What Traders are Talking About:
* Export demand will signal when prices have fallen 'far enough.'. As I feared, China canceled more U.S. soybeans, with USDA announcing cancellations of 315,000 MT of purchases yesterday. With the South American soybean crop looking strong, it appears Chinese end-users are looking to buy cheaper supplies from Brazil and Argentina. That doesn't mean Chinese end-users won't buy any more U.S. soybeans, but they are likely to get the bulk of their upcoming needs from South America, as long as there aren't any major shipping delays. Meanwhile, the break in prices encouraged South Korean feedmakers to stock up, as they purchased 69,000 MT of U.S. or South American corn, 20,000 MT of Indian soymeal, 55,000 MT of South American soymeal and 60,000 MT of South American feed wheat. South Korean feedmakers also passed on tenders for 55,000 MT of corn and 70,000 MT of corn. Weekly export sales for the week ended Dec. 27, which obviously included Christmas, were stronger than expected for soybeans at 434,900 MT for 2012-13 and 61,400 MT for 2013-14, within the guess range for wheat at 400,400 MT for 2012-13 and 2,100 MT for 2013-14, and well below expectations at just 49,100 MT for corn.
The long and short of it: As I've repeatedly said in the past, end-user demand is a very good gauge of when prices have fallen "far enough."
* Keep an eye on the dollar. The U.S. dollar sharply extended gains yesterday after minutes from the latest Federal Open Market Committee meeting revealed some Fed board members have concerns about risks from its bond-buying program. The minutes stated, "Several (officials) thought that it would probably be appropriate to slow or to stop purchases well before the end of 2013, citing concerns about financial stability or the size of the balance sheet." The dollar is higher again this morning, although well off its overnight highs. If the dollar continues to strengthen, it could curb buying interest in commodities.
The long and short of it: While a rising dollar is negative for commodities, it could actually spark increased foreign end-user buying if they fear the greenback is going to embark on a sustained, strong rally.
* Jobs growth slows. The U.S. economy added 155,000 non-farm payrolls in December, which was in line with pre-report expectations, but slightly lower than a revised figure of 161,000 jobs added for November. The unemployment rate rose 0.1 to 7.8%. The U.S. dollar backed off its earlier highs in reaction to the jobs data, while the stock market is holding just above unchanged in early trading.
The long and short of it: Basically, the labor market is treading water. While there's monthly jobs growth, there isn't enough to convey signs of a strong economy.
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