Risk Appetite Improved To Start the Week

December 3, 2012 12:12 AM

What Traders are Talking About:

* Risk-on attitude to start the week. Chinese data is showing its economy is responding to pro-growth monetary policy, with the latest evidence being the official manufacturing purchasing managers' index (PMI), which rose to a seven-month high of 50.6 in November from 50.2 in October. The official services PMI rose to 55.6 last month from 55.5 in October. This is further proof that China's economy likely bottomed earlier this fall and is now showing modest signs of growth. Meanwhile, the euro is higher and the U.S. dollar is under pressure amid falling peripheral euro zone bond yields and on signs Germany may be open to a Greek debt write-down.

The long and short of it: The upbeat Chinese data and the euro-zone news is creating a risk-on environment to start the week, which is supportive for global stock markets and commodities.

* Egypt buys U.S. wheat. Egypt purchased 400,000 MT of wheat over the weekend, including 280,000 MT of U.S. wheat (165,000 MT of soft white, 115,000 MT of soft red winter). In addition to the U.S. supplies, Egypt bought a cargo of French and Romanian wheat. The resumption of active Egyptian purchases of U.S. wheat signals prices are again competitive on the global market as supplies from the Black Sea region are tight.

The long and short of it: To really signal U.S. prices are again competitive, purchases of U.S. wheat by other global end-users will need to increase. But export prospects are looking brighter.

* China shopping for soybeans. State-run China National Grain and Oils Information Center says despite negative margins, Chinese crushers are looking to import soybeans again as they get set to gear up production ahead of the peak consumption season during the Lunar New Year celebration in February. Currently, the price of imported soybeans is around 4,900 yuan ($780) per MT, while domestic soybean prices are around 4,400 to 4,450 yuan ($700 to $708) per MT.

The long and short of it: As I reported last week, Chinese importers reportedly need 3 MMT to 4 MMT of soybeans for first quarter delivery. That suggests they should be active buyers of U.S. soybeans as old-crop South American supplies are tight and new-crop beans won't be ready in time for first-quarter delivery.



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