Fiscal Cliff Uncertainties Holding Markets Captive

November 30, 2012 12:25 AM

What Traders are Talking About:

* Macros cloud outlook. House Speaker John Boehner sounded an alarm on the fiscal cliff talks Thursday, saying limited progress is being made. Republicans and Democrats remain far apart on their views of how to "solve" the situation and the clock is ticking. Although some lawmakers are upbeat a deal will get done in time to avoid going over the cliff, one long-time Washington observer says, "Don’t let any of the talk fool you. We had national elections less than a month ago and there is no reason to think the two parties like each other any more than before the vote. There is still a lot of work to be done on the tax issues — I think we’ll get an agreement by the Super Bowl [that’s in February!], but I wouldn’t hold my breath that we’ll see an agreement before that. I think we’re going over the cliff... and by a few weeks, not just a few days."

The long and short of it: The fiscal cliff uncertainties are keeping markets under wraps. With so much uncertainty, investors are unwilling to aggressively pump money into the long side of markets. Until the fiscal cliff issue is resolved, that's likely to remain the case.

* Chinese grain crop record large again. China produced a record grain crop for a ninth consecutive time this year. Chinese 2012 grain production rose 3.2% from year-ago to 589.57 MMT, according to the National Bureau of Statistics. The corn crop was record large at 208.12 MMT, rising 8% from year-ago. Of note, corn production outpaced rice for the first time ever this year. That shows the evolution of grain production in China, with a rising middle class demanding more protein in their diets.

The long and short of it: Despite continued record grain production, increases in output are not keeping pace with demand as Chinese import needs are rising.

* December grains enter delivery. Today is first notice day, the start of the delivery process, for December grain contracts. Deliveries against the December corn were light, as expected, at 246 contracts. On the other hand, deliveries against December Chicago wheat were heavy at 2,119 contracts. There were no soymeal deliveries, while soyoil deliveries totaled 2,200 contracts.

The long and short of it: Given strength in the cash market and tight supplies following this year's short crop, it's not surprising to see limited deliveries for corn and no deliveries for soymeal, which is likely to remain the case through the delivery process.



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