MORNING COMMENTS 02-22-2012

The euro-area composite index of manufacturing and services industries dropped unexpectedly from 50.4 in January to 49.7 in February. Meanwhile, China’s manufacturing index continues to show contraction with a reading of 49.7, this compares to 48.8 in January. Readings below 50 are a signal of contraction. The USDA Annual Outlook Conference begins Thursday morning with most analysts anticipating a bearish supply picture for the 2012 harvest and crop year. Much of this bearishness is already factored into the market with new crop December futures trading at a 74 cent discount to the old-crop July. Trade estimates for Friday’s Cattle on Feed report is 102.5% with January placements at 98.3% and marketings at 99.8%. Ukraine reports recent grain export delays are a temporary result of harsh weather conditions. Their government denies they have restricted exports due to supply issues. Fitch rating agency downgraded Greece’s debt ratings to junk status. World export news includes Japan seeking 250,000 MT of option-origin corn. Meanwhile, Taiwan bought 58,000 MT of Brazilian beans while Algeria is seeking 125,000 MT of option-origin wheat. A potential blizzard early next week for western Nebraska, South Dakota, Minnesota and Wisconsin could help replenish depleted soil moisture levels.
EARLY CALLS Beans leading us 4 to 5 lower, corn and wheat down 2 to 3. USDA Outlook Conference to begin Thursday morning. Manufacturing data in China signals additional contraction. Goldman Sachs remains bearish grains for 2012; bullish oil and gold.

AFTERNOON COMMENTS 02-22-2012