Morning Commentary

Dec corn down 1 ½ at $3.77

Nov beans down 4 ¼ at $10.3925

The DOW is down

USD is stronger

Crude oil down $1.07 at $40.04

Good morning,

Corn bulls will be trying to add on to last weeks +10 cent gain and six month high in price. The hope is that Chinese demand remains strong and upcoming South American weather a bit uncertain. Bears are pointing to great weather coming up for the U.S. harvest and early yields out the fields perhaps a bit better than expected. With little in the way of new oil exploration and a ton of capacity offline, perhaps the oil market is caught a bit offsides and we see an increase in ethanol demand. If production out of the fields here at home is better than forecast and upcoming South American weather seen as more cooperative prices could pull back a bit. Bears think total U.S. production could be a bit higher than the current USDA forecast. In the latest report, the USDA lowered its U.S. production estimate by -378 million bushels to 14.9 billion on a reduction in yield from 181.8 down to 178.5 bushels per acre. Remember, they also reduced harvested acres from 84 down to 83.5 million acres. Since August 28th, open interest has risen 128,000 lots and Dec futures added 19 cents. The trend for Dec corn is positive. Stable action over 380 will support a drive to 400. Closing under 361.75 cautions for a corrective phase.

Soybeans prices jumped +47 cents higher last week as funds increase their net long position to what is believed to be over +200,000 contracts. Bulls believe Chinese demand will remain strong and the U.S. balance sheet will continue to shrink into the yearend report. The USDA reduced their ending stock estimate by -112 million bushels in the last report as they reduced the average yield by -1.4 bushels per acre from 53.3 down to 51.9. Technically, this is the highest price we’ve seen in the front-end of the market since May 2018. In February 2018 we traded to $10.71 and in January of 2017, we traded to $10.80 per bushel. The highest front-end print in the past five years is $12.08^4 back in June 2016. Total open interest is at its highest level since April 2018. The trend for Nov beans is positive. Stable action over 1045 should fuel a run to 1100. Closing below 1008.5 alerts for a correction.

USDA’s Farm Service Agency (FSA) reminds farm owners that they have a one-time opportunity to update Price Loss Coverage (PLC) program yields for covered commodities on the farm. The deadline is Sept. 30, to update yields, which are used to calculate the PLC payments for 2020 through 2023. Additionally, producers who elected Agriculture Risk Coverage (ARC) should also consider updating their yields.

Sign-ups begin today for a new round of coronavirus aid to producers for as much as $14 billion, which the USDA detailed on Friday. The announcement came after President Donald Trump talked about the aid package at a campaign rally Thursday evening in Wisconsin. The president said his administration was providing an additional $13 billion to producers. The USDA announcement Friday was $1 billion higher than the president said at his rally. USDA said signup for the new Coronavirus Food Assistance Program (CFAP 2) would begin Sept. 21. Applications will be accepted through Dec. 11, 2020. The first CFAP package for coronavirus-related losses before April 15 has paid out $9.9 billion to 621,919 farmers, as of the latest payment update. Cattle, dairy, corn, hogs and soybeans are the main aid recipients. USDA had projected spending $16 billion for the CFAP.

The administrator of the U.S. Environmental Protection announced Friday a step on the road to re-registration of the herbicide atrazine. The announcement by Andrew Wheeler, that the agency has given interim approval to the re-registration of the triazine class of herbicides, is seen as good news for corn farmers. “The next option up if we couldn’t use atrazine is probably between $30 and $60 an acre more,” said Mike Moreland, president of the Missouri Corn Growers Association and a farmer in western Missouri, “And with today’s tight margins that would break a lot of farmers.” Wheeler, who made the announcement at a farm in southwest Missouri, tells Brownfield there’s another step before full approval is given for re-registration. “We still have the biological decision we have to make as far as the Endangered Species Act is concerned,” Wheeler told Brownfield following the announcement, “but at this point, we don’t see any problems with moving forward on atrazine.” (Source: Brownfield Ag)

 

Morning Commentary

Dec corn up 1 ½ at $3.70

Nov beans up 3 ¾ at $9.9975

The DOW is up

USD is weaker

Crude oil down $.39 at $36.94

Good morning,

Corn bulls are a little disappointed as the USDA only trims production by -378 million bushels, dropping yield from 181.8 down to 178.5 and harvested acres lowered from 84.023 down to 83.5. Bulls point to the fact “harvested acres” in Iowa were lowered by -1 million and Nebraska lowered by -350,000, both major producing states that could bring a much greater reduction in total U.S. production, which was lowered from 15.278 billion down to 14.900, but still stands well above last years 13.617 billion. Bears point to the fact the USDA still sees a very big crop and the fact overall demand was lowered by -100 million bushels despite the recent wave of Chinese buying. Net-net, bears argue U.S. ending stocks at 2.503 billion bushels is still comfortably above last years 2.228 billion and not a reason to add additional risk-premium to our current price.

