FOMC LAUNCHES QE3... The Federal Reserve announced plans to rev up the economy by purchasing $40 billion in mortgage-backed securities each month for an unspecified amount of time, beginning tomorrow. The policy known as quantitative easing is dubbed QE3. The U.S. dollar index weakened significantly on the news and gold futures rallied sharply. Today, the Continuous Commodity Index moved to its highest level since March.
“These actions, which together will increase the Committee’s holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets and help to make broader financial conditions more accommodative,” says the FOMC.
The Federal Reserve updated its economic projections, lowering its expectation for real gross domestic product (GDP) for 2012 from 1.9% to 2.4% to 1.7% to 2.0%. But it raised its GDP projection for 2013 from 2.2% to 2.8% to 2.5% to 3.0%. The Fed left its 2012 unemployment projection unchanged at 8.0% to 8.2% and sees unemployment in 2013 between 7.6% and 7.9%. Click here for more.
DROUGHT HANDING ON... According to the National Drought Monitor, 78.5% of the contiguous U.S. is covered by some form of drought -- a one-percentage-point expansion from last week. The monitor notes minor improvements in parts of the Mid-Atlantic, Midwest and Northeast associated with the passage of a strong cold front during the weekend. But in the Plains, drought worsened, which is concerning for establishment of the winter wheat crop. Hot and dry conditions led to expansion of extreme and exceptional drought in northern and central Oklahoma as well as southeast Texas. Click here for more.
2012-13 SOYBEAN EXPORT BOOKINGS OFF TO A STRONG START... Thanks to a total of 2,016,800 metric tons (MT) in sales outstanding on Aug. 31 being carried over to the 2012-13 marketing year, total soybean export commitments for the new marketing year are off to a very strong start.
USDA this week lowered its 2012-13 export projection to 1.055 billion bu., which if realized, represents a 22.4% drop from 2011-12. Meanwhile, total commitments (sales plus shipments) are running 41% ahead of year-ago and USDA reports total bookings as a percent of total exports are at 72% -- in the first week of the new marketing year. As a result, it’s going to take a dramatic slowdown in exports to not exceed USDA’s export projection.
Meanwhile, a total of 1,667,200 MT in corn sales were outstanding on Aug. 31 and carried over to 2012-13. Total corn commitments are running 30% below year-ago and USDA reports total bookings as a percent of total exports are at 32%, which is in line with the five-year average. USDA lowered its 2012-13 corn export projection to 1.25 billion bu. in its September S&D Report, which if realized, represents an 18.8% drop from 2011-12.
STRONG DEMAND AT CHINESE SOYBEAN AUCTION... Chinese soybean crushers purchased 399,741 MT of 400,000 MT of beans offered at the government’s bi-weekly auction today for an average price $720 a ton. High U.S. soybean prices have increased demand for cheaper, domestic supplies at these government auctions. This is eventually expected to result in a shortage in the domestic market, however.
EPA EXTENDS RFS WAIVER COMMENT PERIOD... EPA on Aug. 20 issued a request for comment on letters seeking a waiver of the Renewable Fuels Standard (RFS) volume requirements, but the request was “inadvertently omitted” from the Aug. 27 issue of the Federal Register and therefore was not published until the Aug. 30 issue. Due to this delay, EPA has decided to extend the public comment period by 15 days to Oct. 11, 2012. Click here for instructions on how to submit a comment.
BPI FILES LAWSUIT AGAINST ABC AND OTHERS... Beef Products, Inc. has filed a suit against the American Broadcasting Company, Inc. (ABC) and others for “knowingly and intentionally publishing false and disparaging statements” regarding lean finely textured beef (LFTB). In their complaint filed Thursday in a Union County, South Dakota Circuit Court, BPI alleges those named in the suit published nearly 200 false and disparaging statements regarding BPI and LFTB. BPI says the defendants stated LFTB is “not really beef” and is “not what the typical layperson would consider meat.” BPI says, “these statements were intentionally and knowingly false.” A copy of the complaint is available at this link.
Jeffrey W. Schneider, Senior Vice President, ABC News, said in statement, “The lawsuit is without merit. We will contest it vigorously.”
EVENTUAL FARM BILL COMPLETION... It has been widely evident for quite some time that a new farm bill would not be completed before Congress leaves for Nov. 6 election campaigns. But that didn’t stop a late push by farm group lobbyists and some farm-state lawmakers to waste their time holding media events about the “urgent” need for a new farm bill. Now that these parties have seen their quest defeated, they are inaccurately noting problems that will occur after Sept. 30 if there is no 2008 Farm Bill Extension. There will be some glitches, but there are still several months before the lack of action on a new farm bill will cause consternation and a silly policy to unfold relative to 1949 legislation -- it will not happen.
The eventual new farm bill will include a choice for a farmer and not the static, one-size-fits-all approach taken by the Senate that clearly favors certain regions of the country (Midwest, Northern Plains) over others (Mid-South and Delta). The final measure will also include reference/target prices. This is because House Ag Chairman Frank Lucas (R-Okla.) will chair the eventual farm bill conference, and he is a strong proponent of giving farmers a choice between safety net programs. For more farm bill updates, click here.
