End-User Demand Perking Up On Price Break

November 14, 2012 12:26 AM

What Traders are Talking About:

* End-user demand perking up. The recent sharp price break is encouraging ramped-up end-user buying, as expected. The bulk of the buying has been corn, with China surprisingly quiet on the soybean front thus far. South Korea purchased 269,500 MT of mostly optional origin corn Tuesday, while USDA announced a daily sale of 158,496 MT of corn to unknown destinations. Asian traders are expecting additional purchases as the recent price pressure is giving end-users the best opportunity to buy corn in over a month and the lowest price to buy soybeans in nearly five months. Key will be how much of the anticipated business the U.S. gets. Given tight global supplies for corn and soybeans, odds are relatively good the U.S. will see a pop in export demand. For wheat, U.S. wheat still isn't competitively priced on the global market, limiting the odds of a significant boost in export demand on the recent price pressure.

The long and short of it: A pickup in end-user demand would put in short-term lows for corn and soybeans. But consistent demand is needed to fuel sustained buying.

* HRW wheat conditions continue to decline. As of Sunday, USDA rated 22% of the winter wheat crop "poor" to "very poor," up 3 percentage points from the previous week and 36% of the crop "good" to "excellent," down three percentage points. The decline came in the HRW crop as drought continues to grip the Plains. When USDA's weekly crop condition ratings are plugged into the weighted Pro Farmer Crop Condition Index (0 = crop failure, 500 = perfect crop), the HRW crop decline 10 points to 295 with Kansas leading the deterioration. Meanwhile, the SRW crop improved three points to 379.

The long and short of it: Deterioration of the HRW crop is supportive, but it's very hard to get traders too concerned with crop conditions in the fall. Demand news is needed to fuel sustained buying interest.

* Fiscal cliff remains the macro focus. It's now less than 48 days until the U.S. goes over the so-called "fiscal cliff" if there isn't action on the federal deficit and tax reform. President Obama will meet with a group of top business executives today and also hold a press briefing on the issue. Obama is expected to press Congress to extend most of the expiring 2001 and 2003 tax cuts except those for the top 2% in income. Meanwhile, some reports suggest Obama on Friday during talks with congressional leaders will push for $1.6 trillion in tax revenue -- a considerably larger figure than Obama and House Speaker John Boehner have discussed in the past.

The long and short of it: Uncertainty over the fiscal cliff is keeping markets on edge, but an 11th-hour deal is expected to keep the U.S. from going over the cliff.



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