What Traders are Talking About:
* Export window for U.S. beans remains open. An early start to the Brazilian planting season last fall was expected to close the window on U.S. soybean exports two to four weeks earlier than normal. But heavy late-season rains in central and northern production areas have slowed Brazilian soybean harvest (and exports), while hot, dry conditions have reduced crop forecasts. As a result, demand for U.S. soybeans is still strong -- and showing signs of picking up as importers know they can get a reliable supply of quality soybeans from the United States. In the latest export disruption in Brazil, at least one of four grain loading terminals, and possibly a second, at the Port of Santos is offline for an unspecified period after a ship ran into it earlier this week. So far this week, USDA has announced 403,000 MT of soybean sales (215,000 MT for 2011-12; 188,000 MT for 2012-12) to unknown destinations and 116,000 MT of soybeans to China for 2011-12. Also, a delegation of Chinese officials is expected to sign purchase agreements for U.S. soybeans (mostly for 2012-13) in Des Moines, Iowa, today.
The long and short of it: While South American crop concerns have gotten a lot of attention, improving demand for U.S. soybeans is also a key catalyst on the runup in soybean futures.
* Southern Brazil remains dry. Forecasts continue to call for hot, dry conditions across Rio Grande do Sul and southern Parana in Brazil through the end of the week. Pro Farmer South American crop consultant Dr. Michael Cordonnier calls this region the last area where the soybean crop could still be impacted by weather as 16% of the crop is in vegetative development, 59% is flowering and 34% is filling pods. Forecast models signal a chance for scattered rain chances for the region early next week, but confidence in these rains developing is low given the persistent pattern of hot, dry conditions.
The long and short of it: If Brazilian soybean crop estimates are going to continue to decline, losses will come in Parana (No. 2 soy producing state) and Rio Grande do Sul (No. 3 soy producing state).
* Euro-zone economy contracts. Fourth quarter euro-zone GDP came in at -0.3% versus the third quarter -- the first contraction since the second quarter of 2009. Compared to the fourth quarter of 2010, GDP increased 0.7%. Eurostat calculates GDP at 1.5% for all of last year compared to 1.9% in 2010. Five euro-zone countries are now in recession and the region as a whole is likely to slip into recession this year. But France's economy unexpectedly expanded in the final quarter of last year and Germany's economy contracted less than feared. Investors are also encouraged by comments from China that the country will continue to buy euro-zone debt more than they are discouraged by the economic data. Meanwhile, EU finance ministers cancelled a meeting today at which they were to debate Greece's new austerity measures. There are reports saying Greek officials will sign a document saying they will adhere to new strict austerity measures.
The long and short of it: Investor attitudes are generally strong as European concerns have taken a back seat to improving U.S. economic data, but it's hard to imagine investors will be able to continually ignore Europe if the recession spreads.
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