What Traders are Talking About:
Overnight highlights: As of 6:00 a.m. CT, corn
futures are trading fractionally to 3 cents lower, soybeans are 6 to 8 cents
lower and wheat futures are narrowly mixed. Cattle futures are mixed this
morning, while hog futures are under pressure.
* Bearish reaction to bullish data. USDA cut its old-crop corn ending
stocks forecast by a greater-than-expected 125 million bu. Wednesday as the
export forecast was raised by that amount. But corn futures ended lower on
the day and are showing mild followthrough selling overnight. The bearish
reaction to bullish data is a potential warning sign the market may have topped.
The lack of buying in response to the data signals traders already had the
bullish demand news already factored into the market. Therefore, it's going
to take fresh bullish data to get the market excited. Traders are shifting
their attention to the start of planting. While it's still very slow going
in the Corn Belt and the planting season is definitely not going to be earlier
than normal, traders always assume the crop will get planted, making it difficult
to get support from slow planting progress.
The long and short of it: The corn market is at a critical juncture
and needs demand news to be consistently bullish or it must find another
source of support.
* China defaults on soy cargoes. The soybean market had a favorable
response to the slightly bigger-than-expected cut to old-crop carryover. But
selling pressure developed overnight amid news Chinese importers have defaulted
on at least 500,000 MT (10 to 12 cargoes) of soybean shipments from the U.S.
and Brazil, trade sources told Reuters. The importing companies were
unable to secure letters of credit through their banks due to poor crush margins.
Chinese crushers are estimated to be currently losing $80 to $100 per ton
on the processing of soybeans.
The long and short of it: Old-crop soybean supplies are tight and
therefore fundamentals are bullish. But the Chinese defaults are the type
of news that can put a top in the market. Near-term price action is critical
as to whether soybeans continue to push higher or show signs of the rally
running out of steam.
* More red flags from Chinese economic data. China amassed a trade
surplus of $7.71 billion in March, which was a stark improvement from the
$23 billion deficit in February. But Chinese exports declined 6.6% last month
-- the first time for back-to-back months of lower exports since 2009 -- and
imports dropped 11.3%, prompting additional concerns with the health of the
world's second largest economy. Despite the worrisome trade data, Chinese
Premier Li Keqiang says his country has no plans for short-term stimulus efforts,
instead the focus is on medium- and long-term economic goals.
The long and short of it: Continued signs of slowed growth in China
are a red flag for commodities. Chinese imports will be watched very closely
to see if there's a quick recovery from the disappointing numbers the past
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