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Good Riddance Q3

September 30, 2011

What Traders are Talking About:

* Good riddance Q3. The third quarter will go down as one of the worst three-month periods for investors in recent history. In fact, the third quarter is on pace to mark the worst performing quarter in the U.S. stock market since late 2008, with the major indexes on target to post double-digit declines. The performance in commodities hasn't been much better, with the Continuous Commodity Index down nearly 8% for the quarter as of this morning. For perspective, corn is down 2.5%, soybeans down 5% and Chicago wheat up 7.2% during the third quarter.

The long and short of it: Ag commodities, especially wheat, have performed much better than the overall commodity sector and the stock market during a bleak third quarter.

* Will Quarterly Grain Stocks Report hold another surprise? USDA's Quarterly Grain Stocks Report has been the least predictable set of data the ag department has released since June 2010. Since then, the quarterly stocks updates have been full of surprises, especially for the corn market. So, it's no wonder traders are apprehensive ahead of this morning's data. The average trade guesses for this morning's report show traders expect a relatively modest change in Sept. 1 corn stocks versus estimated carryover from the September Supply & Demand Report -- and no change for soybean stocks from the September S&D Report. Remember, the Sept. 1 corn and soybean stocks figures will be final 2010-11 carryover.

The long and short of it: USDA's quarterly stocks data along with end-of-quarter trade could lead to a highly volatile trading session today.

* Outlook for Chinese corn imports strong, but not as strong as before. A Reuters poll of industry analysts signals China is expected to import 4 MMT of corn in 2011-12. That would be nearly three times the amount USDA estimates for 2010-11, but down 1 MMT from July expectations. While the median forecast is 4 MMT, there's a very wide range of estimates from 2 MMT to 9.5 MMT. The bulk of China's corn purchases will be to rebuild state-owned reserves as the country is forecast to produce a record corn crop this year.

The long and short of it: Everyone knows China needs corn to rebuild state-owned reserves, but the wide range of estimates signals there's a great variance on exactly how much corn the country will buy.

 

Follow me on Twitter: @BGrete


Need a speaker for a seminar or special event? Contact me: bgrete@profarmer.com

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