Morning Commentary

March corn down ½ at $3.8075

Jan beans up 4 ¾ at $8.815

The DOW is up

USD is stronger

Crude oil up $1.24 at $56.41

Good morning,

Corn  bulls this week will be trying to break through technical resistance at the $3.90 level in the MAR19 contract. Keep in mind, we haven’t closed the MAR20 contract above $3.90 since the first week in November. Brazilian weather has arguably improved and cash corn prices have been bid aggressively higher on record strong export demand. They are also starting to see a bit more competition for supply coming from the ethanol space. Net-net, the Brazilian farmer is seeing extremely strong demand for cash corn and probably itching to plant a few more second-crop corn acres. Without a Brazilian weather story of some sort this means more corn for Brazil and not a bullish catalyst. The trend for March corn is negative but a buy signal was generated Friday in the stochastics. Consistent trade below 382.5 on a closing basis will position the market to trade 365.75. A close over 388.75 alerts for a recovery phase.

Soybean  bears continue to point towards no official trade agreement between the U.S. and China, the world’s top buyer of soybeans, as being reason enough to keep swinging their bat. There’s some talk bears have their eye on the low posted in the contract back in mid-September at $8.65. The trend for January beans is negative. The market achieved the 879 target on Friday. Sustained trade below 879 is needed to take the next leg down. Be alert for bottoming action. A close over 908.75 alerts for a recovery phase.

Nearly one-third of projected U.S. net farm income this year will come from government aid and taxpayer-subsidized commodity insurance payments, according to a forecast issued by the USDA. The agency increased its net farm income forecast for 2019 by more than +10%, to $92.5 billion, driven largely by the Trump administration’s trade aid payments to farmers and federal insurance indemnities from extreme weather events, USDA Economic Research Service senior economist Carrie Litkowski said in a conference call with reporters. Without those payments, U.S. net farm income this year would have dropped by nearly -8%, to $63.6 billion. Total direct payments to the nation’s estimated 2 million farms are expected to surge to $22.4 billion this year, a +64% increase over 2018 and the highest rate paid out since 2005, Litkowski said. Farm income also was boosted by an estimated $6.5 billion paid out in federal commodity insurance indemnities, which does not include the premiums that farmers paid themselves, she said. That includes crop insurance payments Midwestern farmers received in the wake of record floods that devastated a wide swath of the Farm Belt this spring.

The EPA typically releases its final rule for annual biofuel blending mandates under the Renewable Fuel Standard the day before or after Thanksgiving — but the agency said last week that it won’t complete this year’s final rule until the winter. The agency issued a supplemental RFS rule this year, throwing a wrench into the usual timeline. “The comment period on EPA’s October 15th supplemental proposal will close on Friday, November 29th, after which the agency will review and respond to all comments and hopes to finalize the rule this winter,” EPA spokesperson Michael Abboud said in a statement. The White House is still getting an earful from biofuel advocates over the proposal. More than 800 advocates for biofuels signed comments to the U.S. Environmental Protection Agency in support of keeping the provisions of the federal Renewable Fuel Standard in place and enforced, according to officials with the Iowa Renewable Fuels Association. The signers urged EPA officials to “stick to President Trump’s deal” — 15 billion gallons of biofuels per year — and ensure biofuel demand is not destroyed by small refinery exemptions to the Renewable Fuel Standard, according to an association statement. In the past three years, according to the association, EPA officials have granted 85 small-refinery exemptions, effectively cutting more than 4 billion gallons of biofuel demand. (Sources: Politico, Biofuels International Magazine)

Deere & Co. last week warned of lower earnings next year after reporting a fall in quarterly profits, hurt by trade tensions as well as poor weather in the U.S. farm belt that has slowed equipment purchases by farmers. In response to an “uncertain” business environment, the company announced a voluntary separation program for its salary employees, which is estimated to cost it about $140 million next year, but is projected to contribute to annual savings of $150 million. The world’s largest farm equipment maker said it was also reviewing its overseas footprint and would focus on growing its more profitable parts and services business. Deere expects net income of $2.7 billion to $3.1 billion next year, lower than $3.25 billion in 2019 and compared with Refinitiv’s average analyst estimate of $3.5 billion for 2020. Deere has cut production and laid off workers to keep a lid on costs in the face of weak demand. It expects global agriculture and turf equipment sales to decline -5% to -10% next year. Industry sales of farm equipment in the U.S. and Canada are forecast to decline about -5% on lower demand for large equipment. Adjusted profit in the latest quarter came in at $2.14 per share, down from $2.30 per share last year. (Source: Reuters)

 

