What Traders are Talking About:
* New all-time highs in corn and soybeans amid drought concerns. September corn futures surged above $8 overnight, while August soybeans topped $17 -- the first time front-month futures have traded at these levels, signifying all-time highs on the weekly continuation charts. Prices continue to surge amid escalating drought concerns. While traders have gotten a relatively good handle on the expected sharp decline in yield potential, they are now trying to equate that to total production as abandoned acres are factored into the equation.
The long and short of it: Eventually, the sharp reduction in production and resulting price surge will play through on the demand side of the balance sheet as high prices will slow use. But for now, traders are still building weather premium into prices.
* China looking to sell back corn purchases. Private Chinese feed makers are reportedly looking to sell back four to five cargoes of U.S. corn purchases for 2012-13 as prices are much higher now than when the cargoes were booked. With supplies tight, exporters are willing to buy the corn back at a negotiated price, as they will be able to move it to other buyers. A trade source told Reuters, "We don't expect domestic corn supply to be tight next year, at least not as tight as that in the United States. There are fewer supply concerns in China since feed mills have been using cheap wheat to substitute for corn."
The long and short of it: This is different than an export sales cancellation. Exporters likely have another home for the shipments or they wouldn't be willing to buy them back. Still, this is a warning sign the market is getting near a top.
* South Korea urges US to slow corn and bean use for biofuels. South Korea's top feed buyer is asking the US government to slow the use of corn and soybeans for biofuels production amid surging prices and tight supplies. The head of purchasing for the Korea Feed Association says supplies from South America and eastern Europe are not the answer, as those prices have also risen sharply. South Korea typically gets more than 80% of its feed corn needs from the United States.
The long and short of it: This plea is likely to have no impact on any decision from EPA (in consultation with USDA and the Energy Department) on reducing the Renewable Fuels Standard, but it does highlight the fact biofuels production, especially ethanol, is going to be highly scrutinized moving forward.
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