CORN: The USDA issued its Quarterly Stocks in All Positions report this morning, and it was considered bearish for corn with the opening call unchanged to 5 cents higher despite the bearish report. Stocks as of September 1st were pegged at 1.624 billion bushels, which was higher than the highest trade estimate. This is up from the USDA’s ending stocks estimate on the August Supply and Demand Report which was 1.576 billion bushels for the 2007/08 crop. (Keep in mind that today’s stocks number coincides with the end of the crop year.) Today’s stocks number implies that domestic usage was lower than what had been expected for corn over the past three months.
SOYBEANS: The USDA’s Stocks in All Positions report was considered bearish to soybeans with the market called 10-15 lower for the opening. The USDA pegged soybean stocks as of September 1st at 205 million bushels, which was well above the recent USDA forecast of 140 million bushels (ending stocks in the supply/demand report) and much higher than the trade estimates near 145 million. The USDA revised their 2007 crop production forecast to 2.676 billion bushels, which was 91 million bushels above the previous estimate. This sparked the higher than expected stocks number. If the beginning stocks are adjusted for the 2008/09 season and all other factors left unchanged, ending stocks would be adjusted to 200 million bushels from 135 posted in last month’s report.
WHEAT: The USDA issued both a Quarterly Grain Stocks and a final Crop Production report for wheat this morning, and the reports were considered neutral with an opening call of 10-15 cents higher on the day. Stocks of all wheat as of September 1st were 1.856 billion bushels, which compares to 1.717 last year. This was lower than the lowest trade estimate and reflects a rapid rate of export sales and export inspections for wheat over the past three months and also a tendency to us more wheat for feed more due to high corn prices. While this looks very bullish on the surface, it does not necessarily mean that usage will be higher than the current USDA projection. We have to wait and see if the USDA raises its export projection on an upcoming Supply and Demand Report. The USDA raised its estimate of 2007/08 US All Wheat production to 2.499 billion bushels from 2.462 billion on the August S&D Report. This balances out the seeming bullishness of the stocks number. They lowered harvested acreage for winter wheat, but raised the average yield to 44.9 bushels per acre compared to 43.5 on last month’s report.
Morning Stock Index Futures Commentary
by Dave Hightower on September 30, 2008
Below is an excerpt from our daily commentary on Stock Index Futures.
While European analysts suggest that the action yesterday in the US was some form of capitulation, we wish it was going to be that easy to find a bottom. Certainly prices are rebounding today but the carnage to the economy and the prospect of more failures in the wake of the historic declines in equity prices yesterday, suggests that the other shoe could drop at any time. Apparently the Asian and European trade is of a mind that the US Senate will get a plan in place on Thursday, but it is somewhat shocking to see the fear from yesterday subside so quickly, without a distinct headline type development. Certainly seeing a host of physical commodity prices fall precipitously ratchets down the inflation threat and that has some analysts suggesting that a massive coordinated global rate cut effort will be seen as soon as a bailout plan is put in place in the US. With crude oil prices at times this morning as much as $55.11 a barrel below their July highs, it would seem like some of the pressure is being taken off the economy. However, one has to wonder how long it will be before the next key failure surfaces. It is somewhat hopeful that the overnight action failed to turn up a fresh international problem and it would be very helpful for a full US session to pass without another bomb dropping. In short, given the historic decline in prices in the prior trading session, it isn’t surprising to see a bounce this morning, but many traders would refer to the action this morning as a dead cat bounce.
DOW: The Dow has managed a rather significant bounce this morning and that isn’t surprising considering the breadth of the knock down in the prior trading session. However, without something surprising from the President, Fed or Congress it could be a very difficult undertaking to push the December Mini Dow back above a prior key low level of 10,750. We think that the bounce in the Dow this morning is attributable to the remaining global confidence in the US to get its house in order and for the coming 36 hours it is possible that the “hope” for something from the Senate will hold up prices. We think that traders should consider the purchase of near to expiration far out of the money puts and calls for what could be the ultimate economic decision directly ahead.
NASDAQ: The Nasdaq is also showing some recovery action this morning and as suggested in other comments this morning, it would appear that the bounce is the result of lingering confidence that Congress got some kind of message from the trillion dollars of value lost in the US equity market in the prior trading session. Given the importance of the upcoming decisions in Washington one has to expect ongoing extreme volatility and that might best be handled with the purchase of near to expiration somewhat out of the money puts and calls!
S&P 500: The S&P is seeing a technical short covering bounce this morning but some foreign players are suggesting that the bounce is the result of faith that the US Congress will come forth with some plan Thursday. In other words, the market is going to be given a temporary pass from the threat of all out debacle but the pause in the selling could be ended with almost any evidence of a resumption of chain reaction failures from anywhere in the world! Initial resistance in the S&P is seen at 1157 in the December S&P contract but as suggested in other comments this morning, there might be no small bets in the coming three trading sessions. Therefore, traders should not dismiss the value of utilizing October serial options!