Markets Gearing Up for September Reports

The trade was driven early on by the European Central Bank’s announcement
of a bond buying program to ease the debt obligations of Portugal, Spain, Greece and
Italy. The outside markets reacted positively to this announcement with stocks trading
over 1.5% higher. Crude oil was up sharply only to end in the red. The dollar index is off
slightly after the announcement. This lent some support to the grains as the pit session
opened up. However, supply and demand is still on most traders’ minds.

On the demand side, we saw wheat export sales of about 475,000 MT to Egypt
lost to Russia, Romania and Ukraine today. Domestic wheat prices are overpriced on the
world market for now, but there has been a lot of chatter about exports being voluntarily
limited by Ukraine later this year. There is also talk of the possibility of Russian exports
being restricted. We haven’t seen anything concrete from either country, but these
limitations will have to be monitored as we move forward.

The Energy Information Administration released its ethanol report for the week
ending Aug. 31st. Ethanol production was reported as 829,000 barrels per day, which
is up 1.2% this week but down 7.5% from last year. Ethanol stocks increased 238,000
barrels, which is an increase of 1.3% from last week and 9.7% above last year at this
time. Total corn used for ethanol in the last marketing year fell just shy of the USDA’s
estimate of 5 billion bushels by 40 million bushels.

A couple of private estimates came out recently with their final yield estimates
of about 121 and 120 for corn and 36.7 and 36 for soybeans. Their corn estimates are
a couple bushels below the current USDA estimate of 123.4, but the bean estimates
are on par with the USDA’s 36.1. The trend of the private estimates has been for corn
to be lower by a couple of bushels and beans roughly the same. We’ll get the USDA’s
updated production estimates next Wednesday. Included in the USDA’s estimates will
be revisions to world production. We already see some early indications that world
production should increase as Brazil is expected to plant a record soybean crop. More
recently the Buenos Aires Grains Exchange projects corn plantings in Argentina to
increase 300,000 hectares from previous estimates to about 3.4 million hectares.

Traders will be focusing on next week’s USDA Supply/Demand and Crop
Production reports towards the end of this week and into the beginning of next week.