Evening Report (VIP) -- October 24, 2012

October 24, 2012 10:01 AM

FED: MONETARY POLICY TO REMAIN 'ACCOMMODATE'...The Federal Open Market Committee (FOMC), at the end of its two-day policy setting meeting today, said a highly accommodative stance of monetary policy will remain appropriate for a "considerable time after the economic recovery strengthens." As expected, the committee kept the target range for the federal funds rate at 0% to 0.25% and anticipates low rates will warranted at least through mid-2015. It also said while inflation has picked up recently to reflect higher energy prices, its longer-term expectations are for inflation to run at or below 2%. Markets had a muted reaction to the announcement, as it provided no surprises. Click here for more.



ETHANOL PRODUCTION RISES SLIGHTLY... The Energy Information Administration reports ethanol production in the week ending Oct. 19 was up slightly from the previous week to 801,000 barrels per day. High corn prices have trimmed ethanol production compared to year-earlier levels and declining gasoline prices will add more pressure on blending margins. As a result, ethanol production will continue to reflect price rationing.



U.S.-PANAMA TRADE AGREEMENT TAKES EFFECT NEXT WEEK... The U.S.-Panama Trade Promotion Agreement (TPA) Congress passed a year ago will enter into force Oct. 31. USDA Ag Secretary Tom Vilsack says this will have the effect of "eliminating tariffs and other barriers to U.S. goods and services, promoting economic growth, and enhancing trade between the United States and Panama."

In 2011, the U.S. exported more than $504 million of ag products to Panama. This is expected to increase as nearly half of the current U.S. farm exports to Panama will become duty free immediately. Most of the remaining tariffs will be eliminated within 15 years. This agreement, along with trade agreements with South Korea and Columbia, are expected to bring an additional $2.2 billion in ag exports.



FOREIGN POLICY DEBATE AWARDED TO OBAMA... The third and final presidential debate was billed as a session on foreign policy issues, but both President Barack Obama and GOP challenger Mitt Romney strayed into domestic policy and economic issues as they sought to connect with voters in a nationwide format. These topics typically outrank foreign policy on voters' priority list.

Obama pained Romney as offering differing views and being "all over the map" on foreign policy issues. Romney challenged Obama to not simply attack him in responding to the questions, saying that was "not a strategy" for the country.

While Obama was labeled the winner of the debate, it's far from clear the evening was enough to tilt the contest from where it has moved to in recent weeks -- essentially a draw between the two. Get more details and analysis here.




CORN: Hedgers and cash-only marketers should get current with advised cash sales. While futures appear to have put in a short-term low, price action is likely to remain choppy near-term. We are closely monitoring the market for a buyback signal as hedgers are 100% sold on 2012-crop production in the cash market -- 90% for harvest delivery; 10% for March 2013 delivery. Hedgers should hold the Dec. $6.50 put options which were purchased on 40% of 2012-crop for 31 1/2 cents as a crop insurance hedge in case the market plunges. Cash-only marketers are 75% priced on 2012-crop production -- 50% for harvest delivery; 10% for March 2013 delivery; and 15% for May 2013 delivery.

BEANS: Soybean futures are showing signs that a short-term low is in place. With hedgers 100% sold on 2012-crop production for harvest delivery, you should be prepared to reown a portion of 2012-crop. The Nov. $14.00 put options which were purchased for 42 3/8 cents on 25% of 2012-crop will expire worthless on Oct. 26. Cash-only marketers have 75% of expected 2012-crop forward sold for harvest delivery.

WHEAT: Hedgers and cash-only marketers have 75% of 2012-crop sold in the cash market. Get current with those sales levels as futures are moving back into the upper end of the broad, downtrending channel. There's no urgency to increase cash sales with long-term fundamentals improving and so much time left in the marketing year.

COTTON: Hedgers and cash-only marketers have 50% of expected 2012-crop production sold for harvest delivery. Get current with recommended sales, but no additional sales are advised at this time. While long-term fundamentals are bearish, traders have much of that already built into the market.

CATTLE: The boxed beef and cash cattle markets are likely nearing short-term tops. But fed cattle producers should continue to carry all risk in the cash market as the downside is limited by tightening supplies and demand is solid. Feeder cattle buyers and sellers carry all risk in the cash market for now.

HOGS: Lean hog futures are showing signs the contra-seasonal rally has been exhausted. Stay in touch to hedge a portion of fall and winter production on violation of uptrending support from the September low.

FEED: Remain hand-to-mouth on feed needs for now, but be prepared to extend coverage as the meal as the market is signaling a short-term low is in place. The corn market still has more work to do before there are signs of a solid short-term low.


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