MORNING COMMENTS

Good Morning    

Current Markets as of         8:05     Friday, February 15, 2019

 

Month                                             High                              Low                                  Change                                   Last

Mar 19 Corn                               $3.76 ¼                       $3.73 ¾                               $ + 1                                    $3.75 ¾                                                           

Dec 19 Corn                                $4.00 ½                      $3.98 ¾                              $ + 1                                    $4.00 ¼                                                                     

Mar 19 Beans                             $9.08 ¾                      $9.03 ¾                              $ + 5                                   $9.08 ½                         

Nov 19 Beans                             $9.52 ¼                       $9.48                                   $ + 4                                   $9.52            

  

Oil    $55 Higher      Gold   $1,317   Higher     Dow $25,532   Higher      Wheat $5.06 Lower 

CME grain markets will be closed Monday for President’s Day.  Following a regular close today, the grain markets will not re-open until Monday night, February 18th, at 7:00pm CT. 

The Des Moines ethanol low rack price is $1.5735. This is $0.1546 lower than the unleaded gas low price of $1.7281. 

Corn Support is $3.76 and resistance is $3.85.  Beans Support is $9.10 and resistance is $9.40. Funds sold 50 Million (10,000 Contracts) of corn and sold 30 Million (6,000) contracts of beans Thursday. Just over 127,000 contracts last night. 

Informa released their updated US acreage expectations for the 2019/20 crop year. They peg the 2019 corn plantings at 91.591 mln acres, up slightly from their January estimate of 91.504 mln acres. They peg the soybean prospective plantings at 86.044 mln acres, down slightly from their Jan estimate of 86.204 mln acres 

U.S. Treasury Secretary Mnuchin said the trade talks were “productive” and Chinese President Xi Jinping said, “negotiations between both sides have achieved important progress in another step”. The talks will continue next week in Washington and traders are hoping/expecting some resolution 

Weather: Plains weather is active this morning with snow in the center/north and mixed precip and rain in SE KS and NE OK; plenty of action is on tap for the Plains and Midwest over the next five days, with extended forecasts still mostly wet

Solid rains fell across much of Brazil over the past 24 hours, moving southward over the next week, drier in the 6-10 day, wetter again northeast for the 11-15 day; Argentina is looking at a strong rain event during the 6-10 day time frame, but forecasts look fairly dry overall 

EARLY MARKET FEATURES

Corn – Price reversals lower yesterday are seeing little follow-through today as markets assess new trade headlines

Beans – The seesaw of trade negotiation headlines has brought some buying back to the bean market this morning

Have a great Weekend!   Darren, Brady and David

Gold-Eagle Cooperative Providing Quality Services and Products Innovatively, Profitably, and Professionally. 

Morning Commentary

March corn down 1 ½ at $3.7725

March beans down 5 ¾ at $9.1075

The DOW is up

USD is stronger

Crude oil up $.15 at $54.05

Good morning,

Corn  traders have very little fresh or new to digest. The market remains in a very tight and narrow pattern. Bears are pointing to Ukraine exports being on a strong pace and in a few weeks Argentine supply will start adding more to global competition. As of right now, several sources in Argentina are saying analyst are starting to adjust their production estimates a bit higher. A big chunk of the crop is thought to be doing very well. Keep in mind, still less than 50% of the Argentine crop has pollinated. In Brazil, first-crop corn will be about 20% harvested this week, while second-crop corn should get to about 45% planted. Bulls are pointing to the fact a couple of Chinese groups are penciling in much higher than expected corn, sorghum and DDG imports. Trend funds are thought to be long 7,000 contracts on a futures and options basis.  The short term trend is neutral-slightly negative.  The market is vulnerable to a drop to 368.25.  Closing over 378.75 would undermine the outlook.  Short, system types will find buy stops around 381.75.  Options are implying a 373.75-382 trading range the balance of this week. 

