Wednesday, September 17, 2014

Fed Watching

By: Dan Hueber


Generally quiet news morning as we reach mid-week with many traders/investors as concerned about the Fed Reserve Open Market Committee meeting that is being held as anything Ag related.  As has been the case when this group meets, everyone will be scrutinizing each and every word for a hint as to when they may begin boosting interest rates, or maybe better stated if there is a possibility that it could occur sooner than later.  A rise in rates would not only potentially stall the equity markets but should send the U.S. Dollar higher, which of course is not a positive for commodities export business.

As expected, the Egyptian wheat tender went to France who is aggressively marketing their crop.  Turkey, the T in the MIST countries, was in for 200k MT of US wheat and Morocco is tendering for 386k MT.  Weekly sales will be released tomorrow morning. 

The ranges for wheat overnight are quite small at this point and we currently hover around the unchanged mark but this of course after dropping to lower lows once again yesterday. I continue to believe December futures have room to slip down to at least the June 2010 lows at 4.73 between now and the beginning of October. 


Well, the FSA acreage bump faded rather quickly yesterday as ongoing reports of big yields occupied the minds of traders.  While I suspect we will eventually see the USDA adjust corn acreage lower, considering that the FSA data is evidently still incomplete and may not be finalized until December, that would mean changes will not be made until the final reports in January. Of course the horses are long out of the barn by then so closing the door a touch may not be much of a market mover at that time.  We did still manage to close right around the unchanged market so it was a victory of sorts.

At this point lower prices do not appear to have stimulated any exceptional export interest for new corn.  The only tender lining up overnight is Israel looking for 70k MT and it would appear the report tomorrow morning will not hold any positive surprises.  You have to imagine that outside of immediate needs, buyers will be content to allow the market to come to them.  Also consider the fact that since July, new crop corn futures have lost around 17% and during the same time the dollar index has gained over 5% so all the flat price decline is not being reflected in other countries. 

While I am not sure if this qualifies as new or old news but it was reported overnight that China and the US failed to reach any kind of agreement on the testing for and acceptance of certain GMO’s in DDG’s as well as corn.  This effectively continues to lock us out of the majority of the Chinese market at least until they suffer a crop problem.  You have probably all read that Cargill has now filed a suit against Syngenta over unapproved GMO varieties which will be very interesting to watch unfold. 

The corn market has actually been quite stable now for the past 5 sessions which is not unexpected but I cannot imagine we will hold this range for any extended period.  A push through exiting lows in December corn at 3.35 ¾ should open the door for a slide down to the targets between 3.10 and 2.90 most logically in October. 


The early bean strength yesterday fizzled quickly after touching the 10.00 mark in November futures.  It would appear we know where the sell order will be sitting is at this point.  We have tried to stabilize and bounce overnight but without a fresh positive story soon, I suspect the expanding harvest and consistently solids yield being reported will overwhelm the support once again. 

According to the Ministry of Agriculture in Argentina, farmers in that nation have sold just 58% of this years’ crop.  Last year at this time they had sold around 66% which was also at a slower pace than usual and I have to believe heavily influenced by the troubled political/economic situation down there.  It is better to hold a commodity than a worthless Peso.  There are two negatives for the US with this situation though.  First, it means there is a larger current world inventory just as our new beans are becoming available and hence, greater competition.  Second, this means the Argentine farmer is probably cash strained moving into the spring season, which would suggest they will plant crops that require less money, i.e., more soybeans. 

As with the corn, the FSA data released yesterday would hint that we could see acreage adjustments on future reports but if that does not happen until January, it could be anti-climatic.  I continue to believe we will see November beans slide down to at least the 9.50/9.40 zone and if yields continue to come in a solid as the early numbers, a push down against 9.00 would not seem unreasonable.

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