Soybeans bulls are happy to see U.S. ending stocks lowered from 610 million down to 460 million. Perhaps most exciting to the bulls is the fact the USDA left demand “unchanged”, meaning the balance sheet could get trimmed more in the coming reports as both “crush” and “exports” look as if they could be bumped higher. The USDA lowered its U.S. yield estimate from 53.3 down to 51.9, but bulls believe that number could also end up working itself lower. The USDA also left “harvested acres” unchanged at 83.020 vs. 74.951 last year, again, bulls are thinking this number could ultimately be reduced, not raised higher. If we get ending stocks sub-400 million on lower harvested acres or perhaps a lower yield and demand stays strong we could have much higher prices as a “demand-driven” bull can get up and run. 

Over the weekend president Trump said that retail gas stations selling E-10 could now offer E-15 gasoline nationwide if their state government provides approval. Before we get overexcited we have to remember unleaded gasoline is actually  selling much cheaper than ethanol at the moment. Meaning it doesn’t really make a ton of financial sense. However, it is a step in the right direction and could provide a longer-term tailwind for ethanol. 

Brazil’s government will extend a tariff-free ethanol import program with the United States for 90 days starting Sept. 14, the foreign ministry said in a statement on Friday. During that time, the United States and Brazil will discuss ways in which they can open up their respective ethanol, soy, and corn markets, the statement said. Brazil allowed a non-tariff quota for imports of 750 million liters per year of ethanol to expire at the end of August, resulting in U.S. producers having to pay a 20% tariff. The next tariff-free regime will apply only to the first 187.5 million liters of ethanol, the Economy Ministry’s foreign trade body said in a separate statement on Friday.

 

Morning Commentary

Dec corn up 2 at $3.6225

Nov beans up 1 at $9.7975

The DOW is up

USD is weaker

Crude oil down $.57 at $37.48

Good morning,

Corn bulls remain hopeful… waiting for the USDA to dramatically lower total U.S. production. Remember, this will be the first one this year that uses actual field surveys. The average trade estimate is looking for a yield of 178.4 bushels per acre vs. the current USDA estimate of 181.8. Perhaps a bigger question will be the USDA’s current view of “harvested acres”? Currently, the USDA is using 84 million harvested but there’s talk that number could ultimately be trimmed by -1 to -2 million by year-end. On the demand side of the balance sheet, most all are in agreement that corn used for ethanol will be trimmed and exports bumped higher. Bears want to argue that feed and residual will be reduced while bulls think it could be stronger than forecast. The trend for Dec corn is positive. A close over 363 will support a drive to 376, perhaps the low‐380 area. Closing under 347.75 confirms a correction phase. Based on the trade count, funds are thought to be short 22,000 corn as of today.

Soybean traders are eagerly waiting on tomorrow’s USDA numbers scheduled to be released at 11:00 am CST. The trade is thinking the USDA will reduce its yield estimate from 53.3 down to 51.7 bushels per acre. . The USDA had ending stocks forecast at 610 million but the trade is now thinking more like 470 million, which makes the market much more interesting. In below average volume, open interest surged 13,000 lots. Gains were led by Nov through March. The trend for Nov beans is positive. Stable action over 975 should fuel a run to 997. Closing below 957.5 alerts for a correction.  Based on the trade count, funds are thought to be long 153,000 beans.

Trump administration officials have told ethanol advocates the government will reject requests by refineries to be waived from renewable fuel-usage requirements. The Environmental Protection Agency could reject as many as 67 of those retroactive waiver requests as soon as this week, according to four people familiar with the matter who asked not to be named prior to an announcement. Refineries filed dozens of applications with the EPA seeking retroactive waivers from the biofuel-blending requirements dating back to 2011. The tactic followed a January federal court ruling that said the relief was limited to facilities that have consistently received exemptions. Administration officials have not yet decided whether to reject a separate 28 pending requests tied to 2019 biofuel quotas, two of the people said.(Bloomberg)

A three-year fuel pump infrastructure program lead by the National Corn Growers Association has delivered 50,000 fuel pumps across the country that support higher octane fuels. NCGA President Kevin Ross tells Brownfield they worked with Wayne Fueling Systems to produce and sell the pumps that pump a blend up to E25. “That was a really fantastic opportunity for us not just right now with E10-E15 usage levels but really moving into the higher-level blends that we would like to get to down the road. 50,000 fuel pumps, that is a big deal right there.” NCGA has also partnered with the Renewable fuels Association to help retailers apply for the USDA’s Higher Blends Infrastructure Incentive Program which includes $86 million to expand the availability of higher blends like E15 and E85. So far, those efforts have reached applicants representing more than 1100 fuel dispensers across 21 states. NCGA Market Development Vice President Jim Bauman says if the US were to move to a higher octane, mid-level blend of ethanol long-term it could create 5 billion gallons of new ethanol demand, equivalent to 1.8 billion bushels of corn annually. (Source: Brownfield Ag)

 

