China Canceling Some Soy Cargoes; Likely To Delay Shipment On Some Corn

May 23, 2012 01:47 AM

What Traders are Talking About:

* Chinese importers cancel some soy purchases, possibly corn too. Rumors of Chinese cancellations of soybean (and corn) purchases swirled through the market Tuesday. A drop in basis helped fuel the talk as did cancellations of coal and iron ore shipments by Chinese importers this week. In a story overnight, Dow Jones quotes multiple trade sources as saying there has indeed been some cancellations of soybean purchases, while some shipments are being sold to other importers as crushers face negative margins of around 100 yuan ($15.85) per ton. The sources also told Dow Jones Chinese importers may cancel or more likely delay delivery on some corn purchases, while Reuters reports Chinese importers will likely wait until September when more is known with this year's crop before booking more corn.

The long and short of it: Cancellations are more likely for soybean purchases than for corn. Negative margins along with ample stocks in port storage and access to cheaper state-owned reserves reduce the "need" for soybean imports. But for corn, it's relatively apparent China needs supplies, although they may defer delivery to get a better price. China likes to "trade" the market, especially when they can get a better price than when the purchases were originally booked (even with a fee for changing plans).

* Longer open-outcry trading hours? CME Group has reportedly reached out to local traders to seek their attitudes on extending open-outcry trading hours. Some locals are reportedly hoping to have the start of pit trade moved up to 7:20 a.m. CT so open-outcry trade will be open during USDA grain reports. There is also some talk the close may be pushed back to 2 p.m. CT to coincide with the end of electronic trade. Meanwhile, USDA Secretary Tom Vilsack told Reuters USDA will seek public comment before making any decisions on potentially changing USDA report times. This is a hot-button topic for many traders, farmers and the commercial grain industry. Many feel USDA's reports should be released when markets are closed. Of course, there is no long such a time, as grain markets at the Chicago Board of Trade, Kansas City Board of Trade and Minneapolis Grain Exchange trade are closed from 2 p.m. to 5 p.m. CT daily, while IntercontinentalExchange grains are closed from 5 p.m. to 7 p.m. CT.

The long and short of it: Longer open outcry hours seem to be favored by local traders as they seek a level playing field, especially following USDA reports, suggesting some change in pit trading hours is likely. In terms of market impact, it shouldn't have much if any. The bigger issue is what USDA will do or won't do with report release times.

* Fears of Greek exit from euro-zone build. Reports that former Greek prime minister Lucas Papademos said the country was preparing for an exit from the euro-zone sent markets into a frenzy yesterday afternoon. Papademos later clarified his remarks, trying to ease fears, but investors are still spooked at prospects of what may happen if Greece does indeed bail from the euro-zone. EU leaders are holding an informal summit today at which they will discuss ways to boost growth in the region, but it's unlikely they will come up with a plan that will ease investor concerns.

The long and short of it: The euro continues to drop amid the Greek fears and other euro-zone problems, pushing the U.S. dollar index to its highest level since Sept. 14, 2010, overnight. Strength in the dollar not only reflects investor risk aversion, but is also limiting buying interest -- and in some cases pressuring -- commodities.


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