USDA Fails To Deliver Bullish Data

March 9, 2012 02:25 AM

What Traders are Talking About:

* USDA fails to deliver expected cuts to U.S. corn and carryover projections. Traders were expecting USDA to cut its U.S. corn and soybean carryover projections, but instead, no changes were made. For wheat, USDA cut 20 million bu. from projected domestic 2011-12 carryover, which was slightly more than traders anticipated. Globally, USDA cut projected carryover for corn, soybeans and wheat. The Argentine bean crop projection was cut 1.5 MMT and the Brazilian bean crop was slashed 3.5 MMT, but USDA raised its Brazilian corn crop projection 1 MMT and left the Argentine corn crop unchanged.

The long and short of it: The domestic numbers for corn and soybeans are negative compared to pre-report expectations, but the cuts to global carrovyer could be enough to keep attracting buying interest in the soybean market.

* Jobs growth stronger than anticipated. The U.S. economy added 227,000 non-farm payrolls last month, which was slightly greater than the average pre-report guess. Additionally, the Labor Department revised up January payrolls to +284,000 -- a 41,000 increase from the initial figure. The unemployment rate remained at 8.3%.

The long and short of it: The U.S. dollar is up sharply on the stronger-than-expected jobs data (along with euro-zone concerns). This could test bulls' mettle in the grain and soy complex today.

* China CPI hits lowest level in 20 months. China’s consumer price index (CPI) in February came in at 3.2% above year-ago, according to the National Bureau of Statistics (NBS), down from 4.5% in January and the slowest rate of inflation in 20 months. Food prices increased 6.2% over year-ago last month, but that was down from a 10.5% increase in January. Non-food prices were up 1.7% from year-ago -- steady compared to January. The sharp drop in inflation data suggests China will take steps to promote economic growth, likely through lower bank reserve requirements, and possibly a cut in interest rates.

The long and short of it: Further monetary policy easing would likely fuel additional Chinese demand for commodities, including soybeans.

* Greece avoids default for now, concerns shift to other countries. The Greek finance ministry said creditors tendered 85.8% of the 177 billion euros ($234.7 billion) in privately held government bonds. The total extends to 95.7% of privately-held Greek debt with the use of "collective action clauses" for those refusing to take part voluntarily. That's enough to keep Greece from defaulting on sovereign debt obligations for now. But the country will face many hurdles in the months ahead as it struggles to keep its head above water. Meanwhile, concerns are rising in Spain, Portugal, Italy and Ireland. As a result, the positive news out of Greece is being overshadowed and the euro is under pressure to close out the week.

The long and short of it: Grain and soy futures, especially soybeans and soymeal, have done a good job ignoring outside markets, but macro-economic headwinds are increasing. If the headwinds continue to increase, it will make it harder to attract fresh investment dollars into the long side of these markets.


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