Still Plenty of Buying Interest On Price Breaks

March 23, 2012 01:25 AM

What Traders are Talking About:

* Plenty of interest in buying weakness. Grain and soy futures went through a liquidation phase earlier this week. But the drop in prices attracted a fresh round of buying interest overnight, with soybeans leading the price recovery. Given a lack of fundamental "reason" for the price recovery, the most logical conclusion is that there is solid buying interest under the market on price breaks. That's a sign that attitudes in the soybean market are still bullish, while traders in corn and wheat are still selective buyers. It appears this stance will prevail until at least the next batch of major market-moving news hits on March 30 when USDA releases its Prospective Plantings and Quarterly Grain Stocks Reports.

The long and short of it: Soybeans posted a needed corrective break, while corn and wheat had dropped to levels that had attracted fresh buying in the past, so a return of buying interest is not too surprising, although it looked like attitudes may have been changing earlier this week.

* State official: China's corn needs to rise. Even if China produces record corn crops, demand will outpace supplies as corn processing is rising sharply, according to the head of the State Council Development Research Center, a state-run think-tank. The official reportedly said China could face a corn deficit of 20 MMT by 2020. As for immediate needs, the official said China imported about 5 MMT of corn in 2011, and he projected the figure to rise in 2012.

The long and short of it: It's no secret China's corn needs are increasing. It's just a matter of how much corn they will buy. The Chinese demand will keep a solid floor of support under the corn market, although that doesn't mean prices can't/won't decline from current levels.

* Argentine truckers end strike. After four days, Argentine truckers have called off their strike and will return to work just as Argentina's grain/soy harvest picks up and demand for trucking hits its seasonal peak. The head of the truckers union says the Argentine government met "almost all" of their demands. The question now is whether the government follows through on its promises. After all, this week's strike was called because truckers claimed the government was not implementing minimum guaranteed trucking rates agreed to last October.

The long and short of it: Focus now turns to Argentine dockworkers, who have pledged to restart their strike from earlier this month if they can't reach an agreement shipping managers within a 10-day window, which ends tomorrow.


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