A Lot Of Focus On Weather, But Demand Is Key

February 19, 2013 11:51 PM

What Traders are Talking About:

* Demand is the key. Soybean futures rallied sharply Tuesday and are are showing followthrough buying this morning. Meanwhile, the corn and wheat markets were lower yesterday and are struggling to find buying interest this morning. This is setting up as a key battle -- soybeans (bulls) versus corn/wheat (bears). While these markets can trade in opposite directions for a brief period, one side will eventually become the "winner" and influence the other. Traders say they are focused on weather, but it really comes down to demand. Soybeans have strong demand, while demand for corn and wheat is struggling.

The long and short of it: Demand will determine which side "wins" this battle, which seems to favor corn/wheat (bears) over soybeans (bulls).

* Brazilian shipping delays? There has recently been talk of the impact rain-induced harvest delays could have on Brazilian soybean exports. But labor unrest, which is typical ahead of the peak export season for soybeans, appears to be a greater threat. Labor unions have already encouraged workers at the Brazilian ports to engage in mini-strikes as they protest the government plan to privatize nearly 100 grain terminals around the country. Pro Farmer South American consultant Dr. Michael Cordonnier says, "If they decide to strike, President Rousseff will take a very hard line concerning their demands just like she did last year when federal workers, including grain inspectors, conducted a work slowdown that lasted for several months."

The long and short of it: There already is some trade chatter that Brazilian beans scheduled to load for China this month may not ship until April. Any shipping delays out of Brazil would keep the window for U.S. soybean exports open a little longer. But once Brazilian soybeans actively hit the world market, it's looking like a longer-than-normal shipping season for Brazil.

* China seeking raptopamine-free pork. China wants shipments of U.S. pork to be certified by a third party as ractopamine-free as of March 1, according to the U.S. Meat Export Federation (USMEF). This follows the recent requirement by Russia that shipments of U.S. pork be free of ractopamine, which is a feed additive used in the U.S. to produce leaner meat. USMEF says this is a "high-priority" issue because China is a major market for U.S. pork. But China already has a zero tolerance for traces of ractopamine, so the issue now is defining what constitutes "third party certification."

The long and short of it: The ractopamine issue is one which looks like it will get bigger before it gets smaller. This raises yet more concerns on pork export demand.


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