Morning Commentary

Dec corn down 1 at $3.5775

Nov beans up 3 ½ at $9.655

The DOW is down

USD is stronger

Crude oil down $.77 at $40.74

Good morning,

Corn traders will be interested in this morning’s export sales data. The continued Chinese buying should help offset some of the weakness we are seeing in ethanol. Corn used for ethanol was down a bit in yesterday’s report and has struggled to gain much ground the past few weeks. Unfortunately, we are starting to see a slight build in overall supply. Most inside the trade expect corn for ethanol will again be trimmed. The production side of the balance sheet, the debate remains U.S. weather and final average yield. Most in the trade seem to be orbiting their guesses around the 175 number vs. the USDA’s August yield estimate of 181.8 bushels per acre. Bottom line, bulls need to be fed on a regular basis and there hasn’t been a lot new this week. The U.S. dollar posted new lows and has rebounded a bit the past couple of days.

Soybean bulls are hoping to see strong weekly export sales data this morning to go along with this week’s record crush data. There’s really no question that demand is robust. The big debate in the market is obviously U.S yield and forecasted finishing weather. I feel like the average yield is down in the 50 to 51-bushel range, but there’s still a lot of talk inside the trade from those who think we could still be north of 53 bushels on big pod counts and some blow out records that will be harvested in some locations. Bears point to the fact there are rains in the forecast for many dry areas.

The USDA in its latest Farm Income Forecast, says net farm income, a broad measure of profits, is forecast to increase +$19.0 billion (+22.7 percent) to $102.7 billion in 2020, after increasing in both 2018 and 2019. In inflation-adjusted 2020 dollars, net farm income is forecast to increase +$18.3 billion (21.7 percent) from 2019. If realized, in inflation-adjusted terms, net farm income in 2020 would be -25.4 percent below its peak of $137.6 billion in 2013, but +13.8 percent above its 2000-19 average ($90.2 billion). Net cash farm income is forecast to increase +$4.9 billion (+4.5 percent) to $115.2 billion in 2020. Inflation-adjusted net cash farm income is forecast to increase +$4.0 billion (+3.6 percent) from 2019, which would be +5.7 percent above its 2000-19 average ($109.0 billion). Cash receipts for all commodities are forecast to decrease -$12.3 billion (-3.3 percent) to $358.3 billion (in nominal terms) in 2020. Total animal/animal product receipts are expected to decrease -$14.3 billion (-8.1 percent) with declines in receipts for broilers, cattle/calves, hogs, and milk. Direct government farm payments are forecast at $37.2 billion in 2020, an increase of +$14.7 billion (+65.7 percent, in nominal terms).

A brokerage analyst says their recent survey of crop producers shows corn and soybean yields might be lower than expected. Rich Nelson is the chief strategist for Allendale. He says, “The yield numbers imply a moderate drop in supply here, but not anything drastic yet.” Nelson says their corn yield projection for the nation is less than what USDA projected. “The official survey is 178.28 bushels per acre for yield. That is down slightly from the 181.83 USDA had been using.” Nelson says in Iowa, their producers are looking at 185 bushels per acre of corn compared to USDA’s recent projection of 202 bushels, or about 227-million-bushel change, but he says they won’t really know until farmers get in the fields. Nelson says since 1970, there have been thirteen years with a dry August, and nine of those years could be compared to 2020. He says in six of those nine, the January yield numbers rebounded some after the harvest. (Source: Brownfield Ag)

Kansas City Southern is reportedly the target of an unsolicited buyout offer from a group of investors including The Blackstone Group, shining a spotlight on the railroad company with strong ties to cross-border trade with Mexico. The Wall Street Journal reported on Wednesday that a consortium including Blackstone and Global Infrastructure Partners has submitted a sweetened bid for Kansas City Southern after an earlier attempt was rebuffed by the company. Terms of the offer were not known, but the Journal had reported in July that a group including Blackstone was weighing making an offer that would have valued Kansas City Southern at about $20 billion. The transportation company had a market capitalization of more than $17 billion as of Wednesday’s trading. None of the parties involved had any comment on the report.

 

Morning Commentary

Dec corn down 3 ¾ at $3.54

Nov beans down 2 ½ at $9.51

The DOW is up

USD is weaker

Crude oil up $.42 at $43.03

Good morning,

Corn bulls are pointing to another round of big buying by the Chinese and further deterioration in the U.S. crop. In fact, , this is the eighth consecutive week of downgrades for the Iowa crop. Bears point to the market not being able to hold the highs above the 200-Day and the funds mostly covering their previously large short position. Traders are digesting another -2% deterioration in the “Good-to-Excellent” rating which now stands at 62% GD/EX vs. 58% last year at this time. Iowa was down another -5% to 45% rated GD/EX vs. 62% last year. The trend for Dec corn is bullish. A close over 363 will support a drive to 380+/‐. Closing under 350.5 alerts for a correction.