Morning Commentary

Dec corn down 1 at $3.675

Jan beans down 1 at $9.00

The DOW is up

USD is stronger

Crude oil down $.22 at $58.36

Good morning,

Corn  bulls are simply excited to see the bleeding slow down and perhaps stop. Demand seems to be improving ever so slightly for both exports and ethanol. Three times this week we’ve had the USDA announce export sales of +100,000 MTs to “unknown” destinations. Yesterday’s weekly export sales data was also an arguable improvement. We’ve also seen ethanol production tick slowly higher for about the past eight weeks. Bears, however, still believe the USDA will offset any major yield reduction or production cut by simply trimming a few more bushels from demand. Depending on who you talk with exports could arguably be reduced by another -50 to -75 million bushels. I’m hoping we continue to see some buying interest nearby which prompts the USDA to pause for a moment. Bears also argue that corn used for ethanol could easily be trimmed by another -25 million bushels. The trend for December corn is negative. Consistent trade below 371.25 on a closing basis will position the market to trade 363 perhaps 358.5. Stable action over 388.25 is the minimum needed to provide fresh upside targets.

Soybean  traders continue to pay close attention to Chinese trade headlines and South American weather. Technically, the JAN20 market is flirting dangerously with the psychological level of $9.00 per bushel. Bears argue a close below $8.94 could quickly open the door down to $8.65, which as a producer, starts to become much more difficult to digest.

U.S. farm exports are projected to total $134.5 billion for fiscal 2019, which ended Sept. 30, while ag imports totaled $129.3 billion, according to the Agriculture Department’s estimates. The projected surplus of $5.2 billion would be the smallest since fiscal 2006. The U.S. in the last 50 years has never run an agricultural trade deficit, according to USDA data going back to 1967. But the value of agricultural imports has been rising faster than the value of farm exports, including lower than expected corn and soybean exports in fiscal 2019. USDA’s initial estimates for fiscal 2020 suggest the trade balance could climb to $8 billion, based on projected exports of $137 billion and imports of $129 billion. Former USDA Chief Economist Joseph Glauber, now a visiting fellow at the American Enterprise Institute, takes a deep dive into the department’s trade relief program for farmers affected by Trump’s trade war with China, which has slammed U.S. ag exports since mid-2018.(Source: Politico)

The New York Department of Agriculture and Markets published a notice of adoption in the New York State Register on Nov. 20 allowing the sales of E15 within the state, opening the fourth-largest fuel market in the U.S. to sales of E15. According to the notice, Growth Energy, the American Coalition for Ethanol, the Renewable Fuels Association and other groups opposed the prohibition on mid-level blends with more than 15 percent and less than 51 percent ethanol. The department said it did not amend the proposed rule as requested by these commenters. In the notice, the department said it “feels that a gradual introduction of higher ethanol blends will allow consumers and the industry time to adjust to new fuel choices,” but noted it intends “to closely monitor the marketplace and will consider, at some future point, allowing additional blends if the marketplace adapts well to the introduction of E15.” (Source: Ethanol Producer)

Asia’s food and agriculture industry needs investment of $800 billion over the next 10 years to meet the region’s growing food demand, a jointly produced report shows. Investments will unlock annual market growth of around 7%, with the region more than doubling its spending on food to more than $8 trillion by 2030, according to the report by consultancy PwC, Rabobank and Singapore state investor Temasek. Asia’s growing population and rising incomes are resulting in higher demand for protein-rich foods which require investment in setting of food supply chains. The report, titled The Asia Food Challenge, sees several Asian cities, such as Beijing, Hong Kong, Mumbai, Singapore and Tokyo, having the potential to become agriculture-food tech hubs. The report said the Singapore Food Agency has set a goal to produce 30% of the country’s nutritional needs by 2030 by adopting new solutions and technologies to grow more with less. (Source: Reuters)

 

Dec corn up 1 ¼ at $3.68

Jan beans up 3 ¼ at $9.0825

The DOW is down

USD is weaker

Crude oil up $.37 at $57.38

Good morning,

Corn  prices continue to trade in an extremely tight and narrow range. Last week the MAR19 contract traded in a six-cent range the entire week, essentially from a low of $3.80 to an end of week high just above $3.86. We are seeing a similar type of story play out this week, choppy, sideways trade just a touch lower. From a high of just over $3.82 this week down to a low of around $3.76. Bears continue to believe estimates of both corn used for ethanol and exports are going to be reduced by the USDA. They believe these reductions in “demand” will more than offset the lower adjustments to yield that might be made to production to the north. Bulls, on the other hand, are obviously betting on some type of Chinese trade resolution involving U.S. agriculture, improved export and ethanol headlines, and perhaps a weather hiccup or two in South America during the next few weeks.

