What Traders are Talking About:
* Forecast rains pressure soybeans. Any doubts that Argentine weather is key to soybean price action should have been erased with the price performance yesterday and overnight. Forecasts calling for better rain chances (along with increased heat) in central Argentina during the 6- to 10-day window are weighing on the market. After three weeks of dryness, these rains would be very timely. With Brazil on pace to grow a record soybean crop this year, the Argentine crop has become the biggest unknown given the recent dryness. But rains now would erase much of that uncertainty.
The long and short of it: If rains remain in the forecast for central Argentina next week, soybeans will struggle to find buying interest. But if the rains are disappointing or don't materialize, the market should quickly regain any lost ground.
* China canceling soy purchases? There was a smattering of talk yesterday China may have canceled some purchases of U.S. soybeans, which also contributed to the price pressure on soybean futures. With Brazil growing a record soybean crop and those supplies about a month from actively hitting the world market, it shouldn't be surprising if China cancels some U.S. soybean purchases. It also wouldn't be surprising to see China make optional origin purchases of soybeans. Then Chinese buyers could source soybeans from the U.S. if there are any delays in getting new-crop soybeans shipped out of South America.
The long and short of it: Don't be surprised to see a lot of activity by Chinese crushers as they position themselves for the transition from primarily sourcing needs from the U.S. to sourcing their needs from new-crop South American supplies.
* Chinese PMI data encouraging. China's HSBC flash purchasing managers' index (PMI) rose to a 2-year high of 51.9 in January from a final reading of 51.5 in December. The sub-indices for output, new orders and employment all increased from last month. Importantly, the new export orders sub-index moved to 50.1, signaling expansion. While this is preliminary data for small and medium sized manufacturers, it's still a further sign China's vast manufacturing sector is strengthening.
The long and short of it: China's HSBC flash PMI is supportive for risky assets, but grain and soy traders are more focused on market fundamentals than macro-economic factors at this time.
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