What Traders are Talking About:
* Changing of the guard? Soybeans have been the clear upside leader in the grain/soy markets for months on support from declining South American crop estimates and strong Chinese demand. While those factors remain intact, some traders are wondering if old-crop corn is assuming a leadership role amid tight old-crop stocks. While that would be a definite shift in power, it's a move that would be healthy for the soybean market. After all, soybeans have had to rally virtually all alone without help from corn or wheat. If old-crop corn futures take a turn as the upside price leader, it would give the soybean market a chance to catch its breath.
The long and short of it: The strongest bull markets are ones which have rotational leadership. If old-crop corn can give soybeans at least a short-term breather, it would be a potentially bullish signal for future price action.
* South American soybean estimates continue to decline. Private crop forecasters continue to lower their estimates for Brazilian and Argentine soybean production. In Brazil, Agroconsult lowered is soybean forecast to 65.2 MMT from 67.1 MMT, Celeres cut its estimate to 67.9 MMT from 69.8 MMT and Pro Farmer consultant Dr. Michael Cordonnier lowered his estimate to 66 MMT from 66.5 MMT previously. In Argentina, Dr. Cordonnier cut 1.5 MMT from his estimate, dropping it to 45.5 MMT and the Rosario Grain Exchange cut its forecast to 43.1 MMT from 44.5 MMT. Dryness in southern and northeastern areas, along with disappointing yields in Mato Grosso are the primary reasons for reductions in Brazil, while an early freeze late last week nipped the Argentine crop.
The long and short of it: With South American soybean forecasts continuing to decline, there's a very solid floor of support under the market. Traders are anticipating more Chinese demand for U.S. soybeans as South American supplies continue to decline.
* Fed minutes disappoint; ECB, BOE hold pat on interest rates. Minutes from the March Federal Open Market Committee (FOMC) meeting released yesterday afternoon were a big disappointment to markets across the board. The FOMC minutes gave no clue of further quantitative easing, which many investors were hoping to see. Instead, Fed governors are focused on recent signs of economic growth, although they remain on guard for potential pitfalls. Meanwhile, the European Central Bank (ECB) and Bank of England (BOE) left interest rates unchanged following their monetary policy meetings. With interest rates predictably on hold, attention is on the ECB's economic stimulus measures. So far, the ECB has resisted pressure from Germany's Bundesbank to begin an exit plan from economic stimulus strategy that has seen it loosen the rules for tapping ECB funding operations. German policy makers are concerned inflationary pressures will build. But others say the economic situation, especially is Spain, is too weak for the ECB to be thinking about exit strategies.
The long and short of it: The U.S. dollar rallied after the FOMC minutes were released, which pressured commodities. The stock market also came under pressure amid the disappointing minutes. The dollar is being boosted further this morning by the ECB and BOE decisions to leave interest rates unchanged.
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