Soybean bulls are pointing to increasing crop deterioration in states like Iowa, Nebraska, and Kansas along with continued buying form the Chinese and a U.S. dollar that just posted two-year lows. Similar to corn, soybean traders are trying to figure out total U.S. production as the market is digesting another -3% deterioration in the “Good-to-Excellent” rating which now stands at 66% GD/EX vs. 55% last year at this time. Poor-to-Very Poor was raised to 10%. Iowa is down another -6% to 50% rated GD/EX vs. 60% last year. The trend for Nov beans is bullish. A close over Monday’s high (966.75) or punch above channel resistance at 975.25 is needed to prompt the next leg higher.  Closing below 942.75 alerts for a correction.

Cattle future’s markets at this time seem like the recent uptrend is at risk of breaking down. For the first time since early May, the futures have moved below the 50 DMA and is possibly signaling a pivot. The negative sentiment stemmed first from questions about near term cash trajectory and then exacerbated by a less than friendly Cattle on Feed Report. Today’s action was on moderate volume and noncommittal trade. For the next ten business days or so we will see the effect of long roll out of Oct. This is expected and could pressure the spreads creating opportunity for spreaders and potentially setting up a better commercial short roll.  Today was last trade for AUG20 LC and was essentially a quiet expiration. Cash trade for last week was a slight disappointment with slightly over 100 thousand head trading at approximately 105.00/CWT versus 106.00-107.00/CWT last week. We are seeing a sizeable increase in the amount of cattle being traded in the Texas negotiated market. I am not sure that this really means anything longer term but rather just and interesting observation from an area that has minimal negotiated trade. The numbers of cattle on the show lists for this week is lower across the country with the largest decreases in the south. Beef markets are beginning to soften in the spot market, but the comprehensive report was released today and printed a +8.23/CWT increase last week on modest volume. Spot choice beef is 227.95/CWT as of this writing and dressed cattle are trading 166.00-167.00/CWT. The strong packing margins should be a supportive factor as we work our way into the fall. There is concern regarding how holiday beef markets may trade considering our current situation and the potential reduced holiday gathering. From a hedging standpoint there are many opportunities even now after breaking off recent highs. Covering some risk for less consistent hedgers is potentially necessary and being more highly hedged for structured players makes sense given our current fundamental and technical setup. The trading community appeared to add length in recent weeks. Friday’s COT report showed a net increase of 22 thousand cars in the non-commercial category with the hedger taking most of that on. As a commercial hedger, this is a challenging time. Futures markets are generally lower than many cattle feeders need them to be in order to capture significant profitability not considering how basis may trade. It is in these times that I remind myself of the wisdom in taking base hits, preserving equity and living to fight another day. I sometimes liken hedging to Capt. Woodrow Call’s comment in Lonesome Dove…”Better to have it and not need it than to need it and not have it.” Trey Warnock –  Amarillo Brokerage Company  

In a year hit by an economic recession, which triggered a cap in global fuel consumption, Brazil is moving toward domestic market protection, withdrawing its ethanol import quota market expiring Aug. 31. Market participants say the absence of official announcement on the expiry day was a sign the federal government was not willing to renew it. In August 2017, a strong lobby from North-Northeast region, where the majority of the imports enter the country, pushed the Brazilian government to limit the import volume free of tax. In that year, the Brazilian NNE imported 1.68 billion liters from September 2016 to August 2017, the record historical volume for the period. During the first 24 months of free import quotas, from Aug. 31, 2017, to Aug. 31, 2019, the quarterly quota of 150 million liters was split between quotas A and B. Companies placed in quota A had access to 50% of the total quota, but could also place orders to access the additional volume available in quota B. Quota A companies could request 7,500 million liters, while companies listed in quota B could request 3,750 million liters. From Aug. 31, 2019, to July 30, 2020, just 500 million liters of ethanol were imported through the NNE ports, half of the 1.07 billion liters imported in the prior 12 months. (Platts)

 

Morning Commentary

Dec corn up 3 at $3.5725

Nov beans up 10 ¾ at $9.35

The DOW is down

USD is stronger

Crude oil down $.18 at $43.21

Good morning,

Corn traders are debating U.S. rains and Chinese buying. Bulls are pointing to comments from some forecasters that upcoming Iowa rains might bring less than hoped for. Bulls are also pointing to talk and headlines out of China that they will more than likely continue buying U.S. corn. The question is in what capacity, i.e. how much and how soon? Moral of the story, total U.S. crop production has obviously backpedaled on weather hiccups in several key regions, and at the same time, Chinese buyers continue to sniff around in the U.S. corn market. These two big changes in the headlines along with the weaker U.S. dollar and more accommodative commodity landscape has forced the funds to exit a majority of what was once a massive short position. Moving forward the trade will need to find the fresh headlines to keep bulls engaged and fed and able to attract new money flow to keep prices moving higher. The trend for Dec corn is positive. The market is poised for a run towards 360+/‐. Closing under 347.5 alerts for a correction.

