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Battle Between Fundamentals and Macro-Economics Rages On

May 18, 2012
By: Brian Grete, Pro Farmer Editor

What Traders are Talking About:

* Fundamentals vs. macros. The battle of bullish fundamentals and bearish macro-economics continues to rage on in the grain and soy markets. While macro-economic headwinds are blowing harder, grain and soy futures have held up well this week, with corn and wheat working on strong weekly gains while the soybean market is trying to stabilize after the recent sharp price pullback. But buyers' mettle will be tested ahead of the weekend amid news Moody's downgraded 16 Spanish banks and Fitch downgraded Greece's credit rating to CCC. The growing disarray in Europe has driven German bund yields to record lows, while costs for financing Spanish and Italian debt is on the rise.

The long and short of it: How grain and soy futures finish out the week will be telling, but it appears traders' focus is shifting more toward fundamentals and away from macro-economics.

* G8 talks kick off. President Obama is hosting the leaders of eight major world industrial economies at Camp David starting today. Focus will be on the European financial crisis and what steps can be taken to avoid a worldwide contagion. While no major economic policy decisions are likely, groundwork will be laid for future decisions. President Obama is also expected to ask key world leaders for support in taping strategic petroleum reserves, despite the recent fall in crude oil prices, as sanctions against Iran tighten.

The long and short of it: The G8 summit will probably turn out to be mostly ceremonial, but investors are still hoping for a glimmer of hope from the meeting.

* CME Group wants expedited approval of 21-hour trading plan. CME Group formally filed paperwork with the Commodity Futures Trading Commission (CFTC) Thursday, in it asking the federal regulator for approval of the new 21-hour grain trading plan "as soon as possible." CFTC normally requires 10 business days notice on matters like this, but since this is a revision to CME Group's original plan, it's possible a quicker approval may be possible. CME Group plans to start the new 21-hour trading day no later than June 4 if there are no hiccups. The National Grain and Feed Association, who was opposed to the original 22-hour trading plan now says there's "no reason to wait," although the group continues to have concerns about increased price volatility around USDA reports, as markets will be actively trading during them under the expanded hours. Meanwhile, the National Farmers Union called on CFTC to implement a 30-day public comment period before approving the expanded trading hours.

The long and short of it: CFTC will approve the plan -- it's just a matter of when -- and expanded grain trading hours will start no later than June 4. Then focus will turn to USDA to see if the agency changes it's report release times, although a change in report times isn't imminent.


Follow me on Twitter: @BGrete

Need a speaker for a seminar or special event? Contact me: bgrete@profarmer.com

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