Western Belt Gets Rains, But System Fades By Mississippi River

June 21, 2012 01:08 AM
 

What Traders are Talking About:

* Rains fall on western Corn Belt, but then fade. Much of the western Corn Belt, including dry areas of Missouri, got beneficial rains overnight. While the rains weren't heavy enough in some of the drier areas to remove moisture deficits, they will provide at least temporary relief. Unfortunately, the rains dried up as they neared the Mississippi River, leaving the driest areas in the eastern Corn Belt without much hope of meaningful precip unless the system regenerates. Forecast models are a little wetter and indicate less heat than earlier in the week, but there are concerns with crops in the eastern Corn Belt if the weather pattern doesn't shift soon.

The long and short of it: The rains (and less threatening forecast) weighed on corn and soybean futures overnight. But if rains are disappointing in the eastern Corn Belt today, as radar suggests, traders may build premium into the market ahead of the weekend.

* China wants (needs) U.S. DDGs. China's Ministry of Commerce has ended an anti-dumping probe against U.S. shipments of distillers dried grains (DDGs), opening the door for more active exports of the feedgrain substitute to the country. China originally started the probe in December 2010. In 2011, Chinese imports of U.S. DDGs fell 47% to 1.68 MMT as importers feared being slapped with taxes by the government. With the ending of the probe, one Chinese industry source told Reuters he believes Chinese imports of U.S. DDGs could expand to 2 MMT this year.

The long and short of it: The end of the anti-dumping probe signals China's need for DDG imports is strong.

* Fed, Bernanke deliver what was expected, but not what was hoped for. The Fed announced Wednesday it will extend its "Operation Twist" program by investing another $267 billion in longer-dated securities by the end of the year. An extension of "Operation Twist" was widely expected, although economists and investors didn't know for how long or how much more the Fed would invest in the program. What the Fed didn't deliver was a hope-for third round of quantitative easing (QE3). But the Fed didn't completely shut the door on QE3, with Chairman Ben Bernanke saying the Fed is "prepared to do more" if needed in his post-meeting press conference. Still, markets were generally disappointed by the Fed actions.

The long and short of it: While the market reaction to the Fed actions Wednesday was generally one of disappointment, there is still a belief the central bank will step up efforts if economic conditions worsen. The Fed is still seen as the proverbial "security blanket" -- there for comfort if needed.

 
 

 

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