QE3 Euphoria Wears Off; Harvest Pressure Builds

* Fed euphoria wears off. Commodities and global stock markets rallied sharply late last week after the Fed announced QE3. But the initial rush has wore off, prompting investors to take profits as they refocus on the broader picture. With the Fed and the European Central Bank (ECB) having played their cards, support must now come from market fundamentals While the U.S. and European central banks have made moves to boost economic activity (and investors sentiment), there are still many economic hurdles that must be cleared. And that will keep investors from getting too bullish. The long and short of it: Recent actions by the Fed and ECB have increased risk appetite, but investors are not fully in “risk-on” mode amid many economic uncertainties. * Harvest progress ramps up. Traders are expecting USDA to show corn harvest around 25% complete and soybean harvest at about 10% done as of Sunday. This week’s forecast calls for scattered showers and cooler temps across much of the Corn Belt, but combines will be actively rolling around the rains as producers fear potential yield loss given the poor corn stalk quality. And given suspect condition of much of the crop being taken out of fields, the early harvested crop is moving to market. That’s putting seasonal pressure on futures and basis. The long and short of it: Basis will be the best indication of when harvest pressure is easing. When basis stops softening it will indicate seasonal pressure is complete. * Importers not just buying Black Sea wheat. Global importers, especially Egypt, have been actively gobbling up Black Sea origin wheat supplies amid concerns exportable stocks will soon be gone. But importers are also actively buying Australian wheat. Australian government data shows Aussie wheat stocks as of Aug. 31 were down 20.1% from the end of July and 7.1% lower than year-ago. Of the total of 9.1 MMT of wheat Australia has in storage, 6.8 MMT are milling wheat and 2.3 MMT are feed wheat. The long and short of it: The U.S. isn’t garnering much of the recent pickup in export demand. But there will be a better opportunity for U.S. wheat exports down the road as global supplies tighten.