Headlines:
- THE FEDERAL RESERVE BEGINS THEIR SEPTEMBER MEETING TODAY AND WILL GIVE THEIR DECISION ON INTEREST RATES TOMORROW. THE BANK OF JAPAN IS ALSO MEETING AND WILL ANNOUNCE FISCAL POLICY TOMORROW MORNING.
- WHEAT QUALITY WORRIES EXTEND TO CHINA, SUPPORTING AUSTRALIA EXPORT HOPES
Australian officials extended the round of forecasts of elevated milling wheat premiums as they added China to the list of countries with needs for higher quality crop. Abares, the Australian commodities bureau, said that “the margins between milling and feed wheat prices are expected to be larger than usual”, joining the list of observers, most lately the US Department of Agriculture last week, forecasting an unusually high wheat quality premium ahead. Abares cited the impact of a world harvest which – while record in quantity terms, and upgraded 13m tonnes to 743m tonnes by the bureau – has fallen short in quality in many geographies, in part reflecting high yields, which tend to come at the expense of protein levels, but also weather setbacks. Indeed, it added China, the world’s top wheat-producing country, to the market’s watchlist of nations whose latest harvest has suffered quality setbacks.
Summary:
The Corn Crop Progress report did not produce the rating decline that the trade was looking for with it once again coming in at 74% in the good to excellent category. Even still, Corn futures posted strong gains today given that recent rain has caused some reported harvest delays. The Corn harvest is sitting at 9% versus the 5-year average that sits at 15% for this time of the year. Additionally, the Mato Grosso Institute of Agricultural Economics (IMEA) estimates for Brazil’s Mato Grosso Corn Crop were reported at 18.9 million metric tons versus 26.2 million metric tons last year. That 28% drop was a contributing factor in the strength that we saw in Corn futures today.
The prospect of additional rainfall continues to be a driving factor in the price of Soybeans. Soybeans led the market with gains today adding 16.50 cents to the November contract. The National Weather Service warned that much of Iowa and Illinois could see rain every day this week. Over the last two months the region has seen rainfall that is 5-6 times what is normal. Such conditions have made for fields flooding. The flooding has led to some sudden death syndrome (SDS) in Beans fields. The Soybean Crop Progress report was strong coming in at 73% in the good to excellent category.
Wheat futures are approaching being overbought. It has been moving up to sideways over the last 13 trading days (a Fibonacci Series number). It is also testing most recent highs at 411. The past 13 days it has managed to retrace only 38 percent of the decline it posted the previous 8 trading days. The next time it show some weakness it may be in for one more drop before putting in a material low.
