What Traders are Talking About:
* Focus on USDA, the Fed. Grain traders' primary focus this week is USDA's Crop Production and Supply & Demand Reports on Wednesday morning. This will be USDA's second survey of the 2012 corn and soybean crops and traders are fully expecting a smaller corn crop estimate, while most are anticipating a smaller soybean crop. In addition to the key USDA data, traders will also keep a close watch on the Fed as it holds its monetary policy meeting Wednesday and Thursday. There's a growing expectation the Fed will announce a third round of quantitative easing (QE3) in an attempt to boost the economy, especially after Friday's disappointing jobs report. But there are still some who believe the Fed will wait until after the Nov. 6 elections to unveil a new stimulus plan.
The long and short of it: For grain traders, USDA's reports are the key, but action (or inaction) by the Fed has more broad, market-moving potential.
* Chinese data points to more easing. China's trade surplus widened to $26.7 billion in August from $25.1 billion in July as exports rose 2.7% while imports unexpectedly declined 2.6%. While exports were lower than anticipated, the unexpected drop in imports is the figure really getting a lot of attention as it signals conditions are even worse than believed. Meanwhile, rising food prices caused Chinese consumer price index (CPI) to uptick to 2% over year-ago last month from +1.8% in August, while the producer price index (PPI) was 3.5% under year-ago.
The long and short of it: The combination of rising consumer inflation and sluggish trade data signals China is likely to act soon to further ease monetary policy in an attempt to boost economic activity.
* Chinese soy imports drop sharply in August. China imported 4.42 MMT of soybeans in August, a drop of 24.7% from July and 2% less than year-ago, according to official customs data. For the first eight months of this calendar year, however, soybean imports are up 17.4% at 39.34 MMT. Export sources signal Chinese importers have purchased only around 11 MMT of soybeans for September through February, less than half of their needs for the period.
The long and short of it: With South American supplies very tight and the U.S. having a short crop this year, Chinese crushers will likely have to rely more heavily on state-owned reserves to fill their needs over the coming months. But it also means Chinese importers will be quick to buy price breaks.
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