Focus Remains on Euro-Zone Amid Escalating Economic Concerns

September 28, 2011 04:17 AM

What Traders are Talking About:

* It's all about Europe. Escalating financial concerns in the euro-zone are keeping investors very cautious. Greece remains the epicenter of the concern as the country tries to avoid defaulting on sovereign debt and euro-zone leaders work to come up with new measures to avoid full-blown contagion throughout the region. There is some hope of stronger actions within the euro-zone amid coaxing from the U.S., China and others, but there isn't enough confidence to completely calm investors' nerves. The global financial landscape remains very euro-centric.

The long and short of it: Until euro-zone concerns ease, it's going to be very difficult to get investors to willingly throw money at the long side of markets, including grain and soy futures.

* Will China buy corn? Rumors were rampant last week that China was shopping for up to 5 MMT of U.S. or Argentine corn. China's appetite for corn is strong amid tight domestic supplies and the recent sharp break in prices makes it economically feasible for Chinese buyers to import corn. But so far, there has been no confirmation of any purchases. Traders will continue to closely monitor the situation.

The long and short of it: Confirmation that prices got "too cheap" is needed to stop the sharp price slide in the corn market.

* Cattle on Feed Report: Bullish. Last Friday's Cattle on Feed Report showed all categories on the bullish side of the average pre-report trade guesses. Most bullish was Placements coming in 1% under year-ago, as the average trade guess was for a 7.7% increase in the number of calves placed in feedlots during August. A weight breakdown of Placements in August suggests the movement of calves from pasture to feedlots has peaked. From this point forward, the impact of a dwindling cow herd should be reflected in tightening cattle supplies.

The long and short of it: The Cattle on Feed Report data is price-friendly for cattle futures. But bullish enthusiasm is likely to be curtailed by ongoing global economic concerns.


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