Morning Commentary

Sept corn unchanged at $3.1125

Nov beans down ¼ at $8.7775

The DOW is down

USD is stronger

Crude oil down $.18 at $41.77

Good morning,

Corn bulls are pointing to strong weekly new-crop sales numbers and pockets of dry conditions in the top-producing state of Iowa. Most of the big new-crop export sales were announced late last week but just now showing up in the weekly report, so not really any fresh news here. The latest drought map however shows the state of Iowa jumping from 62 to 79% “abnormally dry”, and +6% of the state, mainly western Iowa now considered “extreme drought” vs. 0% last week.

Soybean bulls point to continued incremental buying by the Chinese, perhaps more limited supply available out of South America, and an improved macro landscape for commodities with the weaker dollar. Bears are talking about the very real possibility of a record-setting yield being harvested here in the U.S. and the talk of increasing soybean acres being planted in South America the upcoming season. The Chinese debates still seem mostly two-sided, i.e. Bears saying the Chinese will be tapering back their purchases ahead of the upcoming election and that relations are going to get worse before they get better. Bulls are saying the Chinese have a food inflation problem that is concerning, SAM supplies are becoming more limited, so the Chinese have very little choice but to keep buying U.S. supply for the next few months.

To assist Farm Storage Facility Loan (FSFL) borrowers experiencing financial hardship from the pandemic and other challenges in production agriculture, USDA’s Farm Service Agency (FSA) is offering a one-time annual installment payment deferral option. No fees or prepayment penalties apply for borrowers who choose this FSFL loan flexibility option. Eligible borrowers can request a one-time only annual installment payment deferral for loans having terms of three, five, seven or ten years. The installment deferral option is not available for 12-year term loans. The FSFL installment payments will remain the same, except for the last year. The original loan interest rate and annual payment due date will remain the same. However, because the installment payment deferral is a one-year loan term extension, the final payment will be higher due to additional accrued interest.

An ag economist says USDA underestimated the economic need from producers of some commodities, while others have yet to claim their allotted funds through the Coronavirus Food Assistance Program. John Newton, Chief Economist for American Farm Bureau tells Brownfield as of August 3rd, sheep producers had received 140% of their estimated CFAP funds. “USDA probably had a pretty conservative estimate on what CFAP support would go out to those producers and it turns out based on the payment data there are more producers impacted than I think USDA initially estimated.” On the other hand, Newton says some commodities have used less than USDA expected so far with less than a month left to apply. “We’ve really got to get the word out to those fruit and vegetable producers who have only received about 10% of their estimated support.” Newton says historically, USDA has not given direct payments to sheep or specialty crop producers, so they had little data to base their original estimates on. Applications will be accepted until August 28th.

The ethanol industry continues to wait for a decision from EPA on 86 pending small-refinery exemptions after the U.S. Department of Energy finished a review and sent those requests back to EPA. During a news conference on Thursday, Renewable Fuels Association President and CEO Geoff Cooper said the small-refinery exemption program needs to be transparent. A report from Hoosier Ag Today, citing unnamed sources, said the DOE had recommended EPA approve some of the pending 58 retroactive waiver requests to the Renewable Fuel Standard. The EPA still has a total of 86 pending requests for small-refinery exemptions, including a total of 28 for 2019 and 2020. Cooper said the agency already has missed the 90-day deadline to issue decisions on the requests. The deadline was triggered when EPA received the requests. “We haven’t heard what the DOE recommends,” he said. “It would be absolutely insane for DOE to recommend any of those hardship waivers. If there was no hardship in 2012, how can they claim that now? There’s no transparency in this process.”

 

Morning Commentary

Sept corn up 1 ½ at $.30975

Nov beans up 1 at $8.8275

The DOW is up

USD is weaker

Crude oil up $1.34 at $43.04

Good morning,

-Beirut’s explosion was caused by 2750 tons of ammonium nitrate left unsecured in a port facility for six years.

-Gold is racing towards $3000 an oz and the VIX is at a post pandemic low.

-The spread between volatility futures two months out vs the nearby is at an eight year high indicating potential August downdrafts in the S&P.  No sell signal yet.

Corn bears have pressured prices to fresh new contract lows, something we have been concerned about for weeks. From a technical perspective, the DEC20 contract looks terrible for the bulls. The contract traded down to a new low of $3.20 and despite the possibility of a nearby bounce on short-side profit-taking, many inside the trade believe the bears may have enough momentum and cooperative weather in the forecast to test the $3.00 level. The trend for Dec corn is negative.  Stable trade over 330.75 is the minimum needed to improve the outlook.

Soybean bears have now trimmed about -30 cents off the highs posted about a month ago as U.S. crop conditions are some of the best we have seen reported in over +25 years. More traders are talking about the possibility of a sizeable jump in the USDA average yield estimate and the very strong chance of new record being harvested. At the same time, we are also now hearing more forecasts and estimates that South American producers are going to increase soybean acres next year. Bulls are also a little more nervous as President Trump tightens the hold on Chinese businesses like TikTok and Huawei. The obvious worry is that things get more heated between the global powers and eventually China pulls back on U.S. ag purchases.