Soybean traders are talking about the same thing as corn traders, i.e. continued U.S. weather uncertainties and Chinese buying. There have been some headlines out of China recently that President Xi has been urging consumers to conserve food and do their best to limit waste. Bulls believe that plays right into arguments weeks ago that China was starting to battling a major food inflation problem and will have no choice but to be buyers of U.S. supply, Many inside the trade are thinking the Chinese will be importing a record amount of soybeans, some bulls think it could end up being close to 98 to 100 MMTs, with perhaps +40% of those imports coming from the U.S. The trend for Nov beans is positive. The market achieved our target at 924.75 on Aug 25th. Stable action over 924.75 suggests a run to 950. Closing below 910.25 warns of a correction.

The U.S. Department of Agriculture (USDA) is extending the deadline to November 20, 2020, for the Soil Health and Income Protection Program (SHIPP), a new pilot program that enables farmers to receive payments for planting perennial cover for conservation use for three to five years. Through SHIPP, producers can apply for three-, four-, or five-year CRP contracts to establish perennial cover on less productive cropland in exchange for payments. This pilot enables producers to plant perennial cover that, among other benefits, will improve soil health and water quality while having the option to harvest, hay, and graze outside the primary nesting season. Producers can enroll up to 50,000 acres in the program.

The Environmental Protection Agency has not made a decision on U.S. biofuel blending requirements for 2021 or on petitions from refiners asking to be exempted from past-year requirements going back to 2011, EPA Administrator Andrew Wheeler said on Wednesday. Wheeler could not assure that the agency will decide the 2021 Renewable Volume Obligations (RVO) by the Nov. 30 deadline due to the impact of the COVID-19 pandemic, saying the agency hopes to have a decision as soon as possible. He added that the agency is weighing 67 pending petitions from refiners, asking to be exempted from obligations for years covering 2011-2018. In January, an appeals court ruled that waivers granted to small refineries after 2010 had to take the form of an “extension.” Most recipients of waivers in recent years have not continuously received them, casting doubt on the program. (Source: Reuters)

Iowa ag economists who are looking into their crystal balls are finding what could amount to a challenging year in 2021 for farmers. While land prices are expected to slightly improve, farm concentration is expected to continue, big crops are seen pressuring prices, input costs are seen as going higher, and more problems are seen for farm loans. During a webinar Tuesday, a panel of Iowa State University (ISU) Extension economists did share some good news: China and the U.S. cannot do without each other. For that reason, the biggest buyer of U.S. ag products is expected to remain a large customer. In addition to China’s insatiable appetite for soybeans, U.S. corn and soybean product exports are growing into other parts of world, the economists say. Wendong Zhang, ISU Extension economist, says a lot is hinging on the amount of government payments as well.

 

Morning Commentary

Dec corn down 1 1/4 at $3.5325

Nov beans up 3 at $9.2325

The DOW is down

USD is stronger

Crude oil down $.16 at $43.19

Good morning,

Corn bulls are pointing to continued buying of U.S. supply by the Chinese, deteriorating crop conditions in several important areas here at home, and the funds starting to exit a larger portion of their short position.  Prior to Tues open, USDA flashed new crop sales of 408mt corn for China and 100mt for Japan. Last week’s sales report indicated new crop sales to China totaled 5.72 mln tns. Since then flashed sales to China totaled 1.008 mln tns. Therefore, US new crop sales to China total at least 6.728 mln tns. To put this in perspective, this is nearly 1.6 mln tons larger than the current record (2011/12) annual exports to China and the start of the marketing year is still a week away. At the same time, U.S. crop production estimates inside the trade are being trimmed primarily on the hard-hitting headlines that the Iowa crop has deteriorated to just 50%  “Good-to-Excellent” and a sizeable 21% of the Iowa crop now rated “Poor-to-Very Poor”. The trade seems to now be taking a national average yield of perhaps 175 to 180 bushels per acre. I’m still in and around that 177 to 178 area.” The trend for Dec corn is positive. Stable trade over 346.5 is bullish for a run towards 360+/‐. Closing under 347.5 alerts for a correction.

Soybean bulls seem to be talking very much the same language as the corn bulls, i.e. continued Chinese buying, deterioration in crop conditions here in the U.S., funds becoming more bullish, and perhaps a bit more headline interest starting to arise regarding South American weather forecasts. In above average volume, open interest rose just shy of 2,000 lots on Tuesday. Liquidation in Sep was overshadowed by gains in Nov, Jan, and May. The trend for Nov beans is positive. The market appears poised for a test of 924.75.  Stable action over 924.75 suggests a run to 950. Closing below 913 warns of a correction.

