FED WILL CONTINUE SECURITIES PURCHASES FOR NOW, BUT TAPERING EXPECTED TO START LATER THIS YEAR... The Federal Open Market Committee (FOMC) today said it will continue to purchase Treasury and agency mortgage-backed securities until the labor market outlook improves "substantially in the context of price stability." But Chairman Ben Bernanke said in his post-meeting press conference the Fed expects to slow its asset purchases later this year and to end the bond-buying program around mid-2014 -- if economic data unfolds as currently expected.
The FOMC statement said its highly accommodative monetary policy stance will remain in place for a "considerable" time after the asset purchase program ends and the economic recovery strengthens.
As expected, the FOMC kept its target for federal funds at 0% to 0.25% and "currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6.5%, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee's 2% longer-run goal, and longer-term inflation expectations continue to be well anchored."
In determining how long to maintain a highly accommodative stance of monetary policy, the FOMC also said it will consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. "When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2%," it states.
The U.S. dollar index rose sharply and the stock market dropped in reaction to the FOMC statement, the longer-term Fed economic forecasts and Bernanke's comments. Click here for more.
INFORMA EXPECTS USDA TO TRIM CORN ACREAGE, RAISE SOYBEANS... Sources familiar with Informa Economics say the firm has released its expectations ahead of USDA's Acreage Report on June 28. Informa reportedly pegs corn acres at 95.262 million, down 2.02 million from USDA's March Prospective Plantings Report and 1.565 million acres less than the firm expected last month. Informa expects USDA to peg soybean acreage at 77.756 million, which if realized, would be up 630,000 acres from March intentions, but down 530,000 acres from the firm's May forecast. For cotton, Informa pegs acreage at 10.371 million, up 345,000 acres from USDA's March intentions and 130,000 acres more than the firm anticipated last month. Informa reportedly estimates spring wheat acres at 11.791 million, down 910,000 acres from March and 610,000 acres less than the firm's May forecast.
ETHANOL PRODUCTION DECLINES, STOCKS RISE... For the week ended June 14, the Energy Information Administration (EIA) reports ethanol production declined by 11,000 barrels per day (bpd) from the previous week to of 873,000 bpd. Stocks of 16.5 million barrels climbed by 500,000 barrels from the previous week.
SAFRINHA CORN HARVEST UNDERWAY IN MATO GROSSO... South American crop consultant Dr. Michael Cordonnier says harvest of the record safrinha corn crop has begun in Mato Grosso, Brazil. He says about 3% of the expected 3 million hectares have been harvested, which is slightly behind last year's pace.
"Some of the corn will have to be piled on the ground because much of the state's storage space is still occupied by the recently harvested soybean crop," says Dr. Cordonnier. "Open air storage is generally not a problem during the dry season -- May to September -- because of the warm and dry conditions during that time, but the piles will need to be picked up by September or October when the summer rains return. "
ATTACHE RAISES 2013-14 CHINESE SOYBEAN IMPORT FORECAST... The U.S. ag attache in China has trimmed its forecast for 2012-13 soybean imports by 3.5 MMT to 59.5 MMT to reflect a decline in use due to bird flu and a surge in intentional prices. But the attache raised its 2013-14 import forecast by 2 MMT to 67.5 MMT in response to escalating growth in soybean meal use and edible oil consumption. These estimates differ from USDA's current import projections of 59.0 MMT for 2012-13 and 69.0 MMT in 2013-14. The attache expects Chinese imports of U.S. soybeans to rise from 21 MMT in 2012-13 to 23 MMT in 2013-14. Click here for more.
FIRST-HALF COW SLAUGHTER EXPECTED TO BE LARGEST SINCE 1996... USDA's Economic Research Service (ERS) says the ongoing drought in the western U.S. and declining cow-calf margins has led to a pickup in cow slaughter compared to year-ago. Through May 23, 2013, second-quarter federally inspected weekly cow slaughter averaged 10% larger than year-ago. ERS says first-half 2013 total commercial cow slaughter is projected to be three percentage points above first-half 2012 slaughter and could be the largest since nearly 3.5 million cows were slaughtered in 1996. Click here for more.
PF MIDWEEK MARKETING GAME PLAN UPDATE...
CORN: Hedgers are 100% sold in the cash market, with cash-only marketers 75% priced on 2012-crop. Technically, July corn futures are strengthening, but recent bull spread unwinding in the face of firming basis is a potential warning sign. With July corn futures starting the delivery process on June 28 and the contract at over an 80-cent premium to September corn, we are looking to trim old-crop inventories soon. For 2013-crop, hedgers and cash-only marketers have 10% of expected 2013-crop production sold via cash forward contract for harvest delivery. Be prepared to advance new-crop cash sales depending on how December corn futures respond to a test of tough resistance just below $5.75. If that resistance again holds, it would be the sign to make sales. If that resistance is cleared, our sales target area would push up to the $6.00 area.
BEANS: Hedgers are 100% sold in the cash market, with cash-only marketers 90% priced on 2012-crop. Cash-only marketers should hold the remaining 10% as gambling stocks for now. For 2013-crop, hedgers and cash-only marketers have 20% of expected 2013-crop production sold via cash forward contract for harvest delivery. Hedgers also have 50% of expected 2013-crop hedged in November soybeans at $12.19. We are looking to exit the hedge coverage on an extended pullback or on signs the market is ready to rally. Also be prepared to advance new-crop cash sales.
WHEAT: You should be 100% sold on old-crop in the cash market as the 2012-13 marketing year is complete. For 2013-crop, there's no urgency to make cash sales at current price levels as futures are respecting key support at the spring lows. But it won't be easy for wheat futures to rally in the face of harvest.
COTTON: Hedgers are 100% sold on 2012-crop in the cash market, with cash-only marketers 85% sold on old-crop. Cash-only marketers should be prepared to finish old-crop sales. For 2013-crop, hedgers and cash-only marketers have 50% of expected production sold via cash forward contract for harvest delivery. Hedgers also have 50% of expected production hedged in December cotton at 83.87 cents. We are willing to hold onto that coverage as the market looks toppy and the hedge price is attractive.
CATTLE: Traders have removed the premium futures once held to the cash market. That may be what's needed for futures to put in a low. But we still feel the cash and product markets must signal short-term lows before traders are willing to actively buy futures. Fed cattle producers should continue to carry all risk in the cash market. Feeder cattle buyers should also continue to carry risk in the cash market until there are clear indications of a low.
HOGS: Price action is very bullish. But we feel the market may soon run out of steam as the upside is overdone and the market should be nearing a seasonal top. Be prepared to add at least light hedge coverage for second-half marketings soon.
FEED: Continue to carry all feed risk in the cash market. But with the technical picture strengthening for old-crop corn, there's a little more urgency to extend cash coverage beyond hand-to-mouth. Soymeal futures are at levels we don't want to lock in for an extended period.