Farm groups are arguing for a massive new round of cash for agriculture in the coronavirus relief bill being negotiated by Congress and the White House, even though billions of dollars in an ongoing USDA aid program may go unclaimed. There’s no contradiction in the request, said the two largest U.S. farm groups. “There’s ample reason to believe that family farmers and ranchers will need additional support in the coming months to withstand the financial impacts of the pandemic,” said Mike Stranz, a vice president at the National Farmers Union. Stranz and Terri Moore, a vice president at the American Farm Bureau Federation, said the unexpectedly slow rate of payments from a $16 billion coronavirus fund at the USDA was a poor gauge of conditions in farm country. “We believe a combination of factors are contributing to the unallocated dollars — lack of need is not one of them,” said Moore. Stranz and Moore said quirks and glitches in CFAP may limit the program’s reach.(Ag Insider)

The EPA is proposing to register a new contact herbicide to help manage weed resistance. Tiafenacil is proposed for pre-plant and pre-emergence burndown use in corn, cotton, soybeans and wheat and post-emergence burndown in grapes as well as fallow and non-crop areas. EPA expects the herbicide to be useful for herbicide resistance management as it provides an alternative for controlling glyphosate-resistant palmer amaranth, marestail, and waterhemp. The agency has not identified any dietary, residential, aggregate, or occupational risk of concern for human health. Public comment on the proposed decision is open until August 30th. (Source: Brownfield Ag)

 

Morning Commentary

Sept corn up 1 ½ at $3.175

Nov beans up 5 at $8.975

The DOW is down

USD is stronger

Crude oil down $.09 at $40.18

Good morning,

In the last 70 years stocks have been up 38 times and down 32 times in the month of August.  September is exactly the opposite.

Per the WSJ, the FED is going to effectively eliminate the pre-empting of raising rates to reign in inflation.  This is pretty big news in light of the current jump in money supply.

71% of the government debt issued this past year matures in less than 12 months.  Treasury Bills outstanding shot up $5 trillion!  The FED’s balance sheet is about to explode.

Corn bears have been winning the battle as of late with prices down over -30 from the early-July highs. Cooler temperatures and more widespread rainfall has the trade thinking a record-setting U.S. yield is in the bag. Many traders are now taking a 180 to 182 type average. If this plays out we could be looking at a U.S. harvest of +15.2 billion bushels of corn and ending stocks perhaps pushing higher to between +2.75 and 3.0 billion bushels. Obviously, demand will be in question as there’s still a lot of debate and uncertainty surrounding ethanol and exports. Bears worry that corn used for ethanol will again need to be trimmed as U.S. driving demand continues to disappoint. At the same time, there are big debates circulating in regard to ongoing Chinese demand. Bulls are thinking the Chinese need to keep buying to help fulfill their domestic demand to the south. Bears are hesitant in believing the Chinese will be larger buyers of U.S. ag exports as we move closer to the U.S. election. Don’t forget we have the USDA’s monthly supply and demand report scheduled to be released next Wednesday, August 12th. We will also be getting some official “Preventive Plant” numbers.  The trend for Dec corn is negative. The market is poised for a test of 322. Closing over 340 is the minimum needed to improve the outlook.

Soybean bulls hope to continue pointing towards steady Chinese buying and dwindling supply out of South America. The Bears won last week’s battle as prices here at home fell by about -6 cents in total. All it took was a couple of days without Chinese buying headlines and cooperative U.S. weather to bring about talk of a record-setting yield of perhaps +51 bushels per acre. Keep in mind, we are currently looking at one of the best crop-condition ratings on record for the U.S. soybean crop at 72% GD/EX and talks we might improve on the rating this afternoon. In other words, there’s certainly reason to believe and argue the possibility of a record-setting yield. Bulls have to hope the Chinese counterpunch with record-setting U.S, demand. Net-net, it still feels like the U.S. balance sheet will remain in the 375 to 475 million bushel range. In the lowest volume since July 17th, open interest declined 2,000 lots on Friday. The trend for Nov beans is neutral.  Stable action outside 832.75‐897 is needed to provide fresh trending targets

The U.S. Agriculture Department has identified more than a dozen plant species ranging from morning glories to mustard in bags of unsolicited seeds arriving in the mailboxes of thousands of Americans, mostly postmarked from China. While most species identified seem to be innocuous herbs, flowering plants, vegetables or grasses, plant experts warn that seeds from other parts of the world could be non-native varieties that harm commodity crops. Another concern is what appears to be an unknown coating, possibly insecticide or fungicide on the seeds, said Robin Pruisner, state seed control official at the Department of Agriculture and Land Stewardship in Iowa, the top U.S. corn growing state. The Agriculture Department has said the packages are most likely part of a “brushing” scam, in which people receive unsolicited items from a seller who then posts false positive customer reviews to boost sales.

