Big Week Ahead For Fundamental and Macro-Economic Data

December 10, 2012 12:17 AM

What Traders are Talking About:

* Big week ahead. Much of traders' focus this week will be on the ongoing fiscal cliff discussions as the clock is ticking to get a deal done before the end of the year. While there is concern the U.S. will go over the cliff, markets are signaling most investors feel an 11th-hour deal will get done. Still, the uncertainty could curb buying interest. USDA will release its Supply & Demand Report Tuesday morning, which is the primary focus for grain traders. There will be no production update for corn and soybeans this month, although USDA will update its world production forecasts. Also this week, the Fed will hold a two-day Federal Open Market Committee meeting Tuesday and Wednesday, at which it will have to decide what course to take with Operation Twist, which is set to expire at the end of the year. Fed Chairman Ben Bernanke will conclude the meeting with his quarterly press conference.

The long and short of it: Grain traders have plenty of fundamental and macro-economic issues to sort through this week, which could increase price volatility.

* Exports the key to China's economic recovery. Chinese industrial output (+10.1% in November) and retail sales (+14.9%) signal China's economy is strengthening after slumping the first three quarters this year. While the consumer price index (CPI) rose 2% last month (food prices +3%, non-food +1.6%), the positive economic data is overshadowing the modest uptick in inflation. But trade data is a reminder that China's economic rebound isn't going to be without some struggles. After all, many of China's key customers are going through rough (very rough in some cases) economic struggles. China's trade surplus unexpectedly narrowed to $19.6 billion in November, as exports rose only 2.9% and imports were steady.

The long and short of it: While China's industrial output and retail sales signal the country's economy is expanding, keep an eye on exports. If China can't actively ship the things it makes, incentive to ramp up production will be low.

* Chinese soy imports remain strong. China imported 4.16 MMT of soybeans in November, according to official customs data. While that was down 27% from year-ago, it was up 3.2% from October. Through the first 11 months this year, China has imported 52.49 MMT of soybeans, an 11.4% increase from year-ago. Chinese soybean imports are expected to remain strong in December. Last week, state-run China National Grain and Oils Information Center said 2012 Chinese soy imports will likely be around 57.5 MMT, suggesting the country will import around 5 MMT of soybeans this month.

The long and short of it: Robust Chinese demand for soybeans and the fact old-crop South American supplies are very tight suggests the U.S. will continue to get the vast majority of China's soybean business.


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