Spain In Focus As Macro-Economic Concerns Rebuild

September 27, 2012 01:04 AM

What Traders are Talking About:

* Focus on Spain. Spanish Prime Minister Mariano Rajoy today will unveil a new budget, including austerity measures that have prompted rioting in the country. There's some hope Spain's new budget will request emergency funding, many feel is necessary for the country to avoid defaulting on sovereign debt amid rising bond yields. But many investors aren't convinced Spain is ready to ask for help. Meanwhile, new stress tests on Friday will determine how much money is needed to strengthen Spain's struggling banking sector.

The long and short of it: With sluggish macro-economics back in focus, it gives traders another reason to not be buyers of  commodities, including grain and soy futures.

* China moves to boost economy. The People's Bank of China injected a record 365 billion yuan ($57.92 billion) into money markets this week in an attempt to prevent a short-term liquidity crunch at commercial banks amid a slowdown in foreign currency inflows. Some are saying this reduces the odds China will cut bank reserve requirements near-term, while others are saying it paves the way for a potential cut to interest rates. On that front, an adviser to the PBOC says the global economic environment is key to interest rate cuts or bank reserve requirement adjustments. Meanwhile, China's Ministry of Finance and the National Development and Reform Commission announced importers and exporters will not have to pay inspection/quarantine fees or customs supervision charges from Oct. 1 through year-end. Chinese media says this will save importers and exporters 3.5 billion yuan ($555 million) as they try to weather the global economic slowdown.

The long and short of it: China is toeing the fine line of trying to promote economic growth and avoid inflation. The global economic climate, especially in Europe, is not helping matters.

* U.S. firms buy 750,000 MT of Brazilian corn. Prestage Farms, Murphy-Brown LLC (a subsidiary of Smithfield Foods Inc.) and poultry company Nash Johnson & Sons' Farms Inc. -- partners in Wilmington Bulk LLC in North Carolina -- have signed deals to import 750,000 MT of corn from Brazil. The corn is scheduled to arrive in 15 cargoes of about 50,000 MT each over the next six months, with the first shipment scheduled to arrive next week. The companies are trying to buy more corn and other feedgrains from South America and other sources amid tight U.S. supplies and the high costs of moving grain via rail into the Southeast.

The long and short of it: This is confirmation of what was expected as USDA projects U.S. corn imports at a record 1.9 MMT for 2012-13. But it still reflects the tight supply situation and the price concerns of livestock and poultry producers.


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