Morning Commentary

Sept corn down ¾ at $3.1925

Nov beans down 2 ½ at $8.85

The DOW is up

USD is weaker

Crude oil up $.31 at $41.35

Good morning,

Corn traders continue to debate the bearish argument of increasing U.S. yield vs. the bullish argument of improved Chinese buying and a much better macro landscape for commodities. Bears are quick to point the USDA’s weekly crop condition report showing 72% of the U.S. crop now rated GD/EX and more inside the trade talking +180 final yield. Bulls point back to 2018, during this very same week-30, the USDA had the crop rated 72% GD/EX. At that time, they had the 2018 yield estimated at 178.4 bushels per acre, but the final yield actually ended down at 176.6 bushels per acre. In 2016 the U.S crop was rated 76% GD/EX in week 30, and again the final yield ticked lower from 175.1 down to 174.6 bushels per acre. Bottom line as long as the market is focused on U.S. weather and a very possible record yield it will be tough to rally price.

Soybean bears are pointing to the first day in a couple of weeks that we haven’t seen the Chinese in buying U.S. beans. Why this is interesting is because soybean prices were under pressure and most would think that would entice the Chinese buyers. Bears believe this is because China has reached its quota objective for the time being and may trim back their U.S. purchases as we move inside 100-days til the U.S. presidential election. Bears say China wants to look cooperative but not do anything extra that might help President Trump with the rural vote.

China’s COFCO has temporarily suspended operations at its Timbues grains plant in Argentina after 12 employees tested positive for COVID-19, a company spokesman told Reuters on Tuesday. The outage at the plant started on Monday and was expected to last about one week, said Allan Virtanen, global communications director at COFCO International. The plant employees 350 workers and has an annual grains and oilseeds processing capacity of 6.5 million metric tons. Cases have also allegedly been detected at a Bunge plant, according to Gustavo Idigoras, head of the CIARA-CEC grains exporting and crushing chamber. The plants are located in Argentina’s main export hub of Rosario, along the Parana River in Santa Fe province. (Source: Reuters)

The United Food and Commercial Workers Union (UFCW) filed a lawsuit on Tuesday seeking to force the U.S. Department of Agriculture (USDA) to end a program allowing poultry plants to speed up production lines, saying it endangers workers. The union and five local affiliates that represent 35,000 poultry workers in six states said in a complaint in Washington D.C. federal court that the USDA’s Food Safety Inspection Service (FSIS) failed to follow the proper administrative procedures and ignored worker safety when it adopted a 2018 waiver program that allows for testing “new procedures.”

 

Morning Commentary

Sept corn down 3 ½ at $3.215

Nov beans down 11 ¾ at $8.88

The DOW is down

USD is stronger

Crude oil down $.16 at $41.44

Good morning,

Corn traders continue to debate very cooperative U.S. weather vs. what appears to be a more friendly and bullish landscape for commodities i.e. lower U.S. dollar, all-time highs in gold, a big rally in silver, copper, lumber, etc. Bulls want to argue that the Chinese have been buying and the overall macro landscape has finally improved on fear of future inflation and weakness in the greenback. Keep in mind, Chinese corn just traded to all-time highs and beyond levels seen back in January 2007. Bears simply point to the burdensome U.S. balance sheet fundamentals, weaker demand in ethanol, more U.S. acres, and now very real potential for record yield. The USDA’s weekly crop conditions report is confirming the +180 yield argument with the Good-to-Excellent rating jumping +13% from 69% to 72%.  The trend for Dec corn is negative. If we break $3.30, the market is vulnerable to a drop to $3.22.

Soybean traders, similar to corn, are debating improved and very cooperative U.S. weather vs. the improved macro landscape for commodities and continued Chinese buying interest. Keep in mind, we have seen ten consecutive days of the USDA reporting export sales, yesterday it was to both China and Mexico. Bears are quick to point to U.S. weather helping to producer perhaps a record yield. The USDA showed a +3% jump in weekly conditions from 69% to 72% rated Good-to-Excellent vs. just 54% last year.  The trend for Nov beans is neutral-positive.  Stable action outside $8.33-$8.97 is needed to provide fresh trending targets.  Closing under $8.8375 cautions for a correction.

