What Traders are Talking About:
* Surprise! China buying U.S. beans. Chinese crushers have been buying U.S. soybeans this week and more purchases are likely in coming weeks, according to export sources. While crush margins are still negative, they have significantly improved recently, causing importers to start rebooking some of the 600,000 MT of soybean purchases that were canceled mid-month. Export sources signal Chinese crushers still need 3 MMT to 4 MMT of soybeans for first quarter delivery, although that's likely more than the U.S. can supply. Meanwhile, the head of China's state grain policy agency says the country will import around half of the world's soybean exports this year. In addition to strong bean imports, China is a net importer of wheat, corn and rice despite record grain production for a ninth consecutive year.
The long and short of it: Basis strength and recent chatter signaled China was back in the market for U.S. soybeans. That shouldn't be a surprise given the sharp price plunge from the September high to the November low. Key will be whether there's enough Chinese demand to fuel a sustained price recovery in soybean futures.
* Update on Ukraine wheat exports. Ukraine's ag ministry has told exporters the "cap" on 2012-13 wheat exports has been raised to 5.8 MMT, according to the Ukraine Grain Association. That figure lines up with data released by the ag ministry earlier this week that said wheat exports totaled 5.42 MMT through Nov. 26 and another 382,000 MT of wheat were at ports ready for export. After wheat exports reach 5.8 MMT, the government will decide if an official halt to shipments is needed. The Ukraine Grain Association believes the country could export 6.5 MMT of wheat without causing domestic shortages.
The long and short of it: As this saga unfolds, it appears less likely Ukraine will "officially" ban wheat exports. But the fact of the matter is that exportable wheat supplies are tight -- whether there's an "official" ban or not.
* Keep an eye on crude oil. Conflict in the Middle East is keeping the crude oil market supported But the fact crude oil futures aren’t rallying sharply with tensions in the region escalating is very telling. Instead of actively factoring in a "fear" premium as is typically the case when conflict in the Middle East heats up, traders are hesitant to buy given demand concerns. Uncertainty over the outcome of the looming fiscal cliff has something to do with traders’ unease, although things are looking rosier on that front. But a greater concern is the potential negative impact on worldwide consumption next year if the global economic struggles persist. The fear of supply disruptions is being counteracted by the potential for fading demand.
The long and short of it: Though it has lost some of its leadership to gold recently, crude oil is still the "king" of commodities. As the crude oil market goes, so goes the commodity sector as a whole, suggesting grain and soy futures will follow crude oil into year-end.
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