Chinese Soy Purchases Confirmed

November 16, 2011 12:06 AM
 

What Traders are Talking About:

* China soy purchases confirmed, may have bought more. Dow Jones newswire cites two executives familiar with the dealings as saying China Grain Reserves Corp (Sinograin) bought six cargoes (around 500,000 MT) of U.S. soybeans to replenish state reserves Tuesday. There has been talk this week China has purchased up to 10 cargoes of U.S. soybeans from the Pacific Northwest and a smaller number of cargoes from the Gulf, so additional purchases beyond the confirmed amount are possible. One executive indicates Sinograin sees the $12 mark as the "value" line, with purchases unlikely when futures are above that level.

The long and short of it: Confirmation of Chinese buys is not surprising as there was a lot of talk about this the past two days. But confirmation is not price-supportive as this news was already priced in.

* China done buying corn for now? While Sinograin is looking to replenish state soybean reserves, corn stockpiling is likely complete for the next several months -- unless there's a sharp price break -- according to trade sources in China. Sinograin is expected to buy corn domestically as prices are falling and the 2011 crop is record large.

The long and short of it: The "value" line for China on corn is the $6 mark. Below that level and China would be interested in corn; above it and corn purchases are likely on hold.

* Back to macros. Grain and soybean futures divorced themselves from the macro-economic situation Tuesday as focus briefly shifted to fundamentals (demand). But macro-economic concerns aren't going away. Rising bond yields in Italy and Spain are being watched closely by nervous investors. On tap in the euro-zone today, Italy's new technocrat government will unveil its austerity plan, while Greece's new leadership is expected to easily pass a confidence vote.

The long and short of it: As painful as it is, the macro-economic focus is not going away. Grain and soy futures will have periods of fundamental focus, but they will be brief until euro-zone jitters fade.

 

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