Soybean  traders continue to deal with a neurotic market that has split personalities. One minute a “Phase 1” trade deal is in the bag, the next minute the market is trading rumors and whispers that the deal is off the table. Unfortunately, it feels like bears are winning the game and have become the more domineering personality and face of the market as of late. The JAN20 prices have pulled back more than -50 cents from the mid-October highs as more traders start to really wonder if a trade deal will happen anytime soon? Technically, there’s continued talk bears really want to challenge the psychological support at the $9.00 level. Keep in mind, the JAN20 contract hasn’t closed sub-$8.96 since early-September and hasn’t closed sub-$8.41 in well over a year.

Soybean trade between the United States and China has been disrupted for nearly a year and a half as the trade war rages on, but the extent to which an official pact would benefit the U.S. side largely depends on the details inside. Restoring trade to the previous conditions and allowing China to purchase U.S. soybeans and other agricultural goods when the market is favorable is probably the optimal outcome. But having China commit to a certain volume or dollar amount of products, which has been a major demand of Washington, could be destructive and leave the U.S. soybean market in even worse shape than before. Just prior to the start of the trade war, roughly 60% of annual U.S. soybean exports went to China. When the trade war began last year, China essentially cut off purchases of U.S. soybeans and turned largely to Brazil. U.S. soybean prices crashed in June 2018 and Brazilian prices soared by comparison, and China continued buying from Brazil even when U.S. prices plus the 25% tariff were more economical. But the rest of the world (ROW) was not interested in paying such steep Brazilian premiums, and U.S. business to those countries soared. The United States exported 38 million tonnes to ROW in 2018, topping 1982’s record of 25 million. That was also 90% larger than the previous five-year average.

House Democrats unveiled a long-awaited draft bill to extend a crop of expired tax breaks for renewable energy, including incentives for biodiesel blenders. The biodiesel tax credits would be retroactively extended from 2018 through 2021, and then gradually phased out through 2024. Ten biodiesel plants have been idled this year after the $1-per-gallon biodiesel subsidy lapsed at the start of 2018 along with other tax “extenders.” The legislation hasn’t been scheduled for a markup. But biodiesel industry advocates have said they’re hoping an extension of the tax credit hitches a ride on a final appropriations package by the end of the year. (Source: Politico)

 

Morning Commentary

Dec corn up 1 at $3.6875

Jan beans up 3 ¼ at $9.135

The DOW is up

USD is stronger

Crude oil down $.77 at $56.28

Good morning,

Corn  bulls continue to struggle as the U.S. harvest moves beyond 75% complete, the weather appears more cooperative here at home and in South America. At the same time, the trade continues to hear mixed rhetoric surrounding Chinese trade negotiations. The USDA’s latest data suggest the U.S. harvest is now 76% complete vs. 92% on average.  Technically, it’s starting to feel like the market wants to drift downward and settle in that $3.50 to $3.80 range

Soybean  traders continue to debate several big-ticket items i.e. total U.S. production, South American weather, and Chinese trade. The USDA is showing the U.S. harvest is now 91% complete vs. 95% historically. Which means there’s arguably 6.5 to 7.0 million acres still left to harvest.

Cattle:  The news coming into today’s session largely surrounded confirmation from Tyson Foods Inc that the Tyson-Holcomb KS plant would soon be operational. The short version is through the month of Dec they intend to step up production in hopes of being mostly if not fully operational by Jan 2020. Depending on which slaughter numbers you choose to analyze, the harvest was either reduced by an immaterial amount year-to-date or slightly increased. Basically, estimated fed and the non-fed slaughter was not negatively impacted through this capacity strained phase. Now, we must ask ourselves what are the implications moving forward? Obviously, production may go up, but it could also have a tepid effect due to other market participants slowing down to breath and repair while Tyson moves back into a more normal state. Furthermore, we will get Holcomb operational heading into some of our worst domestic beef demand in the first quarter. Conversely, if the widespread between Dec19 LC-Feb20 LC causes some cattle to be deferred into 2020 and if the hopes of a better packer demand incentivize holding cattle back then the near-term effect could tighten market-ready numbers. This is met with a potentially lofty beef market that is seasonally on the heels of a setback and holiday beef movement nearing a peak. Many things to mull regarding these developments and we must wonder how much is already priced in the futures market. On Friday (8.9.19) prior to the plant fire, Feb20 LC settled at 115.700 and made a low close on 9.9.19 at 106.075. We are now 125.100 in that same futures contract which is approximately 18% off the low close and 8% higher than the settlement on Friday pre-fire. Cash trade last week printed steady to firm in the northern regions while the south traded slightly higher on lighter volumes in all areas. Cattle on show lists for this week’s trade were nearly 13,000 head smaller and was mostly attributable to reductions in Kansas. Live cattle futures open interest is up nearly 63,000 cars since the low on 10.15.19 and Feb20 LC is near 5.000/CWT higher than it was at the same time. Technical momentum is mixed, the overall trend is up but behaving a bit toppy. Last week was the first weekly lower close in 10 weeks and some technical support has been violated with the recent action. Traders are beginning to find themselves in a more normal position with the non-commercial short-covering aggressively last week and commercial hedgers slightly over normal for percent hedged. If any one group of traders sticks out it would be the index player. They are approaching historically long levels and nearing a position size like that of this past spring. Trey Warnock – Amarillo Brokerage Company

