Traders Watching Demand, South America and Macro-Economics

October 22, 2012 01:17 AM

What Traders are Talking About:

* Grain traders focused on demand, South American crop prospects. With corn and soybean harvest quickly moving toward completion, grain traders have shifted their focus almost fully to the demand side. Slow farmer selling and solid demand is supporting basis, which is turn is supportive for corn and soybean futures. But will there be enough demand to fuel sustained buying interest in futures? Traders' other focus is on the South American planting pace, which is being slowed by too much wetness in central Argentina and southern Brazil and too-dry conditions in central and northern production areas of Brazil. There's still plenty of time to get South American crops planted, but the longer corn planting is delayed, the more likely it becomes that soybeans will pick up some additional acres.

The long and short of it: The tide seems to be shifting back toward bulls in the grain and soy complex, but bulls need fresh supportive news to trigger sustained buying.

* Active week of news/data. There isn't much on tap this week that's ag specific, but the flow of news and data won't be lacking. President Obama and GOP challenger Mitt Romney will partake in their third and final debate ahead of the Nov. 6 elections this evening. The Federal Open Market Committee will hold a two-day meeting Tuesday and Wednesday. Plus, third quarter earnings will continue to flow in after a disappointing start to the earnings season. And on Friday, investors will get their first look at third quarter GDP. On the global front, traders will continue to closely monitor economic conditions in the euro-zone and China as they formulate their risk appetite.

The long and short of it: Macro-economics will continue to play a major role in the price outlook for grain and soy futures, especially when fresh fundamental news is lacking.

* Record low Placements. All three categories came in lower than expected in last Friday's Cattle on Feed Report. But the headliner was Placements, which were only 81% of year-ago and record low for September since USDA began its current data series in 1996. The combination of lighter-than-expected Placements and Marketings (88% of year-ago) led to a slightly smaller-than-anticipated number of cattle On Feed (97% of year-ago at 10.989 million head). While feedlot numbers continue to tighten compared to year-ago, the Oct. 1 inventory was 342,000 head larger than Sept.1.

The long and short of it: The data suggests traders will bear spread the market as the Placements figure is bullish for deferred live cattle futures. The Marketings figure might be mildly negative, but nearby live cattle futures will continue to get the bulk of their price direction from the boxed beef and cash cattle markets, both of which are strong.



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