Iowa Gov. Kim Reynolds announced the additional allocation of Iowa’s funds from the federal Coronavirus Aid, Relief & Economic Security (CARES) Act of $100 million, with much of that available to assist and support Iowa’s agricultural economy, including biofuel and livestock producers, and funds to help small meat processors expand. “Iowa is at the foundation of our global food supply chain and the epicenter of the renewable fuels industry,” Reynolds said. “COVID-19 and a devastating derecho dealt a major blow to everything from the demand for ethanol to the supply of meat on grocery store shelves, but just as important are the livelihoods of thousands of Iowa farm families, agricultural industries and the communities they support. Today’s investment reflects the critical role Iowa’s ag industry has in our state’s overall economic recovery.” Iowa livestock producers are slated to receive $60 million and biofuel producers $15.5 million.(Feedstuffs)

The National Biodiesel Board is launching a campaign urging President Trump to reject gap small refinery exemption requests and uphold his commitment to the Renewable Fuel Standard. Kurt Kovarik, vice president of federal affairs, says the ads will urge farmers and biodiesel producers to contact officials in support of the industry. “Just 30 seconds at our website would allow individuals to send an email to both President Trump and EPA Administrator Wheeler voicing their concern about what EPA is up to with respect to the Renewable Fuel Standard and providing these loopholes to small refiners to skirt their obligation,” he says. He tells Brownfield action should be taken to reject the retroactive requests soon. Kovarik says in three years the EPA has granted 85 small refinery exemptions that destroyed demand for more than a half-billion gallons of biodiesel and hundreds of millions of bushels of soybeans. EPA is now considering nearly 100 new exemption petitions as producers have seen further demand destruction because of coronavirus-related travel restrictions.(Brownfield Ag)

 

Morning Commentary

Dec corn up 6 ½  at $3.515

Nov beans up 7 ¾ at $9.135

The DOW is up

USD is weaker

Crude oil up $.34 at $42.96

Good morning,

Corn bulls are happy to see the USDA slash the national weekly crop-condition rating by -5% down to 64% now rated GD/EX. Obviously, the big drag came from the crop rating in Iowa being lowered by -9% to now just 50% rated GD/EX vs. 65% last year. Coupled with the heat, the demand for gold, and we have the makings of a bull market. The trend for Dec corn is positive. A close over 346.5 is bullish for a run towards 360. Closing under 335.5 alerts for a correction. Based on the trade count, funds are thought to be short 118,000 corn.

The impact to crop production from the derecho wind event earlier this month has drawn a wide range of estimates. Kent Beadle with CHS Hedging narrowed his focus to 22 counties in Iowa that he believes sustained the most damage to develop an extreme, moderate, and conservative projection. “I did that after talking with my associates that are working in (Iowa), clients we have working in the state, and then also with growers who have had wind damage in the past and what the yield results were.” His most extreme assessment in those 22 counties was a loss of about 410 million bushels of corn. “With my more conservative estimate in about the 225 million-bushel loss. And not surprisingly, the middle-of-the-road estimate was in the mid 300 million-bushel loss.” Beadle tells Brownfield while the damage is significant, his conservative estimate would essentially displace the increase in yield seen in USDA’s latest supply and demand report.(Brownfield Ag)

Soybean  traders, similar to corn, are trying to figure out U.S. yield and total production. The USDA dropped the weekly crop condition rating -3% this week down to 69% rated GD/EX. Interestingly, both Michigan and South Dakota conditions were lowered by -10% in each state. The Iowa crop was lowered -6% and now stands at 56% rated GD/EX vs. 62% last year. The trend for Nov beans is positive. Stable action over 912.25 encourages a run to 924.75. Closing below 898.75 warns of a correction. Based on the trade count, funds are thought to be long 60,000 beans.

Cattle markets continue to trend higher in both the cash and futures markets. The overall feel of the market remains very quiet in light of the firmer action. Friday’s Cattle on Feed report was released and somewhat surprisingly showed a July placement number 111% above last year and still record numbers of cattle on feed. The southern feeding regions continue to hold a massive number of cattle on feed with the north being on the smaller side of historical levels. The weight classes of cattle being placed did see an uptick of lighter calves but the majority remains heavier yearling types that will keep the market front end loaded to an extent. Moving on to cash markets, this past week saw another jump in total volume traded as well as price. The national average live steer brought 106.66/CWT versus 105.11/CWT last week and 169.31/CWT dressed versus 168.00/CWT. Basis has improved against the AUG20 LC contract and with today’s break we would assume we could return the basis to a positive number this week. Spot beef markets added another 11.00/CWT last week and are starting off on a firm tone this week. Interestingly, the main drivers of the beef cutout are higher quality middle meats in the face of food service disruptions. Comprehensive beef report was released today and printed a 7.20/CWT rise in price with a 4% increase in total volume and 29% jump in forward sales. Export sales have underperformed in the short term after seeing incredible movement through early August. Futures markets have trended nicely higher thus far and are experiencing some technical weakness as of late. This technical momentum combined with fear that cash is potentially reaching a near term top has some feeling anxious about the cash markets near term direction. As we write, there are reports of a few thousand cattle trading in the south at 105.00/CWT. There are, as always, many headwinds and factors that can support both the bull and bear thesis. There is no doubt the broader supply story is seemingly negative. Also, the strong demand picture setup by domestic consumption, exports and packing profitability is for sure compelling. Maintaining a healthy perspective based in reality will be important in navigating the market going forward. Wise business decisions and acknowledging risk is imperative. Otherwise, we could end up like Dwight Yoakam…guitars, Cadillacs, hillbilly music; is the only thing that keeps me hanging on. Trey Warnock – Amarillo Brokerage Company

