This morning the grains are mostly lower with September corn trading down 2 ½ cents, September wheat trading up ½ a cent and soybeans pulling back another 7 ¾ cents in the overnight. In the overnight session, November soybeans was able to fill a gap that it printed on Monday’s open and it will be interesting to see if that support area will hold.
Rain fall was light and spotty overnight, with the majority of rain hitting areas of the northern grain belt. The 6-15 day forecast has turned slightly wetter, but continues to look dryer than average. The soybean crop in the western corn belt has come under some stress as a result of light rains, but cooler than average temperatures have helped limit yield loss.
The Federal Reserve will release a policy statement at 1:00 PM central time which could signal a change in interest rate policies in the months to come. This report will be after the grain markets close and are not expected to have a major impact on U.S. grain prices in the near term. Equity markets and energies will watch this report closely.
Ethanol numbers will be released today and we are expecting another strong week of production. Crush margins remain around $3.18 per bushel as cheap corn spurs demand from the ethanol sector. We typically see a decline in weekly production during July and August, but this year production has remained strong on a weekly basis. The USDA is currently projecting a 25 million bushel decline in ethanol usage in 2014/15 from 2013, and this is one balance sheet item that may need to be adjusted if strong weekly figures carry into the new marketing year.
Russia’s harvest is now 28 percent complete as a heatwave settles over the region. According to the Russian state weather forecasts, some areas in the North Caucasus and Southern federal district even face the possibility of fires. The heat wave looks to cover a large swath of Eastern Europe, Ukraine and South Western Russia with high temperatures around 96-100 degrees fahrenheit for the next seven days.
Yesterday, Europe and the U.S significantly expanded sanctions on Russia due to their political stance on the Eastern Ukrainian conflict. The sanctions were expanded onto banks, energy, arms and shipping sectors. Russia is a key supplier of Europe’s natural gas and oil which makes sweeping sanctions very difficult for the fragile European economy. More details on the sanctions will be published Thursday, but one thing is certain, new sanctions would severely curb major Russian banks ability to access global capital markets including VTB Bank, Russian Agricultural Bank and Bank of Moscow.