Still No Signs of Demand Destruction In Soybeans

August 29, 2012 01:14 AM

What Traders are Talking About:

* End-users getting nervous? Taiwanese buyers purchased 178,000 MT of U.S. and Brazilian soybeans Tuesday, including one cargo for shipment next July. Given current historical prices, that would suggest the buyer fears prices are headed even higher and sees limited hope for a significant price pullback. That's one of the first signs of panic buying from global end-users. Of course, the buyer is also looking at a July soybean futures price that is around $2 cheaper than November futures. In that sense, current prices may look like a value buy -- even with a likely sharp increase in South American soybean production expected for 2012-13.

The long and short of it: If there are widespread signs of panic buying from global end-users it would likely be enough to fuel the next wave higher in prices as traders focus is shifting to demand with much of the supply problems already "in" the market.

* Wrath of Isaac. Hurricane Isaac took a path that generally missed the bulk of Gulf oil rigs and refineries, which is allowing crude oil futures to pull back from recent highs. While oil production may have been mostly spared, there are still crop concerns as the slow-moving system moves inland. Heavy rains and high winds associated with Isaac will continue over the coming days, with impacts expected as far north as the central Corn Belt. While rains are needed after the prolonged drought, remnants from Isaac may do more harm than good, especially for the corn crop. With low stalk quality and weak shanks in many areas this year, the corn crop is at risk from heavy rains and high winds. Soybeans in some areas could be helped by the late-season rains, although a fair amount of beans are maturing early due to the stressful conditions.

The long and short of it: Grain traders are keeping a very close and anxious watch on Isaac. Given the severe drought, crops can't afford a heavy pounding from Isaac (or any other late-season storm).

* Will Russia curb grain exports? Russian officials have repeatedly said there are no plans to curb grain exports despite drought-reduced production. But traders aren't buying the rhetoric, as many expect Russia to announce a move to control grain exports at some point. The next key meeting of Russian officials on the grain situation is Friday. While most don't feel a decision on grain exports is imminent, it wouldn't come as a a complete surprise if some measures were announced.

The long and short of it: With the possibility Russia could announce moves to control grain exports Friday, it's unlikely traders will be actively adding short positions the next two days.


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