Another biodiesel plant shut down last week in Indiana, leaving 14 workers unemployed ahead of the holidays — in part due to Congress’ failure to extend a tax credit for biodiesel blenders. The $1-per-gallon subsidy has propped up the industry since 2005, but the credit lapsed at the start of 2018 along with a crop of other temporary tax provisions known as “extenders.” Integrity Biofuels is the tenth biodiesel plant that has been idled this year, putting some 250 employees out of work, according to the National Biodiesel Board. The industry and its allies on Capitol Hill have called on congressional leaders to renew the credit by the end of 2019, as part of a potential year-end appropriations package. In the past Congress has retroactively renewed it with sweeping bipartisan support. (reuters)

GROWMARK and its cooperative members have acquired a propane terminal from Plains LPG Services near Fort Madison, Iowa.  Carol Kitchens with GROWMARK tells Brownfield discussions leading up to this deal began last year. “This process was started, I know, earlier last year and I think Plains was the original owner, and they were looking to reposition the asset, and so they reached out to us.” Kitchens says GROWMARK already has propane terminals in several other Midwest locations, and adding Fort Madison is well-positioned to serve members soon. As far as propane delivery problems many regions are experiencing, Kitchens doesn’t expect any immediate changes. “In the short term, I’m not sure it changes a lot, to be honest with you, I mean the biggest challenge is getting supply out of the mid-south and deep-south of the United States where there’s plenty of propane, we just can’t seem to get it very effectively up into the upper Midwest.” She says the industry is evaluating its infrastructure to determine what can be done to prevent delivery issues in the future. (Source: Brownfield Ag News)

 

Morning Commentary

Dec corn up ¼ at $3.715

Jan beans down 1 ¼ at $9.17

The DOW is up

USD is weaker

Crude oil down $.43 at $57.29

Good morning,

Corn  traders and producers alike are considering another week of lower highs and lower lows. Technically, the DEC19 contract has traded sideways to lower for the past four weeks after posting a short-term high back on October 14 at $4.02^4. We are now well below all major moving averages and about to challenge more serious long-term technical support. The funds are thought to now be short about 125,000 contracts and showing no major signs of flipping their position, especially if South American weather continues to cooperate and the Chinese trade deal remains in a state of flux with no real or official details. Ethanol has slowly improved for the past few weeks but it’s still the lowest production start to Q4 in over four years.

Soybean  bulls will be trying to recover from another week of price deterioration. In the past 30-days, JAN19 soybean prices have trimmed nearly -50 cents off their mid-October high of $9.59^4. Interestingly, bulls believe the USDA is still overestimating the U.S. crop, at the same time, we are now digesting record-setting U.S. crush numbers. The recent NOPA estimate released showed an October crush of roughly 175.4 million bushels, a new record high for any month and perhaps reason enough to argue the USDA’s recent reduction in crush might have been a bit premature.

The IEA added to growing bearish sentiment in the oil market, predicting supplies outside OPEC will increase by +2.3 million barrels a day in 2020, almost twice the expansion in demand. That means OPEC is currently pumping about 1.7 million barrels a day more than will be needed in the first half. The hefty cushion will offer “cold comfort” to OPEC+ ministers gathering next month, the IEA said. Oil inventories in developed nations accumulated by about 9 million barrels during the third quarter, even as OPEC deliberately restrained output and Saudi Arabia lost supplies in the Sept. 14 attack on its Abqaiq processing plant. The calmness the IEA sees resuming next year fits with its expectations for the long term, outlined in its annual World Energy Outlook earlier this week. That report anticipates that increasingly efficient car engines and the adoption of electric vehicles will cause world oil demand to plateau around 2030. (Source: Bloomberg)

U.S. Secretary of Agriculture Sonny Perdue announced the second tranche of 2019 Market Facilitation Program (MFP) payments aimed at assisting farmers suffering from damage due to trade tariffs. The payments will begin the week before Thanksgiving. Producers of MFP-eligible commodities will now be eligible to receive 25% of the total payment expected, in addition to the 50% they have already received from the 2019 MFP. Signup at local FSA offices will run through Friday, December 6, 2019. A producer’s total payment-eligible plantings cannot exceed total 2018 plantings. County payment rates range from $15 to $150 per acre, depending on the impact of trade retaliation in that county. Acreage of non-specialty crops and cover crops had to be planted by August 1, 2019 to be considered eligible for MFP payments. This is the second of up to three tranches of MFP payments. The third tranche will be evaluated as market conditions and trade opportunities dictate. If conditions warrant, the third tranche will be made in January 2020.

