FED MINUTES REVEAL DECISION NOT TO TAPER A 'CLOSE CALL'... The Federal Reserve released its minutes from the September 17-18 Federal Open Market Committee (FOMC) meeting this afternoon, in which it explained the details behind keeping its asset-purchasing plan fully in place. Investors, who largely expected the FOMC last month to announce how it would begin tapering its $85-billion-monthly purchases, learned today the decision not to taper was a "relatively close call" for several of the board members.
"All members but one judged that it would be appropriate for the Committee to await more evidence that progress would be sustained before adjusting the pace of asset purchases," the minutes said.
"During the exchange of views on whether to trim the flow of asset purchases at this meeting, a number of members emphasized the contingent and data-dependent nature of the Committee's purchase program," the minutes said.
Markets had a relatively muted reaction to the meeting minutes. The Dow Jones Industrial Average mildly firmed following the minutes and bond yields ticked up slightly as well. The U.S. dollar index, which was stronger throughout the day, initially extended gains but then moved off session highs.
ETHANOL PRODUCTION DECLINES SLIGHTLY... The Energy Information Administration reports ethanol production averaged 868,000 barrels per day (bpd) the week ended Oct. 4, down 7,000 bpd from the previous week. Ethanol stocks of 15.4 million barrels declined 119,000 barrels from the previous week as gasoline demand rose sharply to average 371.5 million gallons daily.
U.S.-PANAMA FTA DISPUTE... Panama's government in late September announced it plans to ban imports of U.S. corn between January and April 14, 2014, in an effort to protect Panamanian corn farmers during harvest. The U.S. Grains Council says this violates the U.S.-Panama Free Trade Agreement (FTA) and that the country is exploiting an agreement loophole. The council hopes the U.S. Trade Representative's office and USDA's Foreign Ag Service can work with corresponding departments in Panama to resolve the issue. But any such efforts are on hold due to the shutdown of the U.S. government. The country's annual corn imports are around 13.8 million bushels. Panama did not attempt to restrict imports in 2013.
PF MIDWEEK MARKETING GAME PLAN UPDATE...
CORN: Hedgers and cash-only marketers have 25% of expected 2013-crop production sold via cash forward contracts for harvest delivery. While there's risk of seasonal pressure as harvest activity picks up, we don't see a lot of downside risk as demand appears to be building and funds are already heavily loaded up on the short side of the market. We'll wait for a corrective rebound to increase cash sales, but the long-term fundamental outlook signals you must be willing to sell an extended price bounce.
BEANS: Hedgers now have 100% of expected 2013-crop production sold via cash forward contract for harvest delivery, while cash-only marketers are 75% sold on 2013-crop. Hedgers should be prepared to reown a portion of 2013 soybean cash sales in long call options or futures as long-term fundamentals on signs of a low. While futures have rebounded from the early October lows, there is still risk of near-term seasonal price pressure.
WHEAT: Futures continue to work off the lows and the technical action is the best its been in a long while. But the market will need a consistent flow of bullish news and futures must continue to push through layers of resistance to extend the price recovery. We're willing to let the rally extend as far as possible before making additional 2013-crop sales, but be prepared to pull the trigger on light cash sales if futures show signs of rolling over.
COTTON: Hedgers and cash-only marketers have 50% of expected 2013-crop production sold via cash forward contract for harvest delivery. Hedgers also have 50% of expected production hedged in December cotton at 83.87 cents. Hedgers should maintain this hedge coverage unless there's a bullish price development.
CATTLE: Fed cattle producers should continue to carry risk in the cash market as the downside is relatively limited amid tightening supplies. Feeder cattle futures have pushed to new contract highs. While the technical and fundamental situation is bullish, we don't want to chase the market higher. But be prepared to enter long hedges on a pullback or pause.
HOGS: Hog producers have 50% of expected 4th-qtr. production hedged in Dec. lean hog futures at an average price of $82.12 1/2. We're hoping to heavy up 4th-qtr. coverage and to add 1st-qtr. 2014 hedges in Feb. lean hog futures, but we want some confirmation a top is in place before adding to our existing hedges as futures are holding up better than expected.
FEED: 25% of 4th-qtr. protein needs are covered in long Dec. soybean meal futures and 25% of 1st-qtr. needs are covered in long March meal futures. We feel prices are ultimately headed higher, but there may be more near-term price pressure through harvest. We're also looking to add long corn coverage after the market signals a low is in place.