What Traders are Talking About:
* Old-crop soybeans post new contract highs. Soybean futures surged Tuesday and followed it up with strong buying overnight, pushing old-crop contracts to new highs. Crop concerns in Argentina are the latest fuel for bulls' fire as private crop estimates continue to fall amid a poor finish to this year's crop. There are concerns a freeze event prematurely ended the growing season in parts of Argentina after the country earlier struggled with severe drought. Pro Farmer South American consultant Dr. Michael Cordonnier lowered his Argentina soybean crop estimate to 41.5 MMT and his minimum estimate to 37 MMT yesterday. He said, "The big picture is that these low temperatures were not good news for the soybean crop. I think the odds of having a "3" on the crop is increasing significantly. We could have had a 3 even without the cold temperatures. I put my minimum at 37 MMT and I think we end up closer to 37 MMT than 41.5 MMT."
The long and short of it: The combination of South American crop struggles and expectations that will lead to continued strong export demand for U.S. soybeans and soymeal.
* BSE case confirmed; limited fallout expected. Cattle futures plunged just ahead of midday Tuesday as rumors of a bovine spongiform encephalopathy (BSE) case in California circulated through the market. As the rumor picked up steam, long liquidation sharply extended the price plunge with the April through December contracts ultimately ending limit lower. USDA confirmed that a dairy cow in California was diagnosed with "atypical" BSE, although the animal did not enter the meat supply chain and the disease can't be transmitted through milk. While USDA reiterated the U.S. food supply chain was not compromised, the key is how U.S. trading partners and consumers react. So far, the backlash is limited. Mexico, Canada, Japan and the European Union say they will maintain normal beef trade with the United States. Taiwan says it is gathering more information before making a decision. The South Korean government says it will conduct stronger quarantine inspections of U.S. beef, but won't stop inspections or halt imports. However, two major retailers in South Korea have temporarily suspended sales of U.S. beef due to "consumer concerns."
The long and short of it: With limited backlash from our trading partners, there shouldn't be additional, heavy panic selling in cattle futures. But it may take some time before cattle traders' confidence in the long side of the market is restored.
* Fed meeting concludes and Bernanke speaks. The Fed is widely expected to make no changes to monetary policy and only modestly adjust wording in the post-meeting comments following the conclusion of the Federal Open Market Committee meeting today. This afternoon, Fed Chairman Ben Bernanke will hold his quarterly press conference. While the Bernanke press conference should shed some additional light on what the Fed is thinking, no major, market-moving news is expected to be revealed. What traders are most interested in is any mention of what happens when Operation Twist ends and any insight into additional quantitative easing.
The long and short of it: The U.S. economy is growing just enough to give the Fed more time before committing to additional quantitative easing, but there isn't enough growth to put a rise in interest rates anywhere on the near-term horizon.
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