Cattle prices failed to follow through yesterday after opening strong on a combination of optimism surrounding cattle on feed (COF), inventory (INV), and firming cash markets. Relative to the reports, COF was generally speaking a non-event. The pre-report estimates came very close to pegging the actual USDA data. The standout would be the placement number and weight of cattle being placed. The average guess for placements was 104% of last year and the actual estimate was reported as 102%, keeping in mind the range of guesses was 100-108%. There was a fairly large uptick in cattle under 600 lbs. placed is 112% of last year and 119% of their 5-year average. INV report was very vanilla at face value but seeing the end of the expansion cycle as evidenced by fewer beef cow numbers and stagnant heifer retention. The point that possibly received the most attention and scrutiny is the number of cattle outside of feedyards. The supply of these outside cattle was expected to be much larger than a year ago due to sluggish placements and seemingly many cattle being held out on grass. The USDA estimate of these cattle was reported to be only 300k hd above a year ago. Now, a few things to keep in mind are these reports have errors in them just like any other analyst or analysis including that of those in shock over the results themselves. Additionally, the government does routinely adjust data from historical reports after the fact. Finally, this report is technically representative of the entire industry as opposed to the cattle on feed report that represents data only from yards larger than 1000 head. This matters for a few reasons…take for example the cattle on feed number reported in COF was 11.3 million hd, while the INV reports it as 13.6 mil hd. Feedyards with more than 1000 hd made up 84% of the total cattle on feed for July 1 and this is slightly smaller than last year. As we expand the reach and utilize extrapolation, we certainly introduce more errors and smaller operators indeed have more diversity in terms of operation style. Long story short, we realize the number appears to be off. Maybe it’s wrong and maybe we are under-reporting placements (shocking I know). Either way, I think we have all seen more than a few instances where the government reports do not necessarily seem to track what we perceive as reality. Fundamentals continue to firm in most areas. Cash traded approximately 1.00/CWT higher on much larger volume out of southern yards. Open interest is moving higher and it is assumed the non-commercial trader is the aggressor. Some commercial hedgers are beginning to move into the market as nearby purchases are presenting the opportunity and some are finding it necessary to hedge against the unknown as we battle health crises and financial uncertainty. Beef markets are hovering in the 200.00/CWT area and are expected to do the same this week. Show lists for cattle to be sold this week was smaller yet remain robust. The massive build-up in formula numbers is being attenuated and the southern list seems to be normalizing in relationship to northern numbers. Keep the main thing, the main thing. Move towards things that work and away from things that do not. Trey Warnock – Amarillo Brokerage Company

The USDA confirms there will be a third round of the Farmers to Families Food Box Program.  Ag Secretary Sonny Perdue says the next round of purchases and distributions will start September 1st and wrap up by October 31st, and he says this round will spend the balance of the three-billion dollars authorized for the program. USDA again plans to purchase combination boxes of fresh produce, dairy products, fluid milk, and meat products for distribution to families. The second round of the food box program is already underway and concludes August 31st with a target of supplying 1.4 billion dollars’ worth of food to American families. (Source: Brownfield)

Farmland values held steady in the first half of 2020 in the corn belt states served by Farm Credit Services of America (FCSAmerica). Stable demand for farm ground and low interest rates helped to support values amid the broader economic disruption of the COVID-19 pandemic. “There still is liquidity in agriculture, and those who can afford it are looking for real estate,” says Tim Koch, executive vice president and chief credit officer at FCSAmerica. In Iowa and Wyoming, benchmark farmland values increased 0.3% in the first six months of 2020. Nebraska experienced a decline of -0.4%, while South Dakota saw a larger but still modest drop of -2.0%. Koch said overall declines in real estate values in Nebraska and South Dakota were at least partially influenced by broader declines in pastureland values of 4.0% and 4.7%, respectively. South Dakota also is seeing residual impact from last year’s flooding. On the whole, however, values continue to benefit from many of the same factors that have supported the market for the past few years, Koch said.

 

Morning Commentary

Dec corn up ½ at $3.36

Nov beans up ½ at $9.005

The DOW is down

USD is weaker

Crude oil up $.31 at $41.38

Good morning,

Corn bulls continue to believe Chinese demand could ultimately be stronger than most in the trade are anticipating. The problem is will it be enough to shake the bears? As long as we have an estimated new-crop yield of +178 bushels per acre and +2.5 billion in U.S. ending stocks it’s hard for most in the trade to imagine the Chinese buying enough U.S. corn to really scare the bears.  The trend for Dec corn is negative.  An inability to stabilize above $3.375 leaves the market vulnerable to a drop to $3.22.  Closing over $3.5025 is needed to improve the outlook. 

Soybean bulls are pointing to continued Chinese buying and the largest week of U.S. new-crop soybean sales since 2016. The argument of good demand by the bulls is being offset by bears who believe the U.S. yield is heading north of +50.0 bushels per acre. Bears are pointing to adequate rainfall in the extended forecast.  The trend for Nov beans is neutral-positive.  Stable action outside $8.83-$8.97 is needed to provide fresh trending targets. 

Dow Jones Transportation Average (DJTA) railroad components are trading lower after second quarter 2020 earnings, with CSX Corporation (CSX) and Union Pacific Corporation (UNP) beating profit estimates while coming up short on revenues. Revenues crashed around 25% year over year at both operations, highlighting a recessionary environment that may continue well into 2021. Union Pacific warned that fiscal year 2020 carload volumes will drop 10% or so from 2019 levels, while CSX warned that capital spending will come in at the “low end” of current guidance. Transportation stocks are “canaries in the coalmine” for the U.S. economic outlook, with shipping volume rising during periods of expansion and shrinking during recessions and downturns. Analysts expect similar reports from other transportation companies in coming weeks, highlighting the ongoing impact of the pandemic.

