On Cue, Chinese Corn Demand Rumors Surface

April 20, 2012 01:22 AM

What Traders are Talking About:

* China corn rumors swirling. Rumors of Chinese purchases of U.S. corn swirled through the market yesterday. There's a lot of talk Chinese buyers (both private feed mills and state-run Sinograin) booked 500,000 MT to 1 MMT of U.S. corn on the sharp price break. Some say the business was old-crop; some say new-crop. As I mentioned yesterday, old-crop corn futures had dropped to levels where China has purchased corn in the past. Plus, U.S. corn prices are around 6% cheaper than domestic Chinese prices, which are currently 2,350 yuan ($372) per ton. And all indications are Chinese feed mills need supplies and Sinograin is looking to increase state-owned reserves. So... it's not surprising to see Chinese buyers come to the U.S. market on the sharp price break.

The long and short of it: So far, nothing has been confirmed, but there's a lot of smoke. And when there's that much smoke, there's typically fire. The Chinese purchase talk is price-friendly for now, but Chinese buying and traders interest in corn will likely fade as prices rise.

* Cool, wet weekend ahead. Rains pushed across the Corn Belt overnight and are continuing in some areas this morning. The heaviest rains were generally seen through central Iowa and southern Minnesota. The weather focus this weekend is cold overnight temps, with frost/freezing conditions likely tonight across the western Corn Belt and possibly again Saturday night in some areas. Frost/freezing conditions are possible through the weekend and into early next week for areas of the eastern Corn Belt. The combination of wet soils and cold overnight temps will slow planting efforts in many areas of the Corn Belt. But next week's forecast looks warmer and drier, which could aggressively accelerate the planting pace.

The long and short of it: Weather is a mixed bag when it comes to price impact. The cool, wet conditions are mildly price-supportive for now as they temporarily slow planting efforts and some of the emerged crop could get nipped. But with the shot of moisture, planters will be actively rolling once temps warm and the rains stop.

* Euro-zone concerns easing -- for now. Earlier this week, euro-zone concerns were on the rise amid Spanish debt problems. But as the week is coming to an end, the concerns have eased. German business sentiment came in stronger than expected. Plus, the International Monetary Fund (IMF) is expected to announce it's boosting its euro-zone firewall after the conclusion of the G-7 and G-20 meetings of finance ministers and central bankers which is underway in Washington DC. Many of the G-20 nations have already pledged more money to boost the IMF firewall.

The long and short of it: With euro-zone concerns easing for now, the euro is higher and the dollar is weaker, which is price-supportive for commodities to close out the week.


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