 

Morning Commentary

Dec corn unchanged at $3.7575

Jan beans up 2 ½ at $9.1925

The DOW is up

USD is weaker

Crude oil up $.10 at $56.87

Good morning,

Corn  bulls are pointing to better ethanol headlines. Weekly ethanol production continues to bump slightly higher while stocks tighten a bit. In fact, ethanol stocks are down just over -10% compared to last year at this time and at the lowest levels we’ve seen in over two years. Also, Brazil’s corn exports have been record strong. With record exports and more corn-based ethanol plants coming online that means less ending stocks for Brazil.

Soybean  bulls are pointing to continued buying from Chinese importers and the fact China officially lifted bans on U.S. poultry…meaning that perhaps we are getting closer to a “Phase 1” trade deal. Bears are pointing to the fact Brazilian soybeans start to get cheaper than U.S. soybeans out past early-February so the Chinese buying window for U.S. beans could be somewhat limited. Most inside the trade are looking for the USDA to announce another set of strong weekly export sales numbers this morning. U.S. demand seems strong enough to support a bullish story into 2020.

Beijing lifted a nearly five-year ban on imports of U.S. poultry meat on Thursday, a move the U.S. Trade Representative said would lead to more than $1 billion in annual shipments to China. China’s decision comes as the world’s two largest economies are trying to finalize a limited trade deal. It is also driven by an unprecedented shortage of meat in China after a fatal hog disease, African swine fever, has killed millions of pigs in the pork-loving country over the past year. China, the world’s top pork consumer, will likely buy all types of U.S. chicken, turkey and duck to offset the pork shortage, said Jim Sumner, president of the USA Poultry & Egg Export Council, an industry group. Beijing banned U.S. poultry and eggs in January 2015 because of a U.S. outbreak of avian flu, closing a market that bought $500 million worth of American poultry products in 2013, according to the U.S. Department of Agriculture. China’s total imports of chicken surged nearly 48% to 9.2 billion yuan ($1.3 billion) in the first nine months of this year, including breast meat, which is normally in surplus in the country. (Source: Reuters)

USDA’s Risk Management Agency (RMA) has announced it will continue to defer interest on crop insurance premiums to ag producers until January 31 for all policies with a premium billing date of August 15. Keith Gray, chief of staff for the RMA, says this will help farmers and ranchers impacted by the extreme weather in 2019. He tells Brownfield the decision was made to continue to extend flexibility for producers. The USDA previously announced a deferral to November 30, providing producers with an additional two months from the traditional September 30th date. Producers will have until January to pay the 2019 premium without accruing interest. (Source: Brownfield Ag News)

Global debt hit a fresh record above $250 trillion in the first half of 2019, with China and the U.S. accounting for more than 60% of new borrowing, the Institute of International Finance said. Borrowing by governments, households and non-financial business now accounts for more than 240% of the world’s gross domestic product, and it’s growing faster than the global economy, the Washington-based IIF said in a report published Thursday. In developed countries, it’s governments that account for the bulk of borrowing over the past decade, the IIF said. In emerging markets, companies have taken the lead — but more than half of corporate debt in those countries is likely held by state-owned businesses. And it said that “high-debt countries that also have high exposure to climate risk” — like Japan, Singapore, Korea and the U.S. — may struggle with the rapid increase in funding that the fight against climate change will require. IIF expects the global debt load to exceed $255 trillion by the end of the year, with the U.S. and China leading the way. (Source: Bloomberg)

 

Morning Commentary

Dec corn down 2 at $3.7575

Nov beans up ¾ at $9.065

The DOW is down

USD is stronger

Crude oil down $.19 at $56.61

Good morning,

Corn  bulls are pointing to some renewed strength in the wheat market and a U.S. harvest that continues to lag well behind. The USDA showed the U.S. corn harvest just 66% complete vs. 85% traditionally harvested at this stage. Somewhat shockingly, North Dakota still only has 15% of their entire crop harvested vs. what’s traditionally 76% harvested by this date; Wisconsin just 30% harvested vs. 65% historically; Michigan just 33% harvested vs. 64% historically; South Dakota has just 39% harvested vs. 82% historically; Minnesota 63% harvested vs. 87%; Iowa 64% harvested vs. 86%. The trend for December corn is negative. A key support zone begins at 371.25. Stable action over 398.75 is needed to fuel a fresh bull wave. A close over 391 hints at a return to 398.75.

