Grain, Corn, soybean prices august 7 2012

Grain, Corn, soybean prices august 7 2012 : Big daily moves in grain prices over the past two months are likely to become even sharper as traders reduce risk by holding positions for shorter periods, creating a vicious cycle that increases their need for working capital and for credit.

Stung by the 2008 food crisis, the major trade houses went into the storming rally, which started in June, with generous credit buffers in place.

Grain prices either rose or were flat Tuesday in early trading on the Chicago Board of Trade. Wheat for September delivery added 0.25 cent to $8.9350 a bushel; December corn rose 1.75 cent to $8.0675 a bushel; December oats were unchanged at $3.75 a bushel; while November soybeans rose 3.75 cents to $15.88 a bushel.

Corn and wheat prices have risen about 50 percent in the past six weeks and soybeans by around 20 percent, sparked by the worst U.S. dry spell in 56 years. With no relief in sight, buyers have started returning to the market, which could prolong the rally.

Traders have had to cope with higher volatility, including days when corn futures hit their 40 cent trading limit on several occasions in July and soybeans hit their 70 cent limit at least once.

The increased volatility has led exchanges to raise margin requirements - the money a trader needs to put up when taking a position in the futures market.

According to exchange CME Group Inc, the margin when a position on the Chicago Board Of Trade's soybean futures is initiated was $5,063 by the close of business in Monday, Aug. 6, compared with $4,500 on June 27.

To cover the higher margin requirements and prices, traders need more credit. But increased regulation and the banking crisis have eroded the ability of European banks in particular to meet that additional demand.

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