Grain Market Movers: U.S. Presidential Election; Recession Views

November 2, 2008

Once again moves in Chicago Board of Trade grain markets last week were affected by global economic factors, strengthening as moves by central banks and governments to ease credit strains by cutting interest rates began to bear fruit as volatility subsided a little. 
    Financial markets rebounded some. The Dow industrials up 7 percent for the week — exactly the same rise seen in CBOT corn and soybeans. Chicago wheat was up 4 percent.
    CBOT grains markets will undoubtedly mimic the moves in the financials again during the coming week, with both commodity and stock markets driven by macro economic forces and recession views.
    The number 1 event and market mover will be the U.S. presidential election on Tuesday. I haven’t talked to anyone on the trading floor, anywhere for that matter, that is not welcoming Tuesday. After more than two years of political speeches, bantering and heated discussions, it’s time for a decision.
    Key domestic government data released next week includes unemployment figures out on Friday. Reports are expected to show that U.S. nonfarm payrolls shed some 200,000 jobs in October, according to a Reuters poll, while the unemployment rate is forecast to rise 6.3 percent. After the Fed last week cut interest rates by a half point, as expected, further evidence of economic weakness will fuel sentiment for more cuts to buoy the economy. Cheaper money is always supportive for commodity traders.
    Specific to the grain markets will be harvest progress and early analysts’ estimates of what they think the U.S. government on Nov. 10 will project the size of the 2008 American corn and soy crops. Those numbers should be especially interesting given USDA’s latest blunder in crop reporting.
    USDA on Tuesday issued its “oops” update to the Oct. 10 corn and soybean acreage numbers — cutting both by 1.0 million acres after the agency discovered an error due to a suspected computer glitch.
    “I do not know of another time we have corrected a crop report” in mid-month, said Carol House, head of the Agricultural Statistics Board.
    As far as yields, the general sentiment is that soybeans continue to be disappointing while corn is coming in at or above expectations. Currently, USDA is forecasting the soy yields to average 39.5 bushels per acre nationally and corn just under 154 bpa.
    Weekend weather across the Midwest has been nearly perfect for harvest. That was just what farmers ordered as they were running about two weeks behind in getting crops tucked away for winter.
    Traders expect USDA late Monday to report a big jump in harvest progress from last week when only 39 percent of the corn crop was harvested. By early November, typically 80 percent of the corn harvest is complete. Most of the soybean crop should be off the field.

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