Soybean  traders are waiting patiently on additional details about Chinese trade. It sounds like top-level trade officials for both the U.S. and China are meeting these last two days of the week. U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin met last night with China’s top economic czar Liu He and central bank governor Yi Gang as the two sides try to build on the recent progress made in Washington last month. South American weather seems to be somewhat of a non-event right now. The Brazilian harvest should get to about 30% complete by week end. I heard China has been in the South American export market buying both Argentine and Brazil new-crop soybeans. Trend funds are thought to be short 35,500 contracts on a futures and options basis.  The short term trend is neutral.  Consecutive closes outside 906.5-920.5 is needed to provide fresh trending targets.  Short, system types will find buy stops around 920.5.   Options are implying an 903.5-923 trading range the balance of this week. 

USDA has asked the Environmental Protection Agency (EPA) not to enforce the E15 ban this summer against fuel retailers selling E15 gasoline if the rulemaking to allow its year-round use is delayed, says USDA Deputy Secretary Steve Censky. Some are hoping this plan “b” isn’t needed, as the first priority and the preference of everybody, including the EPA, would be to get the rule done. It appears it will be tough to have the rule in place by the summer driving season, considering the lengthy government shutdown.

 

Morning Commentary

March corn up ¼ at $3.785

March beans down ¾ at $9.1675

The DOW is up

USD is stronger

Crude oil up $.48 at $53.59

Good morning,

Corn  bulls are happy to see renewed buying interest in the export market. The USDA yesterday announced a sale of +120k metric tons to an “unknown” along with a bit more buying from South Korea. There continues to be rumors and talk of China perhaps sniffing around the U.S. corn market but absolutely no official confirmation. CONAB raised their corn production estimate for Brazil on thoughts of larger second-crop production. Remember, the soybeans are coming out of the ground early in Brazil, meaning second-crop corn might see less weather related stress late in the season. Here at home there’s still a ton of debate about new-crop corn acres and just how many will be planted? The short term trend is neutral-slightly negative.  The market is vulnerable to a drop to 368.25.  Closing over 378.75 would undermine the outlook.  Short, system types will find buy stops around 381.75.  Options are implying a 373.5-383.25 trading range the balance of this week. 

Soybean  traders continue to digest mixed headlines about Chinese demand and ongoing trade negotiations. The latest is that President Trump would entertain extending the deadline if we are close to making a deal. With this situation being so fluid and ever changing it’s extremely difficult to trade the headlines. The short term trend is neutral.  Consecutive closes outside 906.5-920.5 is needed to provide fresh trending targets.  Short, system types will find buy stops around 920.5.   Options are implying an 906.25-927.25 trading range the balance of this week. 

Biosev SA, the Brazilian sugar and ethanol maker controlled by commodities trader Louis Dreyfus, said its loss in the 2018/19 cane season through December rose 8.4% from the previous season to $240.40 million. Biosev on Tuesday reported a loss of $62 million in the third quarter ended in December, mostly due to the depreciation of the Brazilian currency. The loss was 17% smaller than in the same period a year earlier. Almost 90% of Biosev’s $1.6 billion in debt is dollar denominated. The company said the currency fluctuations have a non-cash effect, since the majority of the debt matures between 2021 and 2023, when the company plans to have enough cash to pay. (Source: Reuters)

Traders are bracing for increasing supplies at Cushing, Oklahoma, the delivery point for benchmark crude futures, as unexpected refinery issues add to inventories that are already at the highest in more than a year. Inventories at Cushing rose to 42.6 million barrels in the week to Feb. 1, the highest level since early January 2018, the U.S. Energy Information Administration said. Problems at a key Midwest refinery, along with upcoming seasonal maintenance, have traders believing supplies will rise more than expected at Cushing in coming weeks. (Source: Yahoo) 

 

