Tuesday, September 30, 2008

Wall St bailout plan

The big news over the weekend was agreement on terms of the Wall St bailout plan. While this is likely to weaken the $US in the short-term it is good news for near-term growth prospects and the impact on the $A is now being viewed as neutral.

If the plan acts to reduce pressure on commodities, it may allow strong grain market fundamentals to assert themselves again. Early US corn and bean yields are all over the place with little discernible trend evident - US ProFarmer is maintaining its yield estimates below those of the USDA.

The first real threat of a killing frost has made its way into the nth American weather forecast for this week. At risk are yet-to-mature corn and soybean crops northern corn and soybean belts. The potential for freezing temps comes towards the end of this week and while forecasts can change, with outside market influences settling down, this could turn out to be a major market-driver this week.

Our Sth American crop production consultant reports that Sth American growers are waiting for a good rain to commence planting and are ‘tightening their input belts’ by cutting fertilizer use by as much as 25%. High input costs will keep acreage expansion in check for the 2009 crop, but growers in Brazil and Argentina are likely to favor soybeans over corn production this year.

With recent good rain across NSW and WA, Australian crop production has stabilized above 20mmt. Areas of concern are now SA and VIC which are very susceptible to some adverse early spring weather. Grower selling is starting to step-up with sales hardest to find in the south-east region.

Quality and protein premiums are starting to creep up and this may start to make pools that pay quality increasingly attractive. With supplies of coarse grain plentiful, there will be heavy penalties for missing quality specifications this year (hence the widening multi-grade discounts for ASW and AGP with some providers).

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