USDA’s Cold Storage report showed total red meat supplies in freezers were up +1% from the previous month but down -15% from last year. Total pounds of beef in freezers were up +3% from the previous month but down -3% from last year. Frozen pork supplies were down slightly from the previous month and down -25% from last year. Stocks of pork bellies were down -21% from last month and down -20% from last year. Total frozen poultry supplies on July 31, 2020 were up +4% from the previous month but down slightly from a year ago. Total stocks of chicken were up +1% from the previous month and up +3% from last year. Total pounds of turkey in freezers were up +10% from last month but down -6% from July 31, 2019.

Loopholes remain, but the USDA is tightening its crop subsidy rules by limiting who can collect a payment for managing a farm, historically one of its most porous definitions. The new regulation requires people to perform at least 500 hours of management or at least 25% of the management work required annually to merit a subsidy check, which some call “a very major advancement.” Previously, the USDA standard was active personal management that was crucial to the profitability of the farming operation. Crop subsidy recipients can collect up to $125,000 apiece, with spouses automatically eligible for payments. Iowa Sen. Chuck Grassley, who says farm supports should be directed to working farmers and family-size farming operations, fought for a limit of one “manager” per farm in the 2018 farm law.

 

Morning Commentary

Dec corn up 3 at $3.435

Nov beans up 6 at $9.1075

The DOW is up

USD is weaker

Crude oil up $.34 at $42.68

Good morning,

Corn bears are talking about improved rainfall chances in the forecast for parts of the corn belt as two hurricanes approach the Gulf. The follow through of the storms could improve moisture profiles in the days and weeks ahead. Bears are also thinking we could soon start to battle more harvest pressure as the crop advances and the harvesting down south starts to move more quickly to the north. Bulls continue to point to Chinese demand and the idea that they will continue to purchase U.S. supply. Bulls also believe the USDA’s current yield forecast is overly optimistic at 181.8 bushels per acre. . The Pro Farmer Crop Tour last week culminated with the group forecasting a final U.S. average yield of 177.5 bushels per acre and total production of 14.820 billion bushels, or about -458 million bushels less than the USDA’s current forecast of 15.278 billion bushels. The Pro Farmer Tour is estimating Iowa at 180 bushels per acre. The trend for Dec corn is positive. A close over 346.5 is bullish. Closing under 329.75 is negative. In Line with the trade count, Friday’s COT report showed funds short 133,000 lots versus 194,000 the week prior.

Soybean traders remain heavily focused on U.S. finishing rains and Chinese buying. Bears believe the USDA is fairly close with its current record-setting yield forecast of 53.3 bushels per acre and 4.425 billion bushels in total supply if the U.S. rains are delivered as forecast. Bears also doubt the Chinese will do much heavy U.S. buying ahead of the upcoming U.S. election. Last weeks Pro Farmer Crop Tour produced a national average yield forecast of 52.5 bushels per acre and a total U.S. crop of 4.362 billion bushels or about -63 million bushels below the current USDA forecast. The state breakdown estimated Iowa averaging 55 bushels per acre. The trend for Nov beans is positive. Stable action over 913 encourages a run to 924.75. Closing below 898 warns of a correction. 45,000 contracts more long than expected, Friday’s COT report showed funds long 68,000 lots versus short 8,000 the week prior.

USDA’s Cattle on Feed report showed inventory for feedlots with capacity of 1,000 head or more totaled 11.3 million head on August 1, 2020, a +2% increase from August 2019 and the highest August inventory since the series began in 1996, according to the USDA. The result was about +1% higher than analysts expected. Placements during July came in at 1.89 million, +11% higher than last year and well above estimates for around a +6% increase. Marketings during July totaled 1.99 million head, -1% below 2019 and right at expectations. 

