What Traders are Talking About:
* USDA fine tunes S&D tables. USDA's March Supply & Demand Report didn't feature many significant changes, but there were some surprises. Perhaps the biggest surprise in traders' eyes was that USDA left its soybean export projection unchanged and carryover at 125 million bushels. Traders had hoped for a bigger export forecast and a tightening of carryover. For corn, there were several significant changes within the balance sheet, but carryover was unchanged. Wheat carryover expanded 25 million bu. on a smaller usage projection.
The long and short of it: Price action Friday and to start the week suggests the report data has been absorbed. Attention now turns to planting intentions at the the of the month.
* Dollar continues to rally. The U.S. dollar remains on an upward trajectory that started at the beginning of February. The U.S. dollar index has moved to its highest level since early August of last year and is challenging the summer 2012 high. A push through that resistance at 84.100 would open the upside to much tougher resistance in the 89.000 to 90.000 range. The latest boost to the greenback came last Friday as the jobs market expanded more than anticipated last month. The Labor Department reported the U.S. economy added 236,000 non-farm payrolls in February, which easily bested expectations. While the unemployment rate at 7.7% is still well above the Fed's target of 6.5%, there's speculation an improving jobs market could encourage the central bank to start reducing its stimulus efforts.
The long and short of it: A rising dollar is a hurdle for commodities as it impedes export demand and also limits speculative buying interest.
* Chinese economic data misses the mark. Chinese inflation rose more than expected last month, with the consumer price index coming in at a 10-month high of 3.2% above year-ago. Food prices continue to pace the inflationary expansion, rising 6% from year-ago in February, while non-food prices rose 1.6%. The National Development & Reform Commission forecasts Chinese consumer price inflation to be around 3% this year. Meanwhile, industrial output and retail sales for the first two months of the year came in lighter than expected at 9.9% and 12.3% above year-ago, respectively.
The long and short of it: If consumer prices continue to climb, the Chinese government may have to tighten monetary policy to control inflation, but doing so would be risky unless the economy shows more strength. Just as in the U.S. and Europe, it looks like Chinese monetary policy makers will have to walk a tight rope with any missteps being potentially disastrous.
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