Senate Agriculture Appropriations Subcommittee Chairman John Hoeven, R-N.D., told DTN on Wednesday he believes the Senate coronavirus aid package will contain about the same amount of money for agriculture programs as the House HEROES Act, but the nutrition provisions will be up to the top Senate leadership. In a telephone interview, Hoeven said USDA can start with the $14 billion that was previously allocated to the Commodity Credit Corporation and Congress will bump that up so USDA has about $33 billion to $35 billion in additional money for farmers. Hoeven said, by his calculations, the HEROES Act passed by the House in late May contains about $68 billion for agriculture and nutrition and $33 billion of that — including the $14 billion in CCC money — is for aid to farmers and ranchers. USDA could not use the $14 billion until July 1 but can now use that money to pay out the rest of the $16.5 billion promised to farmers and ranchers under the Coronavirus Food Assistance Program (CFAP), Hoeven said.(Progressive Farmer)

USDA’s monthly livestock data shows commercial pork production during June was a record monthly high. That followed a couple of months of dramatically lower production as several major plants either closed or reduced hours to fight COVID-19 infections. The USDA says pork production during June 2020 was 2.400 billion pounds, up +14% from June 2019 with a +12% jump in the slaughter to 11.177 million head and a +3 pound gain in the average live weight at 288 pounds. Commercial beef production was 2.374 billion pounds, +7% above the year before with a +2% increase in the slaughter to 2.876 million head and a +52 pound gain in the average live weight at 1,365 pounds. The monthly red meat production total of 4.792 billion pounds was +10% more than the previous year, with the year to date total now at 26.824 billion pounds, slightly ahead of last year’s record pace.

 

Morning Commentary

Sept corn down 1 at $3.265

Nov beans up 1 ¾ at $8.9725

The DOW is up

USD is stronger

Crude oil down $.33 at $41.57

Good morning,

Corn traders continue to debate U.S. yield. Bulls want to talk about a yield closer to 175 bushels per acre, while bears want to talk about a fresh new all-time record U.S. yield of +180 bushels per acre. Bottom line, regardless of the camp you find yourself, everyone on both sides of the debate seems to be in agreement that we are going to have a strong crop. The trend for Dec corn is negative. An inability to reassert above 337.5 leaves the market vulnerable to a drop to 322. Closing over 350.25 is needed to improve the outlook. Based on the trade count, non‐passive funds are thought to be short 165,000 corn on a futures and options basis.

Soybean bulls continue to point to improving Chinese demand and a much weaker U.S. dollar. Bears are talking about mostly cooperative U.S. weather, an average U.S. yield estimate working its way north of +50 bushels per acre, and increasing tensions between U.S. and Chinese leaders. In slightly below average volume Wednesday, open interest was little changed. The trend for Nov beans is neutral-positive.  Stable action outside 883‐897 is needed to provide fresh trending targets. Based on the trade count, non-passive funds are thought to be long 61,000 beans on a futures and options basis.

The U.S. Court of Appeals for the Ninth Circuit denied a petition to vacate the registration of Corteva Agriscience’s Enlist Duo herbicide, a 2,4-D-choline and glyphosate premix designed for use over 2,4-D-tolerant Enlist crops. The court ruled that EPA only needed to fix one oversight with the Enlist Duo registration regarding the herbicide’s risk to monarch butterflies. The herbicide’s registration will remain intact in the meantime. The decision in Enlist’s favor will come as a relief to many in the agrichemical industry, which is still reeling from a recent Ninth Circuit court decision vacating three dicamba herbicides, based on a similar lawsuit from many of the same plaintiffs as this Enlist lawsuit.

America’s frozen pork inventories were down -25% from a year earlier at the end of June, the U.S. Agriculture Department said on Wednesday, after outbreaks of the coronavirus among meatpacking workers slowed production. The USDA said in a monthly report that there were 464.373 million pounds of pork in cold-storage facilities on June 30, down from 467.927 million the previous month and 619.454 million a year earlier. Processors and exporters drew down supplies of frozen meat during the plant disruptions, rather than making new purchases at high prices, according to economists. The drawdown in frozen pork in June was the smallest for the month since 1970, said Rich Nelson, chief strategist for commodity broker Allendale. The -3.5 million pound decline was smaller than the typical 30-million pound decrease for that period, he said. U.S. pork production increased about 6% from a year earlier as plants recovered from the disruptions in June because there were a large number of hogs to slaughter, Nelson said. Total red meat supplies were up +1% from the previous month but down -12% from last year. Beef supplies were up +3% on the month but down -6% from last year. Poultry supplies rose +4% from the previous month but were down -3% from 2019 levels. Total stocks of chicken were down slightly from the previous month but up +2% from last year. Total pounds of turkey in freezers were up +13% from last month but down -12% from June 30, 2019. (Sources: USDA, Reuters)

