What Traders are Talking About:
* Traders will buzzing over USDA data. USDA's Prospective Plantings and Quarterly Grain Stocks Reports triggered strong price gains last Friday and traders are still trying to fully digest the data coming out of the weekend. For the corn market, March 1 stocks were tighter than expected, offsetting a bigger-than-anticipated planting intentions figure. While the makings of a record crop are there, the market will have to deal with very tight old-crop stocks through summer. That's incentive to ration use through higher prices. For the soybean market, a lower-than-expected planting intentions figure raises questions about supplies in the 2012-13 marketing year, especially if Chinese demand remains strong and/or if there is a weather problem this summer. As a result, the soybean market could make an even stronger push for some acres. The wheat acreage data came in lower than expected, but upside in the wheat market is tied to corn and soybeans.
The long and short of it: USDA's data gives soybeans the fuel to continue the strong price rally, while it should be enough to push corn and wheat futures back into the upper end of their respective choppy ranges after threatening downside breakouts ahead of last Friday's reports.
* Encouraging Chinese economic data. China's official Purchasing Managers' Index (PMI) for March came in at 53.1, up 2.1 points from February and an 11-month high. The official reading came in much higher than the preliminary data in mid-March and marks the fourth consecutive month China's large businesses have recorded a figure above the 50-point expansion mark. But while China's large manufacturers are expanding, the HSBC data which measures small businesses fell to 48.3 last month from 49.6 in February.
The long and short of it: China's PMI data eases concerns about a potential hard landing for the Chinese economy. But with small manufacturers still contracting, there are signs China's economy is slowing, which has many economists expecting further monetary policy easing. That's a potential price-supportive scenario for commodities, as long as China can keep its economic growth from slowing too much.
* Funds return to corn market as buyers in a big way. After selling 56,000 contracts (280 million bu.) of corn the first four days last week, funds bought an estimated 40,000 contracts (200 million bu.) on Friday following USDA's report data. While fundamentals will be the key price driver, last week proved that speculative money flow is still very much a key component of price action. Of course, some of the speculative money flow is tied to market fundamentals, but not all of it.
The long and short of it: With the flip of the calendar to April (and the start of a new quarter), fund activity will be a key component of near-term price direction.
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