The Looming Fed Decision and the Grains
Sep 13, 2012
With the USDA report behind us ALL eyes will now focus on today's Fed announcement due out around 11:30am (CST). Most leading analyst are betting that the Fed will take another stab at invigorate the US economy. This means another round of "quantitative easing" should be announced shortly. I understand the argument, I just don't agree with the move. The Fed seems to be facing steep pressure to act now because the US economy is still growing too slowly to create the needed number of jobs. The unemployment rate has topped 8% every month since the "Great Recession" officially ended more than three years ago. Just look at August, as job growth slowed sharply once again. Some guys will point to a lower unemployment rate as it fell from 8.3% to 8.1%, but most realize this was due to a large number of Americans who simply stopped looking for work, therefore they were no longer counted as unemployed.
Bernanke is believed to have tipped his hand toward more easing when he identified "chronic high unemployment" as his most pressing concern at Jackson Hole. He has also mentioned on several occasions that his research indicates the two previous rounds of "QE" had created 2 million jobs and accelerated economic growth. In any regard most seem to think he wants to try and do something now about the US "jobs" situation rather than waiting for it to get even worse. I just think since the situation in Europe seems to have eased to some degree and the US stock market has raced to highs not seen during the past five years, he maybe more hesitant than previously believed. If Bernanke and the Fed disappoint a "risk-off" theme will be the battle cry from midday through the close. If some form or fashion of QE3 is announced look for higher prices across the commodity sector.
As for today, we simply need to remain patient. My guess is the soybean market may need to take a few deep breaths after yesterday's rally, and may in fact setback a bit the next few sessions as traders fear that improved growing conditions may actually bump yields higher in the October report. However, once supply side debates are behind us I believe the market will have very little choice but to move higher on strong demand and fear that the US will soon run out of soybeans. I would also suspect some type of South American weather scare will arise during the next few months giving us more bullish headlines to trade. Wheat bulls will try and get in the race and may actually be the leader during this period of time where soybean yields are being debated. The wheat story is starting to gain some attention and I would be cautious leaning on the short side of this market. Corn may pull up the rear at least until harvest pressure subsides. Until the "cash" corn market starts to turn back around I suspect corn will follow both wheat and soy. Keep your eye on the Fed as they will greatly influence "MONEY-FLOW" by their actions announced this afternoon!
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