The U.S. Department of Agriculture released its long-awaited report on the impact of the 2019 fire at Tyson Foods’ Holcomb, Kan., beef plant and impact of the COVID-19 pandemic on beef price margins. The report failed to identify wrongdoing by market participants but did offer suggestions on how to improve transparency in the market and create additional opportunities for small and local processors. The agency added, “Findings thus far do not preclude the possibility that individual entities or groups of entities violated the Packers & Stockyards Act during the aftermath of the Tyson Holcomb fire and the COVID-19 pandemic. The investigation into potential violations under the Packers & Stockyards Act is continuing.” The North American Meat Institute (NAMI) pointed out that the report found no wrongdoing. “In its analysis of the effects of the fire and the pandemic, USDA found no wrongdoing and confirms the disruption in the beef markets was due to devastating and unprecedented events,” NAMI president and chief executive officer Julie Anna Potts said.

U.S. railroad operator CSX Corp. reported on Wednesday a drop in quarterly profit after cost controls failed to offset a -20% volume slump from the COVID-19 pandemic. The Jacksonville, Florida-based company, considered one of the most efficient U.S. railroads, reported second-quarter net income of $499 million, or 65 cents per share, down from $870 million, or $1.08 per share, a year earlier. The railroad slashed costs, in part, by reducing employee overtime during the quarter. Revenue tumbled -26% – the largest decline in company history – to $2.26 billion after the automotive segment led across-the-board declines. The company says while business has been recovering since the nadir in May, raging infections in key states – including Florida, Texas and California – are raising economic risk. (Source: Reuters)

 

Morning Commentary

Sept corn up 1 ¼ at $3.24

Nov beans down 1 ½ at $8.915

The DOW is down

USD is weaker

Crude oil down $.61 at $41.31

Good morning,

Corn bears are pointing to prices pulling back -30 cents in just the past couple of weeks despite bullish buying from the Chinese. There seems to be more and more talk inside the trade of the U.S. average yield working itself higher and perhaps pushing to a new record north of +180 bushels per acre. Bears continue to believe we will retest the DEC20 contract lows and perhaps move sub-$3.00 deeper into the U.S. harvest.

Soybean bulls continue to see good demand. The problem is U.S. weather forecasters show very little sign of major complication so there’s more talk of a higher average yield +50 bushels per acre. There’s really nothing fresh or new in the headlines. Bears believe Chinese demand will be somewhat limited between now and the U.S. election and that U.S. production estimates are going to creep higher. That makes the $9.00 level seem like the high end of the range and if relations turn more negative with the Chinese then perhaps the market retest the $8.50 level. Bulls think the Chinese buying could eventually be significant enough to pull prices higher, perhaps up to the $9.40 to $9.60 level.

Bayer, BASF and Corteva Agriscience continue the fight to preserve post emergent dicamba use. The companies are contesting the results of a June 3 decision by three judges on the U.S. Circuit Court of Appeals for the Ninth Circuit, which vacated the registrations of their dicamba herbicides, XtendiMax, Engenia and FeXapan. On Monday evening, the three companies filed separate petitions asking for an “en banc” review of the case, which requests that all the judges of the Ninth Circuit re-hear the original case. This petition for an en banc re-hearing is BASF’s second attempt to reverse the judges’ ruling. A petition filed by the company on June 16 asking the Ninth Circuit to stay and recall the its mandate was denied by the judges on June 25. George Kimbrell, legal director for one of the plaintiffs, the Center for Food Safety, said the group is confident these petitions will meet a similar fate.(Progressive Farmer)

A Small Business Administration official urges farmers to apply for the Paycheck Protection Program through their local lenders. Tom Salisbury is SBA regional administrator for Region 7 which includes Iowa, Nebraska, Kansas and Missouri. He says, “You can walk into your local bank that you deal with, that you bank at for the last however many years, and you know the people there. And that’s the people you’re going to be dealing with so you’re not dealing with a stranger in California or something like that.” Salisbury says a lot of Missouri farmers have been caught in an especially tight spot, “Here in Missouri, you had some flooding up north that affected some of them last year and then they turn around and you’re in a pandemic. So, we’ve been real aggressive about helping them.” Salisbury was on a call with Kansas City area Congressman Emanuel Cleaver who is also urging people to apply for the PPP funds by the deadline of August 8th. He says there’s $100 Billion dollars left and he’s trying to get an extension of the program in a new stimulus bill. (Source: Brownfield Ag)

Bayer AG launched a pilot program in the United States and Brazil on Tuesday that will pay farmers for capturing carbon in cropland soils, making it the latest agriculture company to capitalize on environmental initiatives. The company seeks to enroll about 1,200 row crop farmers in its Bayer Carbon Initiative in the first season, scale up in upcoming seasons, and ultimately expand to other countries, company executives said. Bayer’s program requires that farmers enroll in its Climate FieldView digital farming platform, where growers would log data about their eco-friendly farming practices such as no-till farming or planting cover crops. Those claims could then be verified by satellite imagery. Bayer would compensate growers for sequestering carbon and pay them in cash or credits to buy products on its Bayer PLUS rewards platform.

