Hello, I'm Mark Pearson.
Wall Street was disappointed this week by the Federal Reserve's decision to not cut interest rates.
But, the mood of the investment community was buoyed by the passage of the August 14 deadline that required C.E.O's to now personally sign off on their company's financial statements. The fact so few large companies had to restate earnings was viewed by the Street as a return of fiscal accountability, and a good first step toward restoring public confidence in corporate America.
While corporate America struggles with public relations, much of the Rural American economy is being broiled by drought, the impact of which is searing commodities markets.
Futures trading pits erupted on the Monday release of government crop projections. The USDA survey expects far less grain and oilseed to be harvested this year than last. Corn production is projected to be 7 percent lower, the soybean harvest 9 percent lower. The government forecasts the wheat harvest will yield 14 percent fewer bushels than a year ago.
While the trade has been expecting the drought to diminish yields, the government's projections, coupled with its estimates of shrinking stockpiles, pushed prices higher through the week. Prices for soybeans, wheat and corn are trading at the highest level since the mid-90s. Just since August first the value of the new crop December corn futures contract has soared 11%, the December wheat contract nearly 7%, and the new crop November soybean contract has gained 5 and a half percent.
But As Market to Market analyst Doug Jackson cautioned last week, lower U.S. yields and rising futures prices, especially for soybeans, also could be tempered in the months ahead by the arrival of a truly global agri-economy.
Doug Jackson: "… We've learned the hard lesson the last few years that beans are a bihemispheric situation. Even if the U.S. would have a 36 yield and be on the verge of running out of beans next year, we'd still have 100 million tons of beans in the Western Hemisphere. It means big inverses, strong basis, changed market flows around the world. It means the threat of imports into the U.S. of everything this year, including wheat and beans and meal, and we're just going to have to get used to that. A very dangerous situation."