European Elections Spark Renewed Concerns

May 7, 2012 04:10 AM

What Traders are Talking About:

* Macro concerns build. Investors are focused on macro-economics after elections in six European countries -- Greece, France, Germany, Italy, Serbia and Armenia -- over the weekend. The elections in Greece and France are drawing the most attention (causing the most concern). In Greece, the two pro-bailout parties lost their majority in parliament. As a result, there are renewed concerns with the country moving forward. Germany has already said Greece must stick to its previous austerity commitments to secure bailout funding. In France, incumbent Nicolas Sarkozy was defeated by Socialist challenger Francois Hollande for the presidency. The concern is how Hollande will interact with German Chancellor Angela Merkel, as some fear a power struggle may evolve.

The long and short of it: European election results are roiling global stock markets and commodities as traders are taking a "risk-off" stance to start the week.

* Beneficial rains, drier this week. Scattered to locally heavy rains were seen across the bulk of the Corn Belt over the weekend, with the heaviest rainfall in southeastern South Dakota, southern Minnesota and central Illinois. A few scattered rains are lingering in the western Corn Belt this morning, with more developed (although scattered) rains in the eastern Belt. Conditions are expected to be drier the remainder of the week, although more rains could develop by the weekend. Temps are expected to be generally slightly below normal across much of the Corn Belt.

The long and short of it: The weekend rains are seen as beneficial for crops (price-negative for futures, especially new-crop corn), although they will slow fieldwork at least early this week.

* String of bean sales continues. Demand for U.S. soybeans is red-hot, with USDA announcing a 110,000-MT sale to unknown destinations for 2011-12. That makes seven straight days with at least one daily soybean sales announcement -- either to China or "unknown." With talk Brazil may run out of soybeans for export sometime this summer and Argentina also working with a short crop, demand for U.S. soybeans is expected to remain strong until South America has more soybeans to export -- next year.

The long and short of it: Aggressive demand for U.S. soybeans provides strong underlying support for futures, but the market is currently in the midst of a corrective pullback amid increasing macro-economic headwinds.


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