Deere & Co, the world’s largest farm equipment maker, lifted its full-year earnings forecast on Friday after a smaller-than-expected decline in quarterly profit, as the sector benefits from replacement demand and government stimulus. The Moline, Illinois-based company said it now expects net income of about $2.25 billion for the full year, higher than $1.6 billion to $2 billion estimated earlier. Profit for the latest quarter came in at $2.57 per share — an 8.5% year-on-year decline compared with a 55% drop expected by analysts in a Refinitiv survey. Similarly, equipment sales fell 12.4% year-on-year to $7.9 billion, lower than Wall Street’s estimate of a 25.3% decrease. Sales of tractors and combines for the year are expected to be down -10%, compared with a -10% to -15% drop estimated in May, helped by improved demand in North America and Asia. Construction and forestry machine sales are estimated to decline an annual -25%, lower than a -30% to -40% fall forecast earlier. (Source: Fox Business)

 

Morning Commentary

Dec corn down ½ at $3.4425

Nov beans down 1 ¾ at $9.135

The DOW is up

USD is weaker

Crude oil down $.16 at $42.73

Good morning,

Corn bulls are looking at headlines that indicate the U.S. crop is encountering some problems and at the same time so are some important areas in Europe and Ukraine. the bulls are mostly focused on the -10% drop in the USDA’s weekly crop condition report for the top producing state of Iowa which fell to 59% rated GD/EX vs. 65% GD/EX last year. The USDA also pushed up the 8% Poor-to-Very Poor rating for Iowa to a much more worrisome 17% of the crop now rated Poor-to-Very Poor. Overall U.S. crop conditions are now down to 69% rated GD/EX vs. 72% rating most of July. The Pro Farmer Crop Tour showed much better yield results than last year for both South Dakota and Ohio, but with the record yield being forecast by the USDA it should be no surprise to the trade. The big wild card remains Iowa, stay tuned and look for more insight on the Wednesday and Thursday leg of the Tour. The trend for Dec corn is positive. The gap from July 10th was filled at 343.75 on Monday. A close over 346.5 is bullish. Closing under 329.5 is negative. Based on the trade count, funds are thought to be short 115,000 corn. Since August 10th, funds have bought an estimated 93,000 corn. Dec corn rose 24 cents over that time span.

Soybeans: In above average volume, open interest rose 7,000 lots on Monday. The trend for Nov beans is positive. Stable trade over 912.5 leaves the market poised for a run to 924.75. Closing below 885 is negative. Based on the trade count, funds are thought to be long 25,000 beans. Since August 10th, funds have bought an estimated 33,000 beans. Nov beans rose 47.75 cents over that time span.

U.S. President Donald Trump on Monday said he approved federal disaster aid for Iowa after a hurricane-force storm hit last week, causing widespread damage in towns and farms and leaving thousands without power. Iowa Governor Kim Reynolds said on Sunday she requested about $4 billion in emergency funds following the Aug. 10 storm. Media reports said the storm caused at least three deaths in Iowa. Winds as high as 100 miles per hour (160 kph) hit eastern Nebraska, Iowa, Wisconsin and parts of Illinois. The storm affected 58,000 holders of crop-insurance policies with a liability of around $6 billion in Iowa, according to the Iowa Soybean Association. U.S. Senator Charles Grassley of Iowa told reporters on Monday that the number of grain bins flattened is “humongous.” It is too early to determine whether there will be enough storage space for the autumn harvest, he said. (Source: Reuters)

China’s chicken producers are pushing ahead with aggressive expansion plans despite a slump in demand due to the coronavirus, reducing reliance on imports amid recent fears about the safety of foreign meat. The world’s No. 2 poultry producer is expected to produce a record 14.85 million metric tons of chicken meat in 2020, according to the USDA, a substantial increase over last year’s +18% rise to 13.75 million metric tons. The significant expansion is boosting demand for key feed grains like corn and soybeans, traders in China say, while pushing down poultry prices. However, the rapid expansion may have been ill-timed, as the COVID-19 epidemic has pummeled China’s chicken demand.

A new multi-state study shows artificial drainage gives soybeans a yield bump. University of Wisconsin soybean specialist Shawn Conley tells Brownfield fields with artificial drainage have improved yields, whether using drain tile or surface drainage. Conley says, “We can get as much as a 4% yield gain in those areas that were tile-drained vs. if they weren’t drained at all.” Conley says he suspects the reason for improved yields might have nothing to do with managing water on a growing crop. “It’s really kind of hard to tell. Is it the drainage part, or is it the fact that farmers can get into that ground up to seven days earlier?” And, he says earlier planting means point-2 to point-5 more bushels per acre per day in additional yield.(Source: Brownfield Ag)

Bitcoin rallied on Monday, advancing past $12,000 to its highest since July 2019. After trading sideways for much of the summer, Bitcoin seems to have re-gained its mojo. And in an environment of ultra-low rates, a number of analysts and crypto fans say Bitcoin — along with other assets such as gold — could potentially act as an inflation hedge, should prices start to rise. At the same time, some Wall Street veterans have taken a greater interest in the coin. Paul Tudor Jones made waves when he said he’s been buying Bitcoin amid central bank money-printing, while Michael Novogratz, founder of Galaxy Digital Holdings, told Bloomberg Television last week that about 25% of his net worth is tied up in the cryptocurrency. Bitcoin’s advance past $12,000 makes it one of the best-performing asset classes this year. It’s gained about 70% since the end of December and is up more than 100% since mid-March, when it briefly traded below $4,000. This year’s surge still leaves it about 40% below the all-time-high of almost $20,000 reached in December 2017.(Source: Bloomberg)

 

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