 

Morning Commentary

Sept corn down 2 ¾ at $3.255

Nov beans down 6 ¾ at $8.9325

The DOW is up

USD is weaker

Crude oil up $1.11 at $41.92

Good morning,

Corn bulls are disappointed by the USDA leaving weekly crop-conditions unchanged at 69% rated GD/EX vs. 57% last year. Bulls perhaps most surprised by Indiana being left “unchanged” at 59% rated GD/EX as Ohio conditions slide -4% to just 43% rated GD/EX. Others states showing deteriorating conditions include Nebraska down -4% to 66% rated GD/EX vs. 77% last year; and Iowa down -3% to 80% rated GD/.EX vs. 63% last year.  The USDA also showed 59% of the U.S. corn crop as “silking” and 9% in “dough” which are both running ahead of schedule. In other words, more than half the U.S. crop was assumed to be in its highly important pollination stage the past few days. The areas that got extreme heat without the rainfall will be seeing some drag. Keep in mind, in 2018 the USDA had U.S. weekly crop-conditions rated at 72% GD/EX, (Iowa was rated 78% GD/EX) and that crop ended up with an average yield estimate of 176.4 bushels per acre vs. the USDA’s current yield forecast of 178.5 bushels per acre.  There’s more and more talk circulating inside the trade each day about the Chinese trying to desperately battle “food inflation” and the recent heavy rains that have caused major flooding disasters. Form what I’m understanding, this is the worst flooding in China in over 30-years. As many as 35 rivers have reached record highs, while flood alerts have been issued for a total of 443 rivers, according to a release by China’s Ministry of Water Resources.

Soybean bears are pointing to the USDA’s unexpected improvement in weekly crop-conditions from 68% to 69% rated GD/EX vs. just 54% of the crop rated GD/EX last year. Bears are quick to point to 2018 when 69% of the U.S. crop was rated GD/EX and produced an average yield of 50.6 bushels per acre. Conditions deteriorated in Iowa -4%.

Cattle markets start off on a quiet note this week with limited fresh news and still stale fundamental developments. Several things to keep in mind this week, cattle on feed and cattle inventory reports are due out this Friday after the close. Cattle on feed estimates are a bit choppy as we regionally separated ourselves into a couple of setups regarding on feed numbers and pace of marketing. Thus far, we have put our eyes on a handful of industry estimates ranging from 90-102.2% of last year’s on feed for July 1, 95-109% of last year for placements in June and 100-112% of last year for marketing’s in June. Cattle inventory report estimates are a little harder to come by these days as the report is not covered as well by analysts. Having said that, the inventory report is watched closely by non-commercial traders as a longer-term indicator of market direction. We would expect numbers to continue to tighten as the cattle cycle begins to roll over following a period of expansion. Moving on to some market metrics, total open interest is moving higher but remains very low relative to history. Open interest including options is 318,227 and without options is 274,206. Commercial traders have been fairly inactive over the past few weeks outside of some tepid hedging on the recent rally. Some liquidation out of the non-commercial short has been noted and would expect we begin to see the non-commercial long building in the coming weeks. We are currently in an interesting situation where hedgers find themselves compelled to sell breaks and buy rallies for fear of missing the rally. Similarly, spec buying is met with very little hedge paper thus allowing the market to rise rapidly. Cash was ever so slightly higher last week on lighter volume. The bias is that cash will be higher yet again this week and the north will maintain a premium over the south for reasons discussed in previous writings. Futures are in an uptrend and have now taken out the sideways channel. There remains risk in the markets and many consistent hedgers will and should view the increase in prices as an opportunity. However, just judging by the longer-term technical outlook we have more upside potential. Continue to view the market both logically and strategically. Good business decisions rarely land us in trouble and remember seven days without beef makes one weak. Trey Warnock – Amarillo Brokerage Company

Chevron says it’s buying oil and gas producer Noble Energy for about $5 billion in stock, the first big energy deal since the coronavirus crisis crushed global fuel demand and sent crude prices to historic lows. Chevron ended the first quarter with a cash pile of $8.5 billion after withdrawing a $33 billion bid for Anadarko last year and then being among the first big oil companies to slash spending during the downturn. The purchase boosts Chevron’s investments in U.S. shale, and gives it Noble’s flagship Leviathan field off the shore of Israel, the largest natural gas field in the eastern Mediterranean. Including the company’s debt pile, the deal is worth roughly $13 billion. Chevron is paying a “moderate premium” reflecting a cautious outlook for oil and gas deals, said Andrew Dittmar, senior M&A analyst at data provider Enverus. Noble shareholders will own about 3% of the combined company, after the deal closes, expected in the fourth quarter.

