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MACRO – The US Federal Reserve meets tomorrow and Thursday. The market is pricing in a 30% probability the Fed raises interest rates. Many analysts feel there is too much negative news right now for a rate hike but many of the big banks think it could come in the December meeting.
No one has any idea what the Fed is going to say on Thursday and there is even a lot of disagreement if a rate hike is good or bad for the economy and market. One thing for sure is the S&P has been consolidating and is now in a very tight range. Regardless of what the Fed reports on Thursday, I think that is when we break out higher or lower. Owning short dated call and puts could be a good way to play the report if we are still in this tight range on Thursday morning before the Fed announcement. I will have something in Turner’s Take Market Alert on Thursday morning if we still like this idea heading into the Fed announcement.
Emini S&P 500 Chart
GRAINS: Soybean conditions were lowered last night from 63% to 61% Good/Excellent. Today the NOPA report was slightly above expectations. While both reports were bullish, Soybeans could barely rally 10 cents from yesterday’s close. We do have a FSA report tomorrow about acreage, and some are thinking the acres at the end of the year could be a half million to a full one million lower than they are now.
Here is a link to an interesting take on 2015/16 South American Soybean and Corn Production from Soybean and Corn Advisor. They are estimating total SAM soybean production increases 3.6 mmt and total corn declines 3. 8 mmt. Brazil will increase soybean acres while Argentina will lose corn acres. Part of their reasoning takes into account El Nino, which is just another part of the puzzle when it comes to South American crops.
We are also hearing (no official confirmations) that China may have cancelled four cargoes of Argentina soybean oil. The reason given is supposed to be import permit issues with the Chinese Government. Sounds a lot like how corn imports are rejected because a shipment that was good one week is no longer good the next week due to GMOs. If this is true and starts to happen more often, one has to think China does not need soybean oil either because they have enough supply, they think prices are going down, or both. Stay tuned!!!
We are still trying to get bear spread in July 16 vs Sept 16 Corn but has not reached our levels yet. We will remain patient. Corn may not be as burdensome in supply as Wheat and Soybeans, but stocks in the US and around the World are adequate. If South America has a good crop and we are able to get some early corn next year then I don’t see why July doesn’t trade back to a carry against Sept.
July vs September Corn
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