Signs Of Value Buying Starting to Surface

November 15, 2011 12:08 AM

What Traders are Talking About:

* Value buying starting to surface. There has been a lot of attention given to sluggish export demand pace for good reason. China has been slow to buy new-crop U.S. soybeans, corn is facing increasing competition from cheaper and more available feed wheat, and the global wheat market is being dominated by Black Sea countries. But signs of value buying -- in the physical market and on the board -- are starting to surface. Traditional Asian buyers are stepping up purchases of corn and wheat. And there's talk China will be in the market soon for U.S. soybeans.

The long and short of it: With value buying starting to surface, it would suggest prices have fallen far enough. But time will tell if there's enough demand to fuel a sustained recovery rally in futures, especially if macro-economic concerns intensify.

* Still lots of competition for U.S. ag goods. While there are clear signs the drop in price is encouraging more end-user demand, there is still a lot of competition, especially for corn and wheat. An ample supply of global feed wheat and plenty of willing sellers mean end-users may be selective buyers instead of hoarders -- even though prices have reached value levels. The key is corn demand. If end-users actively buy corn, it would be a stronger sign of improved export demand than if wheat business picks up.

The long and short of it: The wild card on the corn demand front is China. When Chinese buyers show up, it would be a strong sign prices are at a true value level.

* Euro-zone fears spread. Last week, concerns about Italian debt intensified as yields on the country's 10-year bonds hit record highs. Add Spain (the euro-zone's fourth largest economy) to the growing list of trouble spots as bond yields are surging there. And there's growing talk that the European Union could disband.

The long and short of it: Euro-zone concerns are building, which makes it difficult for grain and soy traders to ignore the macro-economic noise.


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