Market Commentary

Dec corn down 1 ½ at $3.52
Nov beans down 5 ½ at $9.7875
The DOW is down
USD is stronger
Crude oil up $.54 at $51.20

Good morning,

Corn bulls are eager to see this afternoons latest weekly crop-condition report. Last week the USDA left crop conditions "unchanged" at 61% rated "Good-To-Excellent". But when you looked deeper inside the numbers, you could see larger condition setbacks. Illinois conditions dropped by -4% last week and are now rated just 52% GD/EX; South Dakota conditions fell by -3% and now stand at 40% rated GD/EX; Nebraska conditions fell by -2% to 62% rated GD/EX; Iowa fell by -1% to 59% rated GD/EX; Minnesota conditions also deteriorated by -1%. My point is, when big production states like Illinois, Iowa, Minnesota, Nebraska and South Dakota are all experiencing crop condition setbacks at the same time the bears tend to pause for a moment to take notice. Weather here in the U.S. really hasn't been much of an event nearby. The harvest is progressing steadily form the South to the North and more yield data is starting to circulate inside the trade. However, the story line remains the same, with many producer coming up shorter than they have the past couple of years, but better than they had previously forecast. From a technical perspective, many inside the trade want to see the market close back above the previous nearby high of $3.62 per bushel before getting overly excited about some type of longer-term bullish run to the upside. If that hurdle can be overcome, stiffer technical resistance immediately shows up on the charts between $3.75 and $3.90 per bushel. Funds are thought to currently be short about 125,000 contracts. Yields in SW Iowa on beans are in the 60-65 bpa range and moisture is under 11 percent. Corn yields are all above 200 with moisture under 18 percent.

Cattle on Feed totaled 10.5 million head as of September 1, 2017, a rise of +4% from last year levels. "Placements" during August were reported at 1.93 million head, +3% above 2016. "Marketings" of fed cattle during the month were 1.98 million head, a +6% year-on-year increase. Also on Friday, Cold Storage pegged total red meat supplies as of August 31 up +7% from the previous month, but down -3% from last year. Total pounds of beef were up +10% from July, though down slightly year-on-year. Pork supplies saw a +4% gain for the month, but were -5% below last year. Pork bellies were +8% higher than July, but down a whopping -40% from 2016. Frozen poultry supplies on August 31 were down just slightly from July, but up +6% over last year. In other news, the USDA’s Ottawa bureau projects Canada’s cattle heard is poised to drop to its lowest level in 28 years thanks in part to the reluctance of a new generation of ranchers to enter the industry. They also cite high feeder prices at earlier this year which fueled a +12% increase in the Canadian heifer slaughter and a +16% surge in cow slaughter. The USDA this week also warned that both feeder cattle and fattened cattle face autumn declines, officials said, citing an "abundant supply of competing meats.” U.S. pork output expected to set records in both the current quarter and the October-to-December period, helped by the opening of two slaughter plants two weeks ago.

SX broke through resistance at the $9.78 ¼ recovery high which opens the chart up for a run to the second upside PriceCount objective to $9.90. Support lies at $9.60 for now. The weekly chart closed higher for a sixth consecutive week and followed through on last week’s outside week, downtrend resistance shows in the $10.00 area from here.

Arkansas last week moved just one step away from barring sprayings next summer of an herbicide linked to widespread U.S. crop damage, setting the stage for a potential legal showdown between the state and chemical maker Monsanto Co. The Arkansas State Plant Board advanced a proposal prohibiting use of dicamba weed killers from April 16 to Oct. 31, 2018, after farmers reported that soybeans and other crops were damaged when the herbicide drifted away from where it was sprayed this summer. The no-spray dates proposal will next head to an Arkansas legislative subcommittee for final approval, after a public comment period and public hearing on Nov. 8. Chemical companies have blamed damage to crops that cannot tolerate dicamba on farmers misusing the chemical. Specialists, though, have said the weed killers are risky because they can vaporize and drift across fields after they are sprayed on dicamba-resistant soybeans or cotton developed by Monsanto. That process, known as volatility, occurs more often in high temperatures, according to experts. (Source: Reuters)

China's National Energy Administration recently announced that it plans to implement a nationwide E10 ethanol blending mandate but industry sources are skeptical about Beijing's ability to do so successfully owing to uncertainty about the blended fuel's impact on vehicles and lack of a clear pricing mechanism. The NEA recently published a blueprint claiming that it would boost the production of fuel ethanol and promote the use of E10 gasoline containing 10% ethanol nationwide by 2020. The move aims to balance the supply and demand of grains and optimize the energy structure, as well as improve the environment, NEA noted. The E10 mandate is currently implemented in 11 provinces and cities. Sources said that the use of E10 is controversial and it is unlikely to be made mandatory. A source close to NEA also believed that the blueprint is more advocacy rather than mandatory. Drivers have complained about their exhaust pipes leaking water, cars not having enough power and even fuel efficiency suffering from the use of E10. Another source with a Sinopec refinery said that the consumption of E10 in central Anhui province, one of the 11 provinces that have implemented the E10 mandate, has shrunk this year. (Source: Platts)

Have a good day,

Brady, Darren and David

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