Soybean  bulls are pointing to continued strong export inspections and a U.S. harvest pace that continues to lag expectations. The USDA showed the U.S. soybean harvest 85% complete vs. 92% historically at this stage. States lagging the furthest behind are Wisconsin 71% harvested, Missouri 72%, Michigan and North Dakota 74%, Kansas and Kentucky 83%. The trend for January beans is neutral. Stable action outside 903.75-942.5 is needed to provide fresh trending targets. With the trade count showing funds buying 1,500 beans yesterday, they’re now estimated to be long 16,500 lots.

Dallas-based Dean Foods announced it initiated Chapter 11 proceedings “to enable us to continue serving our customers and operating as normal as we work toward the sale of our business,” Eric Beringause, who recently joined the Dean Foods as president and CEO, said in a statement yesterday. Dean Foods products include Dairy Pure, TruMoo, Land O’Lakes, Lehigh Valley Dairy Farms and Oak Farms. The bankruptcy comes amid another tough year for the milk industry. Dean and dairy farmers for years have grappled with consumers’ decades long move away from traditional cow’s milk, as beverage sales shift toward bottled water, fruit juices and milk alternatives made from soy and oats. Within the milk business, Dean’s brands have struggled to compete with low-price store brands, some of which have even opened their own milk plants. The company said it has secured financing to continue operations and pay employees while it discusses a potential sale to Dairy Farmers of America Inc., the largest U.S. dairy cooperative. Dean operates about 60 dairy processing plants in 29 states, a network it built through years of acquiring regional dairy companies to become the top U.S. milk processor by volume. (Sources: Wall Street Journal, ABC News)

Tyson Foods fell short of Wall Street estimates for quarterly revenue and profit on Tuesday after a fire at a Kansas slaughterhouse hurt sales volumes in its beef business. Tyson grappled with the fire as the global meat industry focused on increasing sales to China. Sales rose nearly +9% to $10.88 billion, but missed analysts’ average estimate of $11 billion, according to IBES data from Refinitiv. Excluding items, the company earned $1.21 per share, compared with the average analyst estimate of $1.29. Volumes in Tyson’s business fell 4.2% in the fourth quarter to Sept. 28, with sales down 1.3%. The fire also resulted in $31 million of net incremental costs, the company said. Tyson’s operating margins for beef were 9.7%, up from 8.9% a year earlier. Margins declined in its pork, chicken and prepared foods units. (Source: CNBC)

 

Morning Commentary

Dec corn up ¼ at $3.735

Nov beans up 1 at $9.06

The DOW is up

USD is stronger

Crude oil up $.33 at $57.19

Good morning,

Corn  prices on the board have deteriorated by about -25 to -30 cents in the past month. the bulls were betting on a production story that never fully unfolded. While the bears have continued to gain confidence in a weaker U.S. demand story. Technically, bears are eyeballing the $3.65 area and the DEC19 low at $3.52^2 posted back on September 9. For what it’s worth, the most recent DEC19 high was posted at $4.73 back in mid-June.

Soybean  bears are talking about ongoing uncertainty regarding Chinese trade negotiations as well as better and more wide-spread rains in South America. The USDA’s curve-ball last week to the balance sheet buckled a few bulls who were looking for a fastball right down the middle of the plate. Most were looking for a further reduction in total U.S. production and in turn another reduction in ending stocks. Instead, there was no real meaningful adjustment to U.S. production and demand was actually lowered, which ultimately pushed ending stocks higher, not lower like the trade was thinking.

Cattle markets saw some issues surrounding the release of certain USDA data yesterday, but the cash trade summaries would suggest that cattle largely traded 2.00/CWT higher in the south and either side of unchanged in the north. Maybe the more important thing associated with last week’s cash trade was the volume. The national number printed something over 120,000 head of negotiated trade on the week. We are forecasted to have ample supplies moving forward, but large trade volumes like that will keep us as current as possible through the fall. The beef cutout moved nearly 6.00/CWT higher last week and now brings the blended cutout something around 30.00/CWT off recent lows. Last week’s estimated cattle slaughter came in at 651,000 head aided by a robust Saturday harvest. Some interest over the weekend in regards to a SW KS regional media outlet printing an article that would suggest the Tyson-Holcomb beef plant could be up by the end of the year if not slightly before. This is obviously not dramatically different than the previously mentioned January date but in our current setup, the notion that the repairs are on or ahead of schedule may go a long way towards comforting portions of the industry. Futures remain in an uptrend and overbought. Feb20 LC traded into fresh move highs and will take over as the largest open interest month today with a sizeable long roll out of Dec19 LC. Bulls touting the trend and firming fundamentals. Bears looking for some fall corrective break and looking for large fall market ready numbers to potentially pressure cash markets. Trey Warnock – Amarillo Brokerage Company

