'February Break' In Full Force

February 13, 2013 12:25 AM

What Traders are Talking About:

* 'February break' continues. Grain and soy futures are in the midst of a seasonal price break. While there are many fundamental reasons for the recent, sharp price pressure, the fact of the matter is that the price break is somewhat seasonal. When prices start heading south in February, it's hard(er) to attract active buying interest as traders are fearful of the dreaded "February break." With that in mind, more near-term price pressure is likely. But prices will eventually get too cheap and there will be a return of buying interest, both on paper and in the physical market.

The long and short of it: Typically selling associated with a "February break" eases around mid-month, which means seasonal pressure should ease soon. Of course, that doesn't mean buyers will automatically return if South American weather concerns ease and/or demand is lacking.

* Another disappointing rain event for Argentina? Light, scattered rains fell on areas of Argentina overnight. Forecasts call for more light, scattered rains through tomorrow. There are better rain chances for Saturday and Sunday, but the event is expected to fade quickly and the outlook is now mostly dry next week. Southern Brazil is also getting needed rains, although coverage levels and amounts are better than in Argentina. Meanwhile, the rains have halted for now in central Brazil, allowing producers to ramp up harvest efforts.

The long and short of it: The improvement in Brazilian weather is offsetting -- for now -- concerns with the Argentine soybean crop. A record South American soybean crop is coming.

* Barclays to exit some of its commodity trading. Banking and finance giant Barclays is undergoing sweeping changes amid new leadership. Among the changes, Barclays announced Tuesday it will halt agricultural trading in its hedge funds. That sparked concerns of massive long liquidation and helped pressure grain and livestock futures. Contrary to some reports, the company says it will maintain its agricultural positions for its index funds. That's key as the company is not completely halting all of its ag trading.

The long and short of it: Panic when the news hit was overblown. But this is the type of situation that "piles on" to markets when they are already reeling and struggling to find buying interest.


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