End-User Demand, Basis Signaling Corn Nearing a Short-Term Low

September 25, 2012 01:12 AM
 

What Traders are Talking About:

* End-users getting corn coverage. The break in corn futures amid seasonal pressure and long liquidation is giving global end-users a chance to extend corn coverage. South Korea has been the most active, picking up 65,000 MT of corn over the weekend and another 258,000 MT of corn overnight. In addition to the purchases, basis is also showing signs of stabilizing after a period of sharp pressure. The key now is how much end-user buying must be seen before traders are persuaded to start pumping money into the long side of the market again.

The long and short of it: With corn harvest quickly nearing the halfway point, which typically is when seasonal pressure starts to ease, the corn market may be nearing a short-term low.

* China to 'fine tune' monetary policy. China's economy is stabilizing and inflation is basically stable, according to the People's Bank of China (PBOC) following its third-quarter monetary policy meeting. As a result, PBOC says it will "fine tune" its monetary policy to promote economic growth and cushion the economy against global risks while closely watching possible impacts from recent quantitative easing in the U.S. and European Union.

The long and short of it: This seems like a situation where China is trying to talk up its economy and talk down the threat of inflation. Given the current economic environment, many believe China will need to do more than fine tune its monetary policy.

* Russia temporarily suspends import and use of Monsanto's NK603 GMO corn. Russian consumer rights watchdog Rospotrebnadzor says the country has temporarily suspended the import and use of Monsanto's NK603 genetically modified corn after a study alleged the corn causes cancer. The study, conducted by the University of Caen in France, alleged that lab rats fed the corn over a two-year period developed more tumors and other severe diseases than rats fed with regular corn.

The long and short of it: The move by Russia is typical overreaction on issues such as GMO corn based on allegations. But without permanent normal trade relations intact yet, the U.S. can't bring WTO challenges against Russia. Market reaction is likely to be limited, but it's definitely not positive -- neutral at best.

 

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