What Traders are Talking About:
Overnight highlights: As of 6:15 a.m. CT, corn futures are trading 6 to 9 cents higher, soybeans are 6 to 10 cents higher in old-crop contracts and mixed in new-crop contracts, while wheat futures are mostly 5 to 9 cents higher. With prices firming early this morning, bulls have the decided upper hand, but weekly export sales and the European Central Bank decision on interest rates (cut expected) could influence the open of the day session. Live cattle futures are expected to open steady to firmer this morning. Lean hog futures are called mixed.
* Soy imports into Southeast? There were lots of rumors Wednesday about South American soy imports into the Southeast United States. While I haven't been able to confirm any business, there was enough smoke to make me believe there's five. But it should not be a surprise to see South American soy come into the United States. Old-crop domestic supplies are tight and it's very costly to get those supplies into the Southeast. Plus, South America just produced a record crop and beans out of Brazil are currently quoted more than $70 per ton cheaper than domestic prices. And if you look at USDA's balance sheets, soybean imports are expected to be up 25% from 2011-12 to 20 million bu., while soybean meal imports are forecast to rise 62% to 350,000 short tons.
The long and short of it: Talk of U.S. soy imports should not be a surprise, but it's still going to put pressure (at least temporarily) on the market when rumors start flying.
* No surprise, Day 2 HRW tour results below year-ago. Scouts on Day 2 of the Wheat Quality Council HRW tour found lower yield potential compared to year-ago, as expected, through western and southern Kansas and far northern Oklahoma. Tour samples unveiled an average yield of 37.1 bu. per acre compared to 43.7 bu. per acre on similar routes last year and a five-year average of 39.5 bu. per acre. An independent tour in Oklahoma forecasts wheat production in that state of 85.583 million bu. (25.45 bu. per acre yield), down from 154.8 million bu. (36 bu. per acre yield) last year. Aside from the expected drought stress and freeze damage scouts have seen the past two days, the bulk of their comments seem to be centered on the immaturity of this year's crop. That could be a double-edged sword. On the positive side, it gives the crop longer to recover -- if weather conditions are favorable. On the negative side, it leaves the crop more vulnerable if late-season conditions are not favorable.
The long and short of it: This year's HRW crop has obviously been damaged by drought and repeated freezes, meaning late-season weather will be even more critical than normal to how the crop finishes.
* More negative Chinese manufacturing data. China's final HSBC purchasing managers' index (PMI) fell to 50.4 in April from 51.6 in March. This data, which measures small- and medium-sized manufacturers, conveys what the broader official PMI data did yesterday -- China's vast manufacturing sector slowed last month. And that's a red flag. Most alarming, the new export orders sub-index fell to 48.4 last month, the first time it has signaled contraction (below 50) this year and the lowest reading since last October.
The long and short of it: Data is mounting that China's economic recovery is slowing. That's a concern for commodities, as China is the world's largest consumer of raw materials. A slowing Chinese economy is not a situation that encourages investors to pile money into commodities.
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