What Traders are Talking About:
* Crop estimates continue to decline. A Reuters poll of market analysts shows the U.S. corn yield plunging to 129 bu. per acre and a crop of 11.2 billion bushels. For soybeans, the guesstimates are 38.1 bu. per acre and a crop of 2.834 billion bushels. The corn guesses assume harvested acreage of 86.8 million acres, which is too high as the number of acres cut for silage will increase this year and abandonment will also be much higher than normal. Pro Farmer crop consultant Dr. Michael Cordonnier sees harvested corn acreage at 83 million, a yield of 127 bu. per acre and production at 10.54 billion bushels. For soybeans, Dr. Cordonnier sees harvested acres at 73.2 million, a yield of 38 bu. per acre and production at 2.78 billion bushels.
The long and short of it: Because of the severe crop stress and the impact that will have on yields and harvested acreage, it's very hard to forecast this year's crop size. But it's clear that crop size is shrinking by the day, especially for corn.
* US isn't the only country dealing with drought. Temps will remain hotter than normal in Russia's key growing regions this month, according to the state weather agency. That will maintain drought stress on crops. Despite the drought problems, Russian officials continue to say the country will have plenty of exportable grain supplies. A Russian government source told Reuters the country will be able to export 12 MMT to 17 MMT of grains in 2012-13, with wheat exports of 11 MMT to 15 MMT. Meanwhile, Ukraine's crops continue to face drought struggles, as well. Expected hot temps in August will trim corn output, according to the state weather center, which now sees corn output at 20 MMT "at best" and total grain production at around 43 MMT.
The long and short of it: While Russia is maintaining it's exportable grain supplies will be plentiful, there are doubts. And some even expect Russia to limit grain exports if crops continue to wilt under drought stress.
* Focus on the Fed. The Fed is not expected to announce any major moves to boost economic activity at the conclusion of the two-day Federal Open Market Committee meeting this afternoon. But investors will closely dissect the post-meeting comments as they try to get a gauge for when the Fed will eventually come with the expected next round of quantitative easing. Meanwhile, disappointing PMI data out of China ups odds the Chinese central bank will soon come with another wave of pro-growth measures to boost its economy. And the European Central Bank (ECB) meets Thursday to discuss economic conditions and monetary policy.
The long and short of it: The Fed is widely expected to hold pat this afternoon, but a coordinated effort with the People's Bank of China, ECB and other central banks around the world to boost global economic activity can't be rule out.
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