What Traders are Talking About:
* Initial price reaction was bullish, but... Corn and soybean futures had a strong bullish reaction to USDA's report data yesterday, although corn futures failed to close limit up despite very heavy fund buying (they purchased an estimated 25,000 contracts -- 125 million bu. -- yesterday) and soybeans didn't even post a weekly high before backing well off session highs into the close. Recent price action suggests short-term lows are in place, especially for corn, but bulls still have work to do. At this point, price action looks very similar to what happened around USDA's Sept. 28 Quarterly Grain Stocks Report -- price pressure ahead of the report, a strong bullish reaction and then a lack of followthrough buying.
The long and short of it: It's safe to say that USDA reports are going to be bullish for the foreseeable future due to tight supplies. Key will be whether there's enough demand support needed for a sustained rally once the bullish supply numbers are factored into the market each month.
* Keeping an eye on macros. While market fundamentals are dominating the headlines, grain traders are also keeping a watch on the macro-economic situation. Euro-zone industrial output rose 0.6% in August from July, the easily besting expectations of a 0.4% decline. But that won't be enough to raise investors' spirits about the euro-zone. The key issue there (for now) is when Spain will request and be granted bailout funding. China is also a focal point. A rumor circulated overnight that China was cutting bank reserve requirements this morning. That appears to be false. Investors will closely watch Chinese data over the next week, with trade data out Saturday, inflation data Monday and economic growth numbers out next Thursday. And Japan is being watched as there are some indications the country may intervene on yen without U.S. support
The long and short of it: The macro-economic environment is still shaky, to say the least, and is not one in which investors are likely to add a lot of risk.
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