Outside Markets as of 5:45am: Dollar Index down 0.0570 at 84.2090; Euro up 0.00110 at 1.29550; S&P’s are down 2.75 at 1981.50; Dow futures are down 28.00 at 17,000.00; 10-yr futures are up 0.15%; The Nikkei closed down 0.23% at 15,911.53; The DAX Is down 0.37% at 9,624.13; The IBEX-35 is down 0.50% at 10,786.60; Gold is up $4.10 at $1239.20; Copper is up $1.40 at $309.95; Crude Oil is down $0.19 at $92.72; Heating Oil is down $0.0059 at $2.7337; Paris Milling Wheat is up €2.00 at €163.50/MT.
Easier global equity markets this morning as investors play it safe ahead of the two-day Federal Reserve which begins today. Again, investors are looking for interest rate guidance from the Fed as to when they may make that first interest rate hike in 2015. The speculation has lifted the US Dollar Index to 14-month highs, contributing to many commodity indices hitting multi-month or multi-year lows. Other economic data today will include the August Producer Price Index which is expected to edge higher to +1.8% y/y from +1.7% in July.
Quiet Midwest radar this morning with the Midwest expected to remain dry until the next batch of storms begins at the tail end of the week. Widespread rains stretching from N-TX to WI are expected to bring totals in the 0.50-1.50” range Friday-Sunday. The Northern Plains are expected to remain dry the next 15-days which will aide in small grain harvest and HRW planting. It will also help in pushing crops to maturity which are lacking GDD’s. An overall warmup is also expected for the Midwest during the 6-10 and 8-14 day period which will keep frost threats low until the end of September. Below normal precip will accompany the warm up, both a boon for northern plains crops. Nothing to really argue with on the weather front, although isolated reports of frost/freeze damage are trickling in with more soybeans hurt than originally thought.
Solid Turnaround Tuesday bounce occurring across the Ag complex this morning as grains catch a long-awaited relief bounce on a combination of crop progress and FSA certified acreage data. Beginning with the former first, last night’s crop progress report seemed to suggest the corn and soybean crops in the north are a bit more immature than we thought heading into last week’s frost/freeze event. The forecasts are turning much more favorable through the end of the month, but the data really hits home how far these crops have to go before getting in the bin. Both are still rated very high historically, so a drastic reduction in yield shouldn’t be expected, but there is vulnerability in these crops. This morning also saw the latest release of the FSA certified acreage data, which according to University of Illinois analysis, should mean planted acreage on corn and soybeans is coming down notably.
Corn conditions were unchanged at 74% G/E vs. 53% last year, and still the highest rated for mid-September since 1994. Dent progress was rated 82% vs. 79% last year and 85% average, which implies this crop is right around average. However, ND is 59% dented vs. 71% average, WI 59% vs. 69% average and MI 60% vs. 71% average. Of more concern is the percent mature at 27% nationally vs. 20% last year and 39% average. In ND, just 2% is mature vs. 24% average, SD 10% vs. 26% average, MN 9% vs. 25% average, WI 8% vs. 20% average, IA 19% vs. 44% average and IL 37% vs. 50% average. The concern here would be light corn if the frost did impact the corn. Corn harvest was estimated at 4% nationally vs. 9% average.
Soybean conditions were seen unchanged at 72% G/E vs. 50% average, and still the highest rated since 1994. In the dropping leaves category, nationally the crop was at 24%, dead on last year’s 24% but behind 32% average. Northern tier states are lagging here with SD at 28% vs. 56% average ND at 37% vs. 45% average, MN 12% vs. 37% average, IA at 13% vs. 26% average and WI at 11% vs. 22% average. Any real freeze damage might not be picked up until next week’s crop progress report.
Spring wheat harvest was estimated at 74% complete vs. 58% last week and 86% average. ND was pegged at 65% vs. 42% last week and 84% average. MN was 74% complete vs. 54% last week and 93% average. Same story, different week with HRS with big yields being witnessed everywhere, but quality deteriorating as things progress north. Color and TW seem to be the big areas, but protein continues to slip as combines march north. MT seems to have an especially large amount of quality issues this year. Switching over to durum, select states have plenty of progress left to tackle with MT at 38% harvested vs. 60% average. MT also saw its G/E durum condition rating drop 5pts with the P/VP category rising 6pts. ND is 34% harvested vs. 68% average, but only has 87% of the crop mature which was surely impacted by the frost. ND also is just 72% harvested on oats vs. 93% average. The durum market bears watching as that market can trade on a hair trigger given its size. The high protein wheat story, between both HRS and durum, could really get interesting when the crop is in the bin later this month.
Switching gears to this morning’s FSA certified acreage data, it would appear on face value the numbers are supportive. In corn, the latest update put certified acreage at 84.684 million with 1.581 prevent plant acres. These would compare with 83.322 and 1.54 million in the August update. Below is a link from the University of Illinois talking about how to interpret the data. Based on their analysis, it would appear NASS corn planted/harvested acres will be coming down significantly in the October WASDE. The second link below takes you to the FSA data. On soybeans, the latest FSA data shows certified acreage at 80.805 million with 841,000 prevent plant vs. 79.249 million and 827,000 in August. Again, based on current NASS numbers, these would appear to be supportive. One caveat, there was talk last month that filing deadlines had been extended, which could be affecting completeness.
Quickly, worth pointing out a Chinese trade delegation is in the states this week and signed frame purchase contracts on soybeans totaling 4.8MMT at a ceremony in Wisconsin last night. These could be reported on the USDA’s daily reporting system and could draw market attention. These ceremonies happen every year, and usually draw market attention. However, because they are “frame contracts,” there is likely no basis or futures portion attached, meaning no risk is actually transferred. Classic ‘dog and pony’ show.
Bottom Line: Hard to argue with a long-awaited bounce in our markets. Continue to monitor developments related to the FSA data as they are sure to be spun every which way. If acres are coming down, and yield ideas are going drastically higher, it is conceivable we have seen the largest carryout ideas for the 14/15 balance sheets. If carryout isn’t going up any further, it will go a long way in helping our markets put in longer term bottoms. Watch upside technical objectives for momentum.
Good Luck Today.
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