Markets are down yesterday and today after a week of short covering by the managed money crowd. The commodities markets saw slight rallies over the past couple weeks as buying interest increased. However, there is no fundamental news to help continue the rally so with a poor export sales report Thursday, managed money began selling contracts again. In the export sales report 66.2 thousand metric tons of wheat were sold last week compared to the 397.6 this week last year. US wheat is still $0.70/bu overpriced to the rest of the world. USDA will probably lower export numbers in the February Supply and Demand report on Tuesday February 9.
Egypt rejected a load of wheat from France due to some Ergot concerns. Egypt was maintaining zero tolerance for ergot even though the GASC (General Authority for Supply Commodities) has a 0.05% tolerance level. Egypt modified their tolerance levels when they stopped receiving offers for wheat and is expected to be back in the market today.
The CME has responded to concerns involving high volatility in the cattle futures. CEO Terry Duffy met with state cattle associations and made a general presentation at the National Cattlemen’s Beef Association in San Diego, CA last week to address the main issues and changes that could be made. Reducing the intra-day volatility of the cattle futures will hopefully result in a better risk management tool for cattle dealers. Cattle currently consists of approximately 1% of CME trading.
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