Grain and Soy Futures Continue Price Slide

September 26, 2012 01:07 AM

What Traders are Talking About:

* Lack of bullish news, trepidation ahead of USDA data and macro-economics weighs on markets. There continues to be a lot of talk about harvest pressure on corn and soybean futures. While combines are actively rolling, the cash markets signal actual harvest pressure is limited. The pressure on markets is tied more to a lack of bullish news and the fact traders are hesitant buyers ahead of USDA's Quarterly Grain Stocks Report on Friday morning. Plus, macro-economic concerns are building again as euro-zone problems resurface.

The long and short of it: Until traders are given a bullish reason, they will remain hesitant buyers, which opens grain and soy futures to additional near-term downside pressure.

* Poll: Chinese corn imports seen declining 60%. China is expected to import 2.15 MMT of corn in 2012-13 (Sept.-Aug.), a reduction of 60.9% from 2011-12, according to a Reuters poll of 10 industry analysts, including five from within China. High prices and limited supplies will cause Chinese importers to seek alternative sources for feed production. Meanwhile, China's 2012 corn production is seen rising 0.4% to 192.6 MMT by the analysts. That's well below the official corn crop estimate of 197 MMT from China and USDA's 200 MMT projection.

The long and short of it: Chinese importers are likely to use the sharp break in corn prices to get some coverage, especially since corn is again competitively priced against wheat. But with corn prices likely to stay very strong through 2012-13, there will be some reduction in corn imports unless wheat prices rally sharply.

* Beneficial rains seen through winter wheat areas. Rains are falling across the Central and Southern Plains and the southern and eastern Corn Belt this morning. Over the next three days, much of these winter wheat areas are expected to see 2-plus inch rains. While that will slow corn and soybean harvest efforts, it's good news for winter wheat producers as the rains will help the newly planted crop and provide better soil moisture conditions on acres not yet seeded. As of Sept. 23, USDA reported winter wheat planting was 25% complete.

The long and short of it: If these rains develop as forecast, wheat futures could challenge key support at the bottom of the extended, choppy range.


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