Evening Report (VIP) -- October 4, 2013

October 4, 2013 09:49 AM

LIMITED MARKET IMPACT SO FAR, BUT GOV'T SHUTDOWN IS COSTING THE U.S. ECONOMY... The U.S. government shutdown is sparking limited risk aversion so far as most traders expect the closure to be relatively short-lived. If the shutdown drags on, however, investors would likely take a more risk-averse stance.

An extended shutdown would shave points off of U.S. gross domestic product (GDP) growth. The last time there was a government shutdown, 1995-96, it was estimated to have caused around a 0.5% hit to GDP. Some projections say the shutdown is costing the U.S. economy $300 million per day and if the current shutdown lasts two weeks it would have a 0.3% drag on GDP and 0.7% if it lasts a month. That could, in turn, prompt the Federal Reserve to delay any intended tapering of its monthly bond-buying program.

In theory, a delay of the tapering should be bullish for the commodity sector. But slower U.S. GDP growth would also be a drag on other world economies’ growth prospects, which could mean less demand for commodities.


STATS CANADA FORECASTS RECORD-LARGE WHEAT & CANOLA CROPS... Farmers in Canada are harvesting their largest wheat and canola crops on record, according to Statistics Canada's second production report of the year. Stats Canada forecasts the all wheat crop at 33.026 MMT, which is up from its August peg of 30.6 MMT. The tally also topped the average pre-report trade guess of 32.9 MMT. The previous record crop was 32.1 MMT in 1990.

Stats Canada pegged canola production at 15.963 MMT, which is up from its August estimate of 14.7 MMT. The canola crop topped the 2011 record production of 14.6 MMT, but the tally still fell short of expectations for a 16.6-MMT crop.

Pro Farmer Canada Editor Mike Jubinville explains, "Despite late seeding this spring, weather conditions that prevailed up to the end of summer have led to higher-than-normal yields. However, sporadic frost or disease may have affected certain crop yields."

While market response to the data was limited today as most of the figures came in near expectations, Jubinville notes, "There is a general sense that the final production numbers will probably come in greater than what StatCan is reporting today." Stats Canada will release its final production numbers Dec. 4.


INFORMA: USDA TO RAISE CORN, SOYBEAN CROP ESTIMATES... Informa Economics reportedly expects USDA on Oct. 11 (or later, depending upon the outcome of the U.S. government shutdown) to peg the U.S. national average corn yield at 158.8 bu. per acre for a 14.010-billion-bu. crop, up 121 million bu. from Informa's previous estimate. This would be up from USDA's September estimates of 155.3 bu. per acre and 13.843 billion bushels.

On soybeans, Informa reportedly expects USDA to raise its national average yield projection by 0.5 bu. from September to 41.7 bu. per acre for a 3.176-billion-bu. crop, which is down 48 million bu. from the firm's previous crop peg but up 27 million bu. from USDA's September estimate.

The firm also reportedly expects USDA to raise its all cotton yield peg from month-ago to 846 lbs. per acre from its previous estimate of 796 lbs. per acre. This is expected to result in a 810,000-bale increase to USDA's cotton crop estimate from month-ago to 13.709 million bales. This represents a 205,000-bale increase from Informa's previous production estimate.


HOUSE PLANS WEEKEND VOTE ON BACK PAY... The House is planning a Saturday vote on legislation to provide back pay for the roughly 800,000 federal employees furloughed by the government shutdown. The Senate has not indicated whether it will take up the measure that is expected to clear the House. Administration officials have reportedly signaled the president would support a back pay bill.


PF PROFIT BRIEFING: BOTTOM LINE ON SEPT. 1 GRAIN STOCKS... Pro Farmer Editor Chip Flory and Senior Market Analyst Brian Grete discuss USDA's Sept. 1 grain stocks surprise and the takeaway from it in this week's Pro Farmer Profit Briefing clip from AgDay TV.

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