Grain Traders' Focus Split Between Fundamentals and Outside Markets

March 8, 2012 12:52 AM

What Traders are Talking About:

* Deadline day in Greece. Optimism is building private holders of Greek debt will agree to a debt swap before today's deadline passes. Provided the debt swap hits a two-thirds acceptance level, Greece is expected to use so-called collective action clauses (CAC) to enforce the deal on all holders of the 177 billion euros ($234.7 billion ) in outstanding debt as regulated by Greek law. The private debt swap is needed to clear the way for Greece to get emergency funding to avoid defaulting on sovereign debt obligations.

The long and short of it: With optimism in Greece building, there's more of a risk-on attitude in the investment world this morning. That's friendly for grain and soy futures.

* Brazil lowers soy crop forecast, raises corn outlook. Conab, the statistical agency of the Brazilian government lowered its soybean crop forecast to 68.75 MMT from 69.23 MMT last month due to drought impacts in southern states. Brazilian soybean exports for 2012-13 are put at 31.8 MMT, down from 32.4 MMT in 2011-12. Conab raised its Brazilian corn crop forecast to 61.7 MMT from 60.83 MMT last month amid increased safrinha (second season) corn plantings.

The long and short of it: The cut to Brazil's soybean crop was expected. USDA is widely expected to cut its Brazilian soybean crop estimate tomorrow morning.

* Reuters: China overstated 2011 corn crop; demand to rise. A Reuters investigation based on assessments from cooperatives, key trading houses and private consulting firm JC Intelligence suggests China overstated it s 2011 corn crop by between 6.8 MMT and 24 MMT, resulting in tighter-than-expected supplies, which is causing domestic prices to rise. That will ultimately lead to increased Chinese imports of feedgrains. Wheat will take up some of the slack, but corn imports are expected to rise, with those interviewed by Retuers putting Chinese corn purchases at 4 MMT to 7 MMT.

The long and short of it: China is trying to talk down the need for corn imports. But if prices fall sharply, expect Chinese importers to actively step up purchases of U.S. corn as their domestic market signals supplies are tighter than the government is leading everyone to believe.


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