Will Better Rainfall Chances Pan Out?

August 2, 2012 01:41 AM

What Traders are Talking About:

* Wetter forecast, but there are doubts. One forecast model signals there are better rain chances for areas of the Corn Belt over the next five days, especially Illinois and Indiana. Some forecasters are also now calling for much cooler conditions in the 11- to 15-day window. While that offers some hope for relief from the persistent hot and dry conditions, forecast rain events have disappointed as amounts and coverage levels have routinely been below expectations. As a result, many traders doubt whether this forecast event will turn into anything significant.

The long and short of it: Rains at this date would be timely for the soybean crop as it tries to fill pods. For the vast majority of the corn crop, rains now would do little more than let the crop hold onto remaining yield potential. And obviously there's a portion of the crop that has already been lost. .

* FC Stone issues first crop estimate. FC Stone pegs the corn yield at 124.3 Bu per acre and sees production at 11.043 billion bushels. For soybeans, the firm is at 36.2 Bu per acre and 2.73 billion bushels. The estimates are based on customer surveys and other factors and use USDA's current harvested acreage estimates. In the case of corn (and likely soybeans), USDA's harvested acreage estimate is too high. Informa Economics will release its August crop estimates at 10:30 a.m. CT Friday.

The long and short of it: Anticipation ahead of USDA's first survey-based look at the corn and soybean crops in the August Crop Production Report is always high, but it's heightened this year given the extreme crop uncertainty due to drought.

* Fed downtrodden, but offers no new stimulus. The Fed signaled greater concern with the economy in its post-FOMC meeting comments yesterday, but gave no indication QE3 is imminent. Attention is now on the Fed's annual economic symposium at the end of the month which Fed Chairman Ben Bernanke headlines and then the Sept. 12-13 FOMC meeting. But there are some economists who feel the Fed will keep with its traditional nonpolitical stance and hold off on QE3 until after the Nov. 6 elections unless its absolutely needed before then. Surprisingly, the European Central Bank made no changes to monetary policy this month despite the recent pledge from ECB President Mario Draghi to do "whatever is necessary" to keep the euro-zone intact.

The long and short of it: While the Fed's lack of activity was not a surprise to many, especially in-tune investors, market reaction still signals investors are clamoring for the hoped-for stimulus sooner rather than later.


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