Steve Meyer said the pork industry is in the midst of the largest economic hit he has ever seen in his 30 years as a hog industry analyst, including the terrible slide in prices seen in 1998 and another in 2009. Meyer, an economist with Kerns & Associates, said during a briefing hosted by the National Pork Producers Council (NPPC) on Monday afternoon that the devastating impact of COVID-19 on the market and mass euthanasia of hogs is “not close to over.” Meyer says the backup could reach as many as 2.5 million hogs by the end of the year. According to his analysis, based on lean hog futures prices on March 1 and July 10 and actual hog prices in the interim, potential 2020 revenues from hog sales have been reduced by roughly $4.7 billion. Other losses associated with euthanasia, disposal and donation of pigs with no market outlet and insufficient space to hold them meant that U.S. pork producers have lost nearly $5 billion in actual and potential profits for 2020. He said it appears that those losses will continue into 2021.(Feedstuffs)

 

Morning Commentary

Sept corn down 2 ¾ at $3.3025

Nov beans up 3 ¼ at $8.9825

The DOW is down

USD is weaker

Crude oil down $.33 at $40.26

Good morning,

Corn traders will again be debating U.S. yield and demand from the Chinese. Bears want to believe the U.S. crop could push towards an average yield of 180 bushels per acre. Bulls believe we are much closer to 175 bushels per acre. The bull argument is that Illinois and some other key areas struggle late and the yield comes in 175 or perhaps a bit lower. At the same time, the Chinese continue to purchase U.S. corn to the tune of 6 to 10 MMTs. All of a sudden the trade could start getting out a pencil and lowering the USDA current new-crop ending stock estimate from +2.6 billion bushels perhaps eventually down to sub-2.0 billion bushels, and all of a sudden we have a much more interesting story.

Soybean bulls are hoping to see the USDA make another slight reduction in overall U.S. crop-conditions this afternoon. It was estimated last week that 68% of the U.S. crop was rated GD/EX vs. 71% the week before. The previous year 54% of the U.S. crop was rated GD/EX at this stage and ended up with an average yield of 47.4 bushels per acre. The year before that, mid-July 2018, the U.S. crop was rated 69% GD/EX and the final yield was estimated at 50.6 bushels per acre. Bears are quick to point out the USDA current yield estimate is 49.8 bushels per acre and might eventually need to be bumped higher.

Overall unit sales of agricultural tractors and self-propelled combines in June 2020 rose in the U.S. and, for the first time this year, grew in Canada as well, according to the latest data from the Association of Equipment Manufacturers (AEM). Total U.S. farm tractor sales rose +32.7% in June compared to 2019, while self-propelled combine sales grew +36.6%. Only four-wheel-drive tractors declined in unit sales in the U.S. in June. Total year-to-date sales of all farm tractor are up +10.5% in 2020, while combines cut year-to-date losses to only -1.7% in the same period. For Canada, June tractor sales grew across almost all segments, leading to an overall gain of +32.5%, with 100 hp-plus tractors the only segment in the red, falling -20.2% to 202 units sold. That put year-to-date unit sales for farm tractors statistically flat with 2019, while combines are down -30.8% for the year despite +14.4% growth in the month of June. (Source: Feedstuffs)

U.S. lawmakers from Iowa are trying to add aid for the biofuels industry into a pending coronavirus relief package in the Senate, U.S. Senator Chuck Grassley said on Friday. Grassley and his Iowa colleague, Senator Joni Ernst, hope to include a subsidy for feedstock for the ethanol industry in the bill. “The long-term hope for ethanol though is directly related to the extent to which the economy picks up and people start driving,” Grassley said in a call with reporters. Grassley could not say when a final bill would be ready in the Senate. (Source: Reuters)

The Kansas City Fed’s latest Ag Lending survey shows farm lending slowed in the second quarter alongside the initial effects of the pandemic and a more pessimistic outlook for agricultural economic conditions. The volume of total non-real estate farm loans continued into a yearlong trend of declines during the second quarter of 2020. The slowdown in lending generally was consistent across all types of loans. Delinquency rates on farm loans increased at a steady pace through the first quarter and agricultural credit conditions remained weak. Recently implemented government lending programs (Paycheck Protection Program (PPP) and Economic Injury Disaster Loans) likely supplemented the financing needs of some producers while direct aid payments may help offset declines in farm revenues in 2020. Despite a more pessimistic environment for farm income and credit conditions, farmland values remained relatively steady in the first quarter. Compared with the previous year, the value of nonirrigated cropland changed by less than 5% in all reporting states except Texas, which rose +9%. In states where values were lower than a year ago, the average decline was about -2%. Across all other states, values increased about +4% on average.

 

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