Short-term Low For Corn?

October 1, 2012 12:57 AM

What Traders are Talking About:

* Low in corn futures? Corn futures finished sharply higher to limit up Friday in reaction to the bullish Quarterly Grain Stocks Report, prompting many calls that a short-term low is in place for the corn market. With 2012-13 beginning stocks (Sept. 1 stocks) lower than expected, USDA will likely have to cut use even if the crop estimate is lowered. Corn supplies must be rationed. The only way to do that is with higher prices. That why many are saying a short-term low is in place following the extended price pullback.

The long and short of it: How end-users react to the report is key. If end-users panic and actively buy corn following the report, it would trigger sustained buying in corn futures. If end-users don't panic, price action is likely to be choppy ahead of USDA's Oct. 11 Crop Production Report.

* Chinese, euro-zone manufacturing sectors remain in contraction. China's official purchasing managers' index (PMI) rose to 49.8 in September from 49.2 in August and China's final HSBC PMI increased to 47.9 in September from 47.6 in August, but this still marked the eleventh straight month of contraction in the country's manufacturing sector. Meanwhile, euro-zone PMI rose to 46.1 in September from 45.1 in August, but this was the fourteenth straight month on contraction in the region's manufacturing sector.

The long and short of it: While there are signs of modest improvement in the Chinese and euro-zone PMI data, the prolonged contraction in the respective manufacturing sectors has investors looking for more pro-growth measures from the European Central Bank and the People's Bank of China as they work to boost economic growth.

* H&P Report mostly neutral. As a whole, last Friday's Quarterly Hogs & Pigs Report was mostly neutral. But there were some interesting figures in the market hog inventory numbers. With hogs 180 lbs. and over up 5%, it suggests the recent surge in hog slaughter was not heavy sow liquidation, as suspected. Looking forward, hog slaughter should run about steady with year-ago into the first quarter of 2013, suggesting the glut of hogs coming to market has passed. Summer farrowings and fall/winter farrowing intentions signal producers plan to scale back pig production modestly.

The long and short of it: Market reaction to the H&P data should be limited, keeping much of traders' focus on the cash hog and pork product markets for price direction.


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