Focus Remains on Europe

December 8, 2011 12:54 AM

What Traders are Talking About:

* ECB cuts interest rates. As widely expected, the European Central Bank (ECB) cut interest rates 25 basis points. That's the second rate cut in two months as the region tries to work out of a debt crisis. ECB President Mario Draghi will hold a press conference later this morning at which investors are hoping to get some answers as to whether there will be pro-growth steps, specifically whether the ECB will unveil any new bank aid or intensify bond purchases. Investors are also nervously waiting on results of the EU summit, which isn't scheduled to conclude until sometime tomorrow.

The long and short of it: Market reaction to the ECB rate decision has been muted as traders are more interested in whether EU leaders can come up with a viable solution to the debt crisis at the summit.

* USDA December S&D Report on tap Friday morning. There will be no updates to production estimates for corn, soybeans or wheat this month, which means the only changes will come on the usage side of the balance sheets (unless there's an adjustment to imports). As a result, traders are expecting just minor fine tuning. The average trade guess according to a Dow Jones newswire survey has corn carryover down 5 million bu., soybean carryover up 18 million bu. and wheat carryover up 2 million bu. from November.

The long and short of it: The December Supply & Demand Report is typically a yawner as adjustments are usually minor, with bigger changes likely in January when USDA issues its Annual Production Summary.

* Conab revises Brazil soy crop down, corn crop up. Conab, the statistical agency of the Brazilian government, lowered its 2011-12 soybean crop forecast to 71.29 MMT from a range of 71.49 MMT to 72.97 MMT last month. That would be well below last year's record production of 75.32 MMT. Conab now sees the 2011-12 Brazilian corn crop at 60.32 MMT compared to a range of 58.43 MMT to 59.46 MMT last month and 57.51 MMT in 2010-11. Conab says soybean plantings, which are virtually wrapped up will be roughly unchanged from last year, while corn plantings are forecast up 6% from 2010-11.

The long and short of it: Conab remains very conservative with its estimates compared to private crop forecasters. After returning from a trip to Brazil, Pro Farmer South American crop consultant Dr. Michael Cordonnier left his Brazilian soybean and corn crop forecasts unchanged at 75 MMT and 63 MMT, respectively.


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