Chinese Data, Bird Flu Weigh On Markets

April 15, 2013 01:25 AM
 

What Traders are Talking About:

Overnight highlights: As of 6:30 a.m. CT, corn futures are 9 to 11 cents lower, soybeans are 4 to 13 cents lower and wheat futures are 6 to 15 cents lower with Chicago contracts leading the price drop. Based on overnight trade and the strong risk-off stance after disappointing Chinese data, bears will maintain a strong upper hand when grain and soy futures open at 8:30 a.m. CT. Cattle futures are expected to open steady to mildly higher, while hogs are seen opening with a mixed tone this morning.

 

* Chinese economic data misses the mark. China's first quarter GDP came in 7.7% over year-ago, which was down from 7.9% growth in the final quarter of last year and below expectations for 8% growth. Meanwhile, industrial output rose 8.9% compared to expectations for 10% expansion. The data signals China's economic recovery hit a speed bump in the first three quarters of this year and has investors concerned more disappointing numbers may come from China in the months ahead.

The long and short of it: The disappointing data is weighing heavily on global markets, especially commodities, given China is the world's largest consumer of raw materials.

* Bird flu spread also a concern. China reported more cases of bird flu over the weekend, with the number of instances now at 60 and the death toll at 13. More importantly, the first cases outside of far eastern China were reported -- one in Beijing and two in Henan. The spread of the disease outside of eastern China is raising expectations that the number of cases will continue to grow. The real concern is that this could turn into a pandemic and put others throughout Asia in danger.

The long and short of it: Aside from the human tragedy, the concern on the agricultural side is with feed demand. Soybean meal use has already slowed and some now believe this could lead to a reduction in Chinese soybean imports versus year-ago.

* Cold, wet week ahead. Forecasts call for a near daily chance of precip this week, while temps are expected to be below to well below normal. Most of the precip will be rain, but northern and far western locations will get snow and/or freezing rain. There's the risk of another freeze in HRW wheat country later this week. The cold, wet conditions will keep producers out of fields across the Midwest. In fact, the National Weather Service forecast indicates the cold, wet conditions will persist through at least April 26.

The long and short of it: USDA will start releasing corn planting updates this afternoon, which will shift more focus to planting delays. But for now, traders believe the longer-term benefits of the rains outweigh the shorter-term negatives.

 

Follow me on Twitter: @BGrete


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