Chinese Demand For State-Owned Soybeans Increases

May 8, 2012 01:15 AM

What Traders are Talking About:

* Chinese demand for state-owned soybeans increases. China sold 68,328 MT of state-owned soybeans at the bi-weekly auction, according to China National Grain and Oils Information Center. While that's the highest total since late 2010, it was less than one-quarter of the total amount offered (around 300,000 MT). Still, with state-owned reserves priced 5% to 10% below current prices for imported soybeans, it's likely demand at these auctions will increase in coming weeks, especially amid talk Brazil may run out of exportable soybeans sometime this summer.

The long and short of it: For now, the state-owned soybean auctions don't pose a major threat to demand for U.S. soybeans. But if import prices remain well above those offered by the government, crushers will more actively turn to the state-owned reserves for their needs.

* Chinese corn rumors, tight old-crop supplies overshadow plantings. Talk of additional Chinese interest in U.S. corn has resurfaced, although there are no specifics aside from Chinese buyers being interested at current price levels. In combination with surging basis and tight old-crop stocks, this is allowing traders to look past the stronger-than-expected planting pace. As of May 6, USDA reported 71% of the U.S. corn crop was seeded and 32% has emerged.

The long and short of it: After recently moving to the bottom of the established, choppy trading range, it wouldn't be surprising to see corn futures stage an extended price recovery. May corn futures, which are in delivery and expire next Monday, are leading the price recovery and threatening an upside breakout from the choppy range.

* European fears linger. Some of the worries that surfaced following the European elections over the weekend have calmed, but there is still plenty of concern. Greece is the primary focal point as the country struggles to form a new government after Sunday's elections. Investors are concerned Greece may have bailout funding pulled if the eventual new government doesn't back the previously agreed-to austerity measures.

The long and short of it: Amid the increased euro-zone concerns, the euro is under pressure and the U.S. dollar is stronger. A firmer greenback could pressure commodities, although corn and wheat futures held up well to the pressure Monday and led a mostly firmer tone overnight.


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