Cautious Tone Ahead of February Crop Reports

February 8, 2012 02:08 AM

What Traders are Talking About:

* USDA's February report data awaited. USDA will not update domestic corn, soybean or wheat production estimates this month, meaning the only changes will come on the demand side of the balance sheets. Based on the average pre-report trade guesses (from a Dow Jones newswire survey), corn carryover is expected to tighten to 797 million bu. from 846 million bu. in January. Soybean and wheat carryover are expected to decline to 269 million bu. and 868 million bu., respectively. With only minor fine tuning expected on the domestic side, the bulk of the attention will be on the world production projections, specially South American corn and soybean figures as USDA plays catch-up to private crop estimates. Some traders also believe USDA will lower wheat production for Ukraine and Russia, although it's most likely any changes in those countries will wait at least one more month.

The long and short of it: While traders are anticipating neutral to friendly data, they are cautious as USDA has a recent history of surprising the market with its data.

* Global weather watch continues. Rains were seen through central Argentina and central Brazil yesterday. The rains will continue in these regions today and will likely linger into Thursday in central Brazil. While beneficial for late-planted crops, the rains continue to slow harvest efforts in central and northern Brazil. Meanwhile, temps have moderated somewhat across Russia and Ukraine, but the region could be in line for another wave of bitterly cold temps this weekend.

The long and short of it: Weather concerns in South America and the Black Sea region have eased somewhat, but could take on greater focus once USDA's report data is out Thursday.

* Greek deal expected soon. Greek leaders are meeting again today and hopes are building they will adopt tougher austerity measures needed to secure the next tranche of rescue funding. The euro-zone rescue fund anticipates it will play a significant role in steps Greece's debt restructuring. "We are now waiting for the PSI (Private Sector Involvement)and new program for Greece to be finalized. The EFSF will probably play a significant role in both," said Christophe Frankel, deputy chief executive officer at the European Financial Stability Facility (EFSF). The Wall Street Journal reports the European Central Bank will exchange holding in Greek government bonds with the EFSF at a discounted price.

The long and short of it: Despite multiple delays in the process, it appears to be a matter of when, not if, Greece will adopt the tougher austerity measures and secure the needed funding to avoid sovereign debt default. As a result, the euro pushed to a two-month high against the U.S. dollar overnight.


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