Johnston Pro Farmer Senior Markets Editor
as of 7:00 a.m. CT
Fed lowers rates 50
basis points... One percent. That is where the federal funds rate now
stands after the Federal Open Market Committee (FOMC) trimmed rates another 50
basis points at the conclusion of yesterday's meeting. This is the lowest the
Fed has ever gone on rates, matching the cut to 1% in June 2003 through June 2004.
The dollar remained under stiff pressure throughout the day
due in anticipation
of a rate cut.
In their statement, the Fed expressed worries
about the damage being done to the economy by the ongoing credit crisis in the
financial and credit markets. "The pace of economic activity appears to have
slowed markedly, owing importantly to a decline in consumer expenditures,"
states the Fed. "Business equipment spending and industrial production have
weakened in recent months, and slowing economic activity in many foreign economies
is dampening the prospects for U.S. exports. Moreover, the intensification of
financial market turmoil is likely to exert additional restraint on spending,
partly by further reducing the ability of households and businesses to obtain
'Dampening the prospects for U.S. exports'...
This isn't a price-positive statement for commodity markets, which relied heavily
on a strong export pace during the "commodity boom" rally that topped
this summer. Additionally, the Fed says, "In light of the declines in the
prices of energy and other commodities and the weaker prospects for economic activity,
the Committee expects inflation to moderate in coming quarters to levels consistent
with price stability."
The Fed says they believe recent policy
actions, including this week's rate reduction, coordinated interest rate cuts
by central banks, "extraordinary" liquidity measures, and official steps
to strengthen financial systems, credit conditions should improve over time and
"promote a return to moderate economic growth."
"Nevertheless, downside risks to growth remain," they warn. "The
Committee will monitor economic and financial developments carefully and will
act as needed to promote sustainable economic growth and price stability."
Hence, another rate cut is possible.
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calls. These calls originate more than three hours before the open
-- use caution, things change:
Corn: Narrowly mixed. Futures
were mostly marginally higher in mixed trade overnight. Futures closed sharply
to limit higher yesterday, supported by pressure in the dollar and strength in
crude oil. How outside markets perform this morning will largely direct corn prices
this morning. Spillover gains today would increase thoughts a near-term low has
been posted. December corn penetrated resistance at last week's high to return
to the top of the month-long choppy consolidation range.
to 5 cents higher. Futures saw slight gains overnight. A strong surge in crude
oil futures combined with heavy pressure on the U.S. dollar fueled a strong wave
of buying in the soybean pit yesterday. January soybean futures pushed above Tuesday's
post-report reaction high, but were unable to close above this level. So far,
the contract has done nothing more than move to the top of the short-term consolidation
range. A close above the Oct. 14 high at $9.56 and a push above the last reaction
high at $10.03 is needed to signal an extended bounce is likely.
1 cent lower to 13 cents higher. Futures were widely mixed overnight in directionless
trade. Chicago wheat finished around 47 cents higher yesterday, spurred by outside
markets and spillover from neighboring pits. December Chicago wheat filled the
Oct. 22 gap at $5.46. The daily trading limit stopped the contract right at the
last minor reaction high at $5.74. A push through that level would leave the top
of the Oct. 10 gap at $6.01 as resistance.
cattle expectations: $1 higher. Scattered, light cash cattle trade
was reported earlier in the day at $91, but trade turned active late Wednesday
afternoon as packers raised bids to $92 -- $1 higher than top- end bids last week.
The $92 price came after a sharp rise in cattle futures and leaves nearby contracts
at a slight discount to cash.
Futures call: Higher.
Futures are called higher on spillover from yesterday's gains, but how outside
markets perform will depend on the lasting power of a higher open. Nearby cattle
are trading in line with the start of this week's cash trade, which should limit
pressure if profit-taking is seen today.
hog expectations: Steady to weaker. The pork cutout value plunged
$2.51 Wednesday on widespread, sharp product losses. The sharp downturn in pork
prices will put pressure on the cash hog market, especially since packers have
the bulk of this week's slaughter needs already secured. Hog traders continue
to fear a slump in the pork market amid hefty market-ready supplies.
Futures call: Mixed. Futures are called to open mixed after yesterday's
choppy price performance. February lean hog futures remain in the delicate uptrend
from the mid- October low. But the contract is having a tough time pushing above
the mid-August high. The contract closed right on this trendline yesterday. Consecutive
closes above this trendline are needed to signal the short- term uptrend will