Morning Commentary

March corn down 1 at $3.7325

March beans down 2 ¾ at $9.1175

The DOW is up

USD is stronger

Crude oil down $.43 at $52.29

Good morning,

Corn prices retreated a bit last week on improved weather in South America and no sign of a trade deal yet with the Chinese. In somewhat of a surprise move, the USDA raised its Argentine corn crop estimate from 42.5 to 46.0 MMTs. It seemed like going into the report, the trade was looking for a -1 or +1 adjustment in the Argentine estimate. The +3.5 adjustment to the Argentine crop was a bit stronger than many anticipated. Here at home, the USDA lowered their average yield estimate more than expected from 178.9 down to 176.4 bushels per acre. Keep in mind this is still the second best ever harvested. Because of the reduction in yield and total harvested acres, total U.S. production was lowered by -206 million bushels. On the demand side of the equation, total U.S. demand was lowered by -165 million bushels. Ethanol lowered by -25 million bushels. Other Feed, Seed & Industrial use was lowered by -15 million bushels with lower projections for high fructose corn syrup and glucose and dextrose. Exports were left “unchanged”. Feed & Residual was actually lowered by -125 million bushels. Imports lowered -5 million bushels. In summary, U.S. ending stocks were lowered by -46 million bushels to 1.735 billion. U.S. average on farm price was lowered to between $3.35 and $3.85 per bushel. The short term trend is neutral- negative.  Friday’s close below 375.5 leaves the market vulnerable to a drop to 368.25.  Closing over 381.5 would undermine the outlook.  Whipsawed Friday after the report, short system types will find buy stops around 381.75.  Options are implying a 368-379 trading range this week. 

Soybean   traders are keeping a very close eye on U.S. and Chinese trade negotiations that begin again today in Beijing. The market seems a bit nervous and uncertain by the recent comments out of Washington. Is it just political jockeying or is a trade compromise moving further out on the time horizon? The USDA elected to lower their Argentine soybean production estimate slightly from 55.5 to 55.0 MMTs. Brazil’s soybean production estimate was lowered from 122.0 MMTs down to 117.0 MMTs. The USDA also lowered the export estimates for Brazil, Uruguay, and Paraguay, which was partly offset by higher exports by Argentina. Global imports are also reduced mainly on a 2-million-ton reduction for China due to lower crush demand. Here at home, the USDA elected to lower the average yield estimate from 52.1 down to 51.6 bushels per acre; Harvested acres were lowered from 88.3 down to 88.1 million acres. Total Production was lowered from 4.600 down to 4.544 billion bushels. On the demand side of the equation, domestic crush was raised higher by +10 million bushels. U.S. exports were lowered by -25 million bushels. Residual was lowered by -1 million bushels. U.S. imports were lowered by -5 million bushels. Net-Net, U.S. ending stocks were lowered by -45 million bushels, but still remain extremely burdensome at 910 million bushels. The short term trend is slightly-positive.  A close over 922.25 provides a target around 931.25.  We need a close under 905.25 to undermine the outlook.  Short, system types will find buy stops above 931.25.   Options are implying an 899-928 trading range this week.

November saw a record amount of beef exported from the U.S. as well as an increase of +2.2% from a year ago. Between January and November, beef shipments totaled almost 2.9 billion pounds, up 11.3% from the same range in 2017.  U.S. beef exports to the top four customers in November were up from year-earlier levels. However, shipments to the fifth largest buyer, Hong Kong, dropped 29.5% in November.

Many EV owners discovered in the past few weeks as winter storms slammed much of the country, the cold weather is not ideal. A new AAA stay found that when the thermometer drops to 20 degrees F, range fell by an average of 41% on the five models tested, including the Tesla Model 3, Chevy Bolt EV, Jaguar I-Pace, Nissan Leaf Plus, and the VW e-Golf. It’s definitely something all automakers are going to have to deal with as they push for further EV deployment as it’s something that could surprise and upset consumers. (Source: CNBC)

Beef Products Inc. BPI, the South Dakota-based meat processing company at the center of 2012’s “pink slime” controversy, just won a long-sought semantic victory. For years, the company has argued that its signature product is safe, wholesome, and not unlike everyday burger meat. Now, BPI has enlisted a powerful ally in its effort to recoup its image and reclassify its product: the federal government. After a months-long evaluation, the United States Department of Agriculture’s Food Safety and Inspection Service (FSIS) determined in December that BPI’s signature product—the offering famously called “pink slime” in an ABC News exposé—can be labeled “ground beef.” Legally speaking, it’s now no different from ordinary hamburger, and could even be sold directly to the public. FSIS calls it a “new” product because BPI’s process has evolved substantially since 2012—though how exactly it has changed is not immediately clear.