Propane suppliers are facing a supply challenge this fall due to farmers’ increased need for crop drying across the Midwest, according to CHS. The issue is not a propane shortage, the National Propane Gas Assn. (NPGA) reported; rather, the challenge is getting propane to the right place at the right time. NPGA relayed that the supply issues are caused by limits on the safe transportation of propane from supply points as well as limits on pipeline capacity. The high demand for propane is being felt by Midwest farmers, whose propane is primarily sourced from Kansas, Texas and western Canada and transported by pipeline, rail or truck, CHS explained. The Minnesota Propane Assn. said in an average November, propane marketers in Minnesota use 190 transport loads of propane per day for the state. This year, however, nearly 300 transports have been shipping per day. The Federal Motor Carrier Safety Administration has declared a regional emergency for Iowa, Kansas, Illinois, Nebraska, South Dakota, Missouri, Wisconsin and Minnesota. Several state governors have also issued executive orders to waive hours of service for the delivery of propane due to long wait times at terminals. (Source: Feedstuffs)

 

Morning Commentary

Dec corn down 2 ¾ at $3.745

Nov beans down 6 ½ at $9.13

The DOW is down

USD is weaker

Crude oil down $.52 at $56.72

Good morning,

Corn  bulls have to be disappointed to see such large reductions in overall U.S. demand. Yes, the USDA cut its total production forecast, but as feared, the overall downgrades to demand offset the majority of the yield reduction. The USDA cut its total U.S. production forecast by -118 million bushels from last month down to 13.661 billion, lowering the yield estimate from 168.4 down to 167.9 bushels per acre. Area harvested was left “unchanged” at 81.8 million acres, still up slightly from 2018. On the flip side of the balance sheet, total demand is reduced by -100 million bushels: Feed and residual use down -25 million bushels; Exports are reduced -50 million bushels; Ethanol is lowered by -25 million bushels. Net-net, corn ending stocks are lowered by only -18 million bushels from last month. The trend for December corn is negative. Key support runs between 371.5 and 363.75. A gap is closed on the weekly all-sessions chart at 358.5. Stable action over 398.75 is needed to fuel a fresh bull wave. A close over 391.5 hints at a return to 398.75.

Soybean  bulls didn’t get the drop in yield they were looking from the USDA but the bears did receive a slight reduction in overall demand. The USDA reduced its U.S. crush forecast by -15 million bushels ultimately pushing ending stocks higher by +15 million bushels not lower like many in the trade had been forecasting. Bears are also pointing to arguably improved weather in South America and some ongoing trade uncertainties involving the Chinese. The trend for January beans is neutral-positive. Stable action over 959.5 is needed to drive the next leg higher. Closing over 947 hints at a return to 959.5. Closing under 919 alerts for a return to corrective action.

Governor Tim Walz is asking the federal government to declare a dozen counties in northwest Minnesota an agriculture disaster area to help farmers struggling with the fall harvest because of bad weather. The governor says the long-range forecast predicts flooding next spring — not good news for farmers having a tough time now. “So I think what you’re gonna have is two years back-to-back where it’s gonna be very, very challenging, ” Walz says. “The disaster declaration… I think that’s not a fix, it’s not an instant fix. It might provide some of that safety net to kind of soften the blow a little bit — but I’m concerned for next year.” Undersecretary Bill Northey said Thursday they’re already reviewing a request from neighboring North Dakota. “Doesn’t take a long time,” Northey says. “I think we’re getting very close on the North Dakota request [and] we’ll be able to announce whether those will get a declaration or not. Certainly we’ll quickly look at the Minnesota information and be able to address it there as well.” (Source: Minnesota News Network) 

The USDA is said to be moving forward with a second batch of direct payments for farmers and ranchers burned by retaliatory tariffs, according to Ag Secretary Sonny Perdue, who said the agency just got authorization for a second tranche. “We’ll be getting it ready hopefully at the end of this month or early December.” It was previously unclear if the department planned to offer another tranche of payments, with U.S. and Chinese officials working to finalize a partial trade agreement that would include a commitment by China to purchase huge sums of U.S. farm goods. USDA has already paid farmers $6.7 billion for their 2019 production, on top of $8.6 million that was provided for 2018. Perdue said further aid might not be needed in 2020 if the limited U.S.-China agreement is signed. “We’re hopeful that trade would supplant any type of farm aid needed in 2020,” he said. (Source: Politico)

