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March S&D Report Should Be A Yawner

05:50AM Mar 08, 2013

What Traders are Talking About:

* March S&D Report should be a yawner. USDA is expected to do little more than fine tune its balance sheets later this morning. Therefore, it would be a surprise if there are any significant changes (more than 50 million bu. in this case, in my opinion) to the usage projections. Most likely, corn and wheat carryover will increase. Based on the average pre-report guess, soybean carryover is expected to tighten modestly, but I'd be surprised to see USDA make any changes to soybean use this month. While South American soybean exports have been slowed, they will eventually hit the world market full-force and dramatically slow U.S. soybean exports. Plus, domestic crush margins are on the decline, which threatens to slow the crush pace, especially since processors will struggle to get their hands on supplies later in the marketing year.

The long and short of it: If this morning's report is a yawner, traders' true attitudes will show through in their post-report reaction. A negative reaction would signal attitudes are fully bearish. A bullish reaction would suggest traders feel the market has been beaten down too hard and a correction is needed.

* Chinese February soy imports predictably decline. Chinese soybean imports slowed to 2.9 MMT last month, according to official customs data. Imports were down 39.3% from January and 24.3% lower than year-ago. Chinese demand for soybean imports was slow around the Lunar New Year holiday, but they celebrate that every year. The real reason for slowed imports last month was poorer crush margins. Through the first two months of year, Chinese soy imports stand at 7.68 MMT, down 9% from year-ago. Meanwhile, China National Grain and Oils Information Center says Chinese port stocks of soybeans have declined to 4.5 MMT, suggesting crushers pulled from port stocks as imports slowed last month. The state-run firm expects Chinese soybean imports to improve in March, but to be below 4 MMT compared to imports of 4.8 MMT in March 2012.

The long and short of it: Chinese crushers have slowed imports as they wait on new-crop South American supplies to become available. But purchase activity the past two weeks signals they are having to turn to U.S. soybeans to fill near-term needs amid port congestion in Brazil.

* China surprisingly runs a trade surplus in February. China's trade surplus tightened to $15.25 billion in February from $25.15 billion in January, but that was much better than anticipated as traders were expecting a trade deficit. Chinese exports were much stronger than anticipated last month at 21.8% over year-ago, while imports fell 15.2% compared to February 2012.

The long and short of it: Traders are encouraged by the exports figure as that is the primary concern with China's economy since it relies so heavily on exports to the U.S. and Europe, both of which continue to struggle economically, especially Europe.


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