Markets Anxiously Await EU Debt-Relief News

October 26, 2011 01:16 AM

What Traders are Talking About:

* Markets wait with bated breath. Attention is squarely focused on Europe today as traders anxiously wait to see if EU leaders will announce details of a hoped-for financial rescue plan to recapitalize banks, beef up the EFSF bailout fund and restructure Greece's debt . It was announced yesterday that a meeting of finance ministers scheduled for today was cancelled, which prompted some nervousness in the investment world among fear talks could break down without a concrete solution. Meanwhile, concerns are rising that Italy's plans for economic reform will not be seen as sufficient by euro-zone partners.

The long and short of it: A lack of positive news from the EU summit could deflate markets, although grain and soy futures are relatively well supported by fundamentals.

* Fundamental focus shifting to demand. Corn and soybean basis has softened the first two days this week after showing recent strength. The dip in basis would suggest there's plenty of demand under the market, but not much above it at this time. That could change, but it appears end-users are waiting on another price pullback to further extend coverage. With corn and soybean harvest rapidly progressing, fundamental attention is shifting to demand, which means traders will more closely monitor export activity and basis.

The long and short of it: Demand has temporarily slowed, but downside risk is seen limited for corn and soybean futures as end-user buying is likely to pick up on a price dip.

* Brazil 2011-12 crops off to strong start. Planting of full-season corn and soybeans in Brazil is running well ahead of normal and rains have been plentiful through most production areas, according to Pro Farmer South American consultant Dr. Michael Cordonnier. As a result, early crop prospects are strong. With the quick planting pace of soybeans, there's also a positive outlook for the safrinha (second) corn crop, as it will get seeded earlier, which gives it a better chance to pollinate before the hot, dry season hits. Meanwhile, corn and soybean planting is running slower than normal as conditions have been generally dry, although recent rains will speed up the planting pace.

The long and short of it: Dr. Cordonnier says Brazilians are generally not concerned with the reemergence of La Nina as there was record soybean production last year and that La Nina event was much stronger. The early impacts of La Nina are more evident with the dryness in Argentina.


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