China Demand Talk, Economic Data Supporting Soybeans

November 1, 2012 01:06 AM

What Traders are Talking About:

* China supporting soybeans. Talk of Chinese purchases of U.S. soybeans continue to circulate through the market. Although nothing has been officially confirmed, the Chinese demand talk is supportive of soy futures. USDA did confirm a 25,000 MT purchase of soyoil by China yesterday. Meanwhile, manufacturing data out of China is also supportive, as it shows China's economy likely bottomed in September and is starting to modestly improve. The official purchasing managers' index (PMI) rose to 50.2 in October from 49.8 in September, the first time above the expansion/contraction mark of 50 since July. The final HSBC PMI rose to 49.5 last month from 47.9 in September.

The long and short of it: With Chinese economic data and demand talk supporting soybean futures, momentum is swinging to bulls. But this market still doesn't "feel" like it's ready for a major rally given the many macro-economic uncertainties.

* Recovery from Sandy underway. The East Coast has started the recovery effort from Superstorm Sandy, but it will take months to get back to "normal." The key question is how much of a hit Sandy will have on the U.S. economy, which is struggling to strengthen. While purchases for the recovery and rebuilding will give some economic support, it's the lost productivity caused by Sandy that will hurt the economy. As a result, most economists feel there will be some drag on the economy in the fourth quarter.

The long and short of it: Sandy will likely result in slowed economic growth for the final quarter of this year, although it won’t kill the recovery.

* Weekly export sales data delayed, employment report on for Friday. Due to USDA closures for Superstorm Sandy earlier this week, export sales data for the week ended Oct. 25 is delayed until Friday morning. The Labor Department is still scheduled to release key employment data Friday morning.

The long and short of it: For grain and soy futures, the weekly sales data will carry more weight. But macro-economically, the jobs data is the key tomorrow.



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