have the liquidity to handle margin calls and bankers may not be interested in providing financing to meet margin calls because of market conditions," he said.

That's frustrating for farmers, Olsen said, because they're excited to raise a crop at the kind of prices that are being seen now.

"But they know prices are cyclical and they need to limit their risk," he said.

Much of the volatility is caused by the great influx of index funds in the commodity markets and the technical buying and selling of those funds, Olsen said.

He said the substantial increase of participation by index funds and other speculators has moved the grain futures markets further from the desired balance between the future delivery of grain and paper positions in the market.

The Chicago Mercantile Exchange plans to expand daily trading limits and increase position limits on March 28, but that could very well heighten the volatility, Olsen said.

In a letter to the acting chairman of the Commodity Futures Trading Commission, Olsen and the Nebraska Farm Bureau board of directors asked the commission to "take a very cautious and studious look" before acting on the expansion.

"Consideration should be given to requiring index funds and other non-grain participants to have higher margin requirements as a way to restore some order to the market," he said.