 

Morning Commentary

March corn up 1 ½ at $3.78

March beans up 1 ¾ at $9.15

The DOW is down

USD is weaker

Crude oil up $.15 at $52.79

Good morning,

Corn traders are extremely eager to see today’s USDA reports. There’s really no reason to waste time and or talk about anything else. The biggest question looming are… How big of a reduction will the USDA make to old-crop average yield? How many acres will go unharvested? Will there be a reduction in their U.S. export estimate? How much further will they reduce their corn used for ethanol forecast? Will corn used for feed be lowered because of more alternative backing up in the pipeline? Will there be any change to South American production? Will the Ukraine corn production estimate be raised higher? The short term trend is neutral-slightly positive.  The market remains in position to test the mid-upper 380 area.  Closing under 375.5 would undermine the outlook.  Short, system types will find buy stops above 381.5.  Options are implying a 372.25-384.25 trading range today.

Soybean traders are not only battling uncertainties surrounding Chinese trade, but also uncertainty surrounding todays USDA data dump. The market backpedaled yesterday on rumors that President Trump would not be meeting with Chinese President Xi anytime soon. To paraphrase, a senior leader in Washington said, there was still a lot of work that needed to be done and hurdles cleared before the two leaders get together. They don’t see that happening anytime soon. President Trump also confided similar sentiment. The big question, is this simply more political jockeying ahead of next weeks meeting with U.S. trade representatives or are we really talking about a significant delay in finding a trade compromise? Here at home today, it’s all about the USDA reports. How far will they lower U.S. old-crop yield? How many harvested acres will be taken out of the equation? How will they interpret Chinese demand and the current trade conflict? Will they aggressively lower U.S. exports and or Chinese imports? How big of reduction will be made to South American soybean production? The short term trend is slightly-positive.  A close over 923.25 provides a target around 931.25.  We need a close under 906.5 to undermine the outlook.  Given a sell signal Thursday, system types will find buy stops above 931.25.   Options are implying an 904-925.5 trading range today.

The largest U.S. meat processor — Tyson Foods — missed Wall Street estimates for first-quarter revenue as the company was hit by lower average prices of pork, denting its sales. Sales in the company’s pork business fell 8.1% as prices fell on average 4.6% compared to last year. Analysts point to China’s retaliatory tariffs of more than 60% on pork having resulted in oversupplies of hogs in the U.S. as fewer producers ship them for Chinese consumption. (Source: Reuters)

Current tariffs make direct transfers of U.S. ethanol to China unprofitable, but the fuel can enter China tariff-free if it arrives with a blend of at least 40% Asian-produced material, according to trade rules established by the regional economic and political body, the Association of Southeast Asian Nations. The trip for U.S. ethanol-to China now takes about two months and includes a ship-to-ship transfer and a stop in Malaysia before it arrives. The journey reflects a broader shift in global ethanol flows since the trade war with China begun last spring. Remember, China slapped retaliatory tariffs up to 70% on U.S. ethanol. (Source: Reuters)

 

Morning Commentary

March corn down ¾ at $3.7925

March beans down 1 at $9.2075

The DOW is down

USD is stronger

Crude oil down $.43 at $53.58

Good morning,

Corn finds zero headline moving excitement and remains in an extremely narrow trading range. Keep in mind, during the past 3-weeks the MAR19 contract has basically traded between $3.75 and $3.82, just a 7 cent range. During the same time period, the new-crop DEC19 contract has essentially traded in an even narrower range of between $3.99 and $4.04 per bushel. Chinese trade headlines are an obvious wild-card and so is South American weather and production.