New Antitrust Lawsuit Targets Pork Industry: A class-action lawsuit filed last week on behalf of pork consumers alleges that hog companies have colluded to artificially hike the price of pork and, as a result, their profits. The complaint also provides new insight into Agri Stats, a data-sharing company that sits at the center of the wave of antitrust allegations sweeping the meat sector. The complaint, along with a similar suit brought on behalf of commercial pork buyers, was filed in Minnesota District Court on Nov. 6. The pork companies named in the case include meatpacking giants Smithfield Foods, Tyson Foods, and JBS USA, as well as Hormel Foods and several other pork companies. Together, the defendants control more than 80 percent of the hog market, according to the complaint. The suit alleges that beginning in 2009, the companies colluded to reduce the supply of pork and thereby drive up their profits. Using reports produced by Agri Stats, which is also a defendant in the case, the companies were allegedly able to “have access to standardized data (cost, price, and supply information) from their erstwhile competitors which they used to extract the maximum amount of profits from the American consumer.” These allegations of antitrust violations in the pork industry join a wave of concern that over the past decade, the biggest corporate actors in the beef and poultry industries have coordinated their production and suppressed producer pay to hike their profits. (Source: Fern’s Ag Insider)

China is scouring the world for meat to replace the millions of pigs killed by African swine fever (ASF), boosting prices, business and profits for European and South American meatpackers as it re-shapes global markets for pork, beef and chicken. The European Union, the world’s second largest pork producer after China, has ramped up sales to the Asian giant although it can only fill part of the shortfall caused by ASF. Argentina and Brazil have approved new export plants to meet demand and are selling beef and chickens, as well as pork, to fill the gap. U.S. producers, however, have been hampered due to tariffs imposed by Beijing. Other Asian countries are also ready to step up imports as they, too, deal with outbreaks of ASF. Vietnam, the Philippines, North and South Korea, Laos, Myanmar and Cambodia are all struggling to contain outbreaks of the disease. Shortages in the world’s top pork consumer have been exacerbated by the upcoming Lunar New Year celebrations in late January, when pork, and pork dumplings in particular, play a central role in the food on offer. Rabobank estimates that China’s hog herd, the world’s largest, fell by half in the first eight months of 2019 and will likely shrink by 55 percent by the end of the year.

 

Morning Commentary

Dec corn down 1 at $3.7425

Nov beans up ¼ at $9.2525

The DOW is down

USD is stronger

Crude oil down $.86 at $56.30

Good morning,

Corn closes sub-$3.80 for the first time since late-September. Bulls are getting cold feet or simply remembering the pain that followed the past couple of USDA reports. The DEC19 contract has now given back about -25 cents from the mid-October highs, yet we are still higher priced on this date than we have been the past four years. Bears continue to talk about weakness in demand. Exports continue to disappoint and running well behind last years pace. We still have ethanol and DDG exports running about -10% less than last year and continue to be a headwind. Bears are also pointing to improved weather conditions in South America. Bottom-line, bulls have to be somewhat worried that any reduction in the U.S. crop estimate could easily be offset by lower demand numbers and perhaps a slight bump in South American production.

Soybean bulls are talking about strong export sales and improved headlines surrounding Chinese trade negotiations. Not only were weekly export sales stronger than anticipated but Chinese buyers were reported as leading the way. As for U.S. production, most sources are looking for the USDA to adjust its estimate slightly lower and in turn, slightly reduce U.S. ending stocks. Bears point to improved weather in South America, and still no official Chinese deal or specific details on how the “Phase 1” compromise will play out? All eyes on today’s USDA report.

China is considering the removal of restrictions on poultry imports from the United States, state-owned Xinhua News Agency reported on Thursday. The report comes after the commerce ministry said the two country have agreed to cancel in phases the tariffs imposed during the months-long trade war. China has banned all U.S. poultry and eggs since January 2015 due to an avian influenza outbreak, which has been over for years. That caused imports to tank after the United States shipped $390 million worth of poultry and products to China in 2014. The following year, shipments were less than a fifth of that, at $74 million. (Source: Reuters)

African swine fever (ASF) will cut pork output in China, the world’s largest producer, by at least -20% in 2019, the United Nations’ food agency said on Thursday, doubling the decline it had expected six months ago. The disease has slashed China’s hog herd since August 2018, pushing Chinese pork prices to record high. With the disease also spreading to neighboring countries, notably Vietnam, Laos, Mongolia and Cambodia, the UN’s Food and Agriculture Organisation (FAO) expects world pigmeat production to fall -8.5% this year to 110.5 million metric tons (carcass weight equivalent). FAO projects world trade in meat and meat products at 36.0 million metric tons in 2019, up +6.7% from 2018, principally driven by increased imports by China due to domestic tightness caused by ASF-related production losses. (Source: Reuters)

 

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