The massive flooding from the Mississippi River in May is finally catching up to the rice market. Rough rice futures had a substantial drop since late May, but the market came roaring back in the last few trading days after the USDA released some surprising acreage numbers on June 30. The market has gained more than 9 percent in the last four trading days.

The USDA stated that planted acreage for rice is down 26 percent from last year. Many acres in Arkansas were wiped out from the floods and went unplanted or did not get replanted. Rice came in well below the expectations for acreage numbers and corn came well above expectations. Obviously, rice prices shot higher and corn tanked.

To add fuel to the rally, the USDA released their weekly crop conditions on Tuesday. Overall crop conditions for rice dropped in the last week and Arkansas saw their good-to-excellent crop ratings drop four percentage points.

The U.S. is the world's third largest rice exporter, so this is a big deal. I don't think we'll see another runaway market like 2008 when prices shot well above 20. However, there could be more room for a rally, especially if crop conditions don't improve in the near future. Rice futures closed at 15.59 on Wednesday.

Commodities had a strong run higher in the first half of 2011, but May and June saw a great deal of profit taking in many commodities. Milk futures was the biggest gainer with a 32 percent increase. Milk is a lightly traded commodity that most traders don't even watch, but it is a popular item at the grocery store that has become much more expensive.

The oil commodities were strong performers. Unleaded gas (RBOB) gained 19 percent and heating oil gained 15 percent. Brent crude oil gained 18 percent, but the WTI crude oil contract that trades in the New York only gained 2 percent. The spread between the two markets really expanded in the first half of the year.

Silver managed to hold onto a 15 percent gain even though the market dropped about $16 in the last two months. Several of the soft commodities - sugar, coffee and orange juice had an 11 percent gain. The US dollar had a loss of 7 percent in the first half of 2011, which helped support commodities.

On the negative side, wheat was the biggest loser with a drop of 27 percent. Lumber dropped 26 percent and natural gas lost 9 percent. Most of the other grain commodities were slightly lower to slightly positive. Copper ended the first half slightly lower, which shows that many of the most economically sensitive commodities struggled in the first half - copper, lumber and natural gas. Crude oil / gasoline would be the exception.

Looking at the second half of the year, it looks like commodity prices should be a little higher. Many commodities had a rough May and June, but it looks like they are bouncing. I'm not really sure why commodities moved higher in the last week along with stocks, but there could be a nice turnaround if it continues into the next couple weeks. Otherwise, the medium trend is slightly negative, while the long-term trend higher is still intact.

The whole ball game changed at 8:30 Thursday morning when the USDA released their reports on quarterly corn stocks and planted acreage for corn. The reports were a bombshell for the market as supplies were unexpectedly increased and planted acreage was far greater than traders expected. Needless to say, corn futures dropped like a rock on Thursday and Friday.

The fundamentals made a rapid shift to the bearish side on this data. Goldman Sachs is now calling for a twelve month target of $5.70 a bushel for corn. December corn is currently trading at $5.98 late on Friday. The corn market has dropped about 20 percent from the highs in early June.

The corn market is actually following along with the typically seasonal pattern where prices tend to peak in June and drop until harvest. A return of demand and the weather this summer are the key variables to watch for corn at this time.

Demand for corn dropped as it hit record highs around $8 in early June. With prices hovering around $6, demand for corn is likely to come back. There have already been some recent major purchases of US corn, which is likely China. Many analysts believe China has to replenish their supplies of corn and they like to buy after a large drop in price. The International Grains Council raised their world production forecast for the 2011/2012 season to a record high, which is about 3 ½ percent above last year.

Unless there is extremely bad weather this summer or the USDA is off on their planted acreage numbers for corn, the highs around $8 will probably not be seen again this year. Demand will probably continue to rise in the coming years and there will still be a premium in the markets as there is not much margin for a bad crop year. However, corn prices are on the defensive now and it is a question of whether they have fallen too far. Demand reports and the weather will tell the tale.

Copper jumped higher by more than 12 cents on Wednesday and it is currently trading at $4.2130 a pound. The strong move today looks like the beginning of a technical breakout higher, but I am a bit skeptical.

Copper will normally follow the direction of the stock market and today it is playing catch-up to the strong performance of stocks this week. Financial reporters are giving any number of reasons why copper is moving higher. They include a possible housing turnaround (not likely), an uptick in Japanese manufacturing, a weaker dollar, passing of Greece's austerity package or maybe a combination of any of the aforementioned reasons.

I don't see any major factor to cause that much buying, but this was a large rally for one day. It makes sense if crude oil and stocks are rallying that copper has to follow along. Hedge funds these days have programs that key off price action like this. The market has been bouncing in a tight range for nearly a month and it was bound to get an explosive move one way or the other.

Warehouse stocks of copper have been dropping and this could possibly signal an uptick in demand. I don't see where it would be coming from, other than Japan getting back to normal production. If copper is having a true rally, the market could eventually move to the $4.40 - $4.50 level. However, I would be looking to find a selling opportunity at that point. There will have to be continued supporting economic data to push the market to new highs and I don't see it coming from the U.S. or even China in the near future.