Soybean bulls where happy to hear that another sale to China was reported. Perhaps even more optimistic is the fact U.S. Treasury Secretary Steve Mnuchin reported that he and a “large team” of U.S. trade officials, including Lighthizer, would be making a trip to China next week to try and hammer out more details for a compromise. . Harvested acres are currently forecast at 88.348 million vs. 89.522 million last year. The harvested acreage estimate is obviously moving lower. Again, similar to corn, a reduction in yield and a reduction in harvested acres equals a reduction in total production. The USDA is currently forecasting total U.S. soybean production at 4.600 million bushels. The trade is thinking the total production number will be reduced down to around 4.55 billion bushels. For reference, total U.S. production last year was reported at 4.411 billion bushels, so still more than last year. Throw on top lack of export interest from China in 2018 and you can easily understand the headwind. In fact, just look at U.S. soybean ending stocks which are currently forecast at 955 million bushels vs. just 438 million bushels last year. The trade currently seems to be thinking we could see a -20 to -30 million bushel reduction in U.S. ending stocks, but that would still keep us at a very burdensome +900 million bushels.

As The Wall Street Journal ran a story yesterday talking about a wave of bankruptcies sweeping the U.S. Farm Belt. “Throughout much of the Midwest, U.S. farmers are filing for chapter 12 bankruptcy protection at levels not seen for at least a decade, a Wall Street Journal review of federal data shows. Bankruptcies in three regions covering major farm states last year rose to the highest level in at least 10 years. The Seventh Circuit Court of Appeals, which includes Illinois, Indiana and Wisconsin, had double the bankruptcies in 2018 compared with 2008. In the Eighth Circuit, which includes states from North Dakota to Arkansas, bankruptcies swelled 96%. The 10th Circuit, which covers Kansas and other states, last year had 59% more bankruptcies than a decade earlier.”

According to the monthly index of ag industry sentiment from Purdue Univ. and CME Group, the Ag Economy Barometer Index for January rebounded sharply to a rating of 143, a 16 point improvement (12.5% rise). The January survey provided the first opportunity to measure farmer sentiment following USDA’s announcement the the second round of Trade Aid payments would be made to soybean producers and it was also the first survey taken following the passage of the 2018 Farm Bill. (Source: Purdue Univ.)

The Ag Economy Barometer also found that nearly 25% of soybean growers plan to reduce their acreage in 2019. Meanwhile, producer optimism about farmland values was lower compared with November. (Source: Purdue Univ)

 

Morning Commentary

March corn down 1 at $3.7975

March beans down 1 ¼ at $9.19

The DOW is up

USD is stronger

Crude oil down $.15 at $53.51

Good morning,

Stock bulls remain up to bat as the market continues to rebound from the 2018 lows. The Fed has clearly pivoted, taking a less hawkish stance and investor optimism is once again banging the drum. Technically, we now have 80% of the S&P 500 companies trading back above their 50-Day Moving Average.

Corn prices remain in an extremely narrow trading range. Most are waiting to hear what the USDA has to say when they release update numbers on Friday. Some of the biggest question are… How big of a reduction will the USDA make to old-crop average yield? How many acres will go unharvested? Will there be a reduction in their U.S. export estimate? How much further will they reduce their corn used for ethanol forecast? Will corn used for feed be lowered because of more alternative backing up in the pipeline? Will there be any change to South American production? Will the Ukraine corn production estimate be raised higher? Outside of the USDA uncertainty, bulls are still hoping they will see more positive headlines regarding Chinese trade and the very real possibility of them buying larger doses of U.S. corn, ethanol and DDGs in the near future.  Corn basis seems to have done as much of the work as it needs to, so now we are due for a flat price rally over the next 60 days, which also means basis will begin to weaken.  Trend funds are thought to be long 24,000 contracts on a futures and options basis.  Significantly less long than expected, the CFTC last night pegged the trend fund long just 2,000 corn on a futures and options basis as of December 31st.  Commercials decreased their net short by nearly 28,000 contracts during the last week of 2018.  The short term trend is neutral-slightly positive.  The market remains in position to test the mid-upper 380 area.  Closing under 375.5 would undermine the outlook.  Short, system types will find buy stops above 384.5.  Options are implying a 370.5-389.5 trading range this week.

