Reaction, Not the Numbers Key To Jobs Report

February 7, 2014 12:13 AM

What Traders are Talking About:

Overnight highlights: As of 6:10 a.m. CT, corn futures are trading 1 to 2 cents lower, soybeans are mixed amid bull spread unwinding and wheat futures are fractionally to 3 cents higher in most contracts. A lack of market-moving news suggests price action is likely to be two-sided to close out the week. Cattle and hog futures are trading mixed to mostly firmer in electronic trade this morning.


* Jobs data in focus today. The Labor Department will release its January jobs data this morning, including revisions to previously released December and November non-farm payrolls. Economists are looking for a sharp rebound in non-farm payrolls following a disappointing report last month, with many also expecting December payrolls to be revised up. But ADP data earlier this week showed private-sector job growth was less than expected in January and the lowest since August. That's a potential red flag that the Labor Department data will be disappointing. Also, harsh weather in January likely held back hiring efforts for some. Economists expect the unemployment rate to dip to 6.6% from 6.7% in last month's report.

The long and short of it: The real key to the data is how markets react, specifically the stock market, which has been reeling recently after the major indices marked all-time highs in late December/early January.

* Bookings pace points to higher export forecasts. USDA's Supply & Demand Report on Monday is expected to show modest reductions in 2013-14 domestic carryover projections for corn, soybeans and wheat. USDA is expected to raise its export forecasts for all three as the export pace is stronger than required to hit the current projections. Total corn bookings are running 145% ahead of year-ago. USDA currently projects corn exports up 98.4% from the previous marketing year. Total soybean bookings are running 26% above year-ago, while USDA currently projects a 13.3% increase from the previous marketing year. Total wheat bookings are running 27% ahead of year-ago, whereas USDA currently forecasts exports up 11.7% from 2012-13.

The long and short of it: The bookings pace clearly signals there's room to raise the export forecasts, but USDA has a history of waiting things out, especially when cancellations are expected, as is the case with soybeans. With that said, if the export forecasts aren't raised and carryover doesn't tighten (even modestly) it would be a negative surprise.

* China continues to reject, cancel U.S. corn cargoes. Official announcements from China on rejections of U.S. corn cargoes due to the presence of MIR 162 have been lacking of late, but that doesn't mean they've stopped. Exporters say South Korea feedmakers overnight bought two cargoes totaling 116,000 MT of corn that was rejected by China. USDA's Weekly Export Sales Report Thursday also showed 63,127 MT of U.S. corn that was reported shipped to China in the week ended Dec. 19 was instead bound for Vietnam. Most of the rejected cargoes have found a home in Japan and South Korea. In addition to the rejections, Chinese buyers also canceled the purchase of 220,000 MT of U.S. corn in the weekly export sales update.

The long and short of it: The Chinese rejections/cancellations are no longer a drag on the market. But it will be harder for corn to rally with rejections/cancellations continuing.


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