Soybean Traders Still Looking For a Price That Slows Demand

September 4, 2012 01:00 AM

What Traders are Talking About:

* Record high in soybeans. Soybean futures continue to rally amid tight supplies and no proof record prices are slowing demand. November soybean futures are quickly nearing the $18 level and there's talk it will take $20 soybeans to slow demand enough to ration remaining supplies. On the crop front, odds that late-season rains could help the U.S. soybean crop are fading quickly as much of the crop is turning and dropping leaves. With South American supplies tight after a short crop and the U.S. dealing with a drought-reduced crop, importers are scrambling to get coverage.

The long and short of it: Based on recent demand data and price action, the soybean market has not found a price that slows demand.

* ECB stimulus likely. The European Central Bank (ECB) convenes Thursday for its monthly policy-setting meeting. The ECB is widely expected to announce new economic stimulus measures, especially after ECB President Mario Draghi remarked that a bond-buying program would not violate the rules on the European Union. Specifically, Draghi says the central bank is open to buying government bonds with maturities of three years or less.

The long and short of it: Investors believe the ECB will announce new stimulus measures Thursday and the Fed will come with another round of quantitative easing following the Sept. 12-13 Federal Open Market Committee meeting, although most are willing to play it relatively close to the vest for now.

* Chinese economic data continues to concern. China's official PMI for August slipped to 49.2 from 50.1 in July -- the first time the reading has been below the 50 contraction/expansion line since last November. Meanwhile, the final HSBC PMI data, which measures China's small manufacturers, dropped to 47.6 in August -- the lowest since March 2009.

The long and short of it: Continued disappointing economic data out of China signals the government will take additional measures to boost economic activity. There's talk China may boost export tax rebates as growth slows.


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