What Traders are Talking About:
* Short-term low or pause in the downturn? That's the question many traders are asking this morning as grain and soy markets are rebounding after recent sharp price pressure. While only time will tell, there are some indications the corrective pullback may have run its course. As I wrote yesterday, end-user buying is key. There haven't been any major end-user purchases, but export demand has picked up over the past day-plus, suggesting there's still solid demand under markets. What I'll be watching today is fund activity. Funds have been active sellers of 31,000 contracts (155 million bu.) of corn and 32,000 contracts (160 million bu.) of soybeans the first two days this week. If they suddenly become active buyers, it would be yet another clue the corrective phase has run its course.
The long and short of it: End-user buying is key from a fundamental standpoint, but speculative money flow is a key component in the price discovery process.
* China should focus on food price inflation. While many are expecting China's government and central bank to continue to use measures to build economic growth, a researcher for the finance ministry says the need to guard against inflation is greater than the need to boost economic growth. Meanwhile, traders expect China to continue selling state-owned soybean reserves well into next year. Currently, China is offering around 400,000 MT of state-owned soybean reserves every other week. The editor of Oil World says China currently has around 13 MMT of soybean reserves and may need to reduce that by 4 MMT to 5 MMT by February to combat food price inflation. Chinese crushers have increasingly been turning to government reserves for needs amid rising global prices as supplies are tight.
The long and short of it: If China starts to actively combat inflation instead of working to promote economic growth, it would be key shift in policy that would suggest greater imports of commodities.
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