Soybean prices continue to chop around near the upper end of the recent 8-month range. There’s very little fresh or new to report as everyone inside the trade seems to be patiently waiting on Friday’s updated USDA data and additional insight regarding Chinese trade negotiations. The short term trend is positive.  A close over 924.5 provides targets at 937.25, perhaps the 941.  The 941 area will be key from a longer term perspective.  We need a close under 906.5 to undermine the outlook.  Long, system types will find sell stops below 913.25.   Options are implying an 902.5-937 trading range this week.

The USDA has received nearly 805,000 applications and paid out $6.41 billion so far in President Trump’s tariff payments created to buffer the impact of the China-U.S. trade war. The tariff payments are the largest element of a mitigation package that was announced as a maximum of $12 billion but could turn out smaller in the end. Remember, deadline to apply for payments is February 14. (Source: USDA)

Meat processor Tyson Foods has held talks to buy privately-owned California-based Foster Farms for roughly $2 billion. The two have had disagreements over price, and it is possible the talks could fall apart. The deal talks come just months after Tyson closed its $2.16 billion acquisition of McDonald’s meat supplier Keystone Foods, which further expanded its capabilities in Asia. (Source: CNBC)

As the U.S.-China trade war roiled global agriculture, Archer Daniels Midland reported lower-than-expected fourth-quarter 2018 earnings, sending its shares down more than -6% following the news on Tuesday.  Three of its four business units reported lower results, including their grain trading origination business, where adjusted operating profit slumped -30% to $183 million.

 

Morning Commentary

March corn up ¼ at $3.795

March beans up ¼ at $9.1875

The DOW is up

USD is stronger

Crude oil down $.38 at $54.18

Good morning,

Corn traders remain cautious ahead of this week’s heavy USDA data dump. South American weather has arguably improved a bit and there’s still no solid deal in place with the Chinese, hence no real race or hurry to add additional risk-premium, at least not at this point. Many parts of Argentina are expected to dry down and create a more cooperative environment. In fact, there seems to be a few more sources starting to bump their Argentine corn production estimate higher. Most inside the trade are looking for the USDA to reduce their current average U.S. yield estimate from 178.9 down to around 178.0 bushels per acre. Bulls are hoping to see the yield estimate lowered to sub-177.0 bushels per acre, bears are wanting to argue that it could stay unchanged. There’s also some ongoing debate about “harvested acres”, most are in agreement that they will be trimmed but by how much? The trade is also looking for a reduction in overall U.S. ending stocks, also a slight reduction in world ending stocks. We’ve all seen the ethanol margins tighten and estimates for corn used by ethanol plants starting to pullback. Depending on who you are speaking with, most inside the trade are looking for a -25 to -50 million bushel reduction in the USDA’s current corn used for ethanol estimate. Also interesting is that roughly 9.5 million bushels of sorghum was recently used for ethanol production (during the month of November) which is much larger than the 8.2 million used in October and was the highest sorghum used for ethanol figure we’ve seen since the summer of 2017. The short term trend is slightly positive.  The market remains in position to test the mid-upper 380 area.  Closing under 375.5 would undermine the outlook.  Short, system types will find buy stops around 384.5.  Options are implying a 370-389 trading range this week.

Using only 454.5 million bushel for ethanol in November, ethanol grind declined 5.6 million bushels or 1.2% from October and 21.2 million bushels or 4.5% from November 2017. I should mention that corn used for all industrial purposes totaled 504 million bushel in November, down 1% from October and down 4% from 2017. Also, corn-for-ethanol grind in the first quarter of the 2018-19 marketing year was 1.360 billion bu., down 31 million bushel (2.2%) from last year.

Soybean traders continue to debate Chinese demand, U.S. trade negotiations, South American production, and the upcoming adjustments by the USDA. There’s been reports of continued U.S. buying by the Chinese, but still not enough to excite potential bulls who are not yet in the market, and not enough to scare bears out of positions that are already in play. There’s been more talk that the USDA could trim the Chinese import estimate, but at this point it’s still just talk. The short term trend is positive.  A close over 925 provides targets at 937.25, perhaps the 941.  The 941 area will be key from a longer term perspective.  We need a close under 906.5 to undermine the outlook.  Long, system types will find sell stops around 913.25.   Options are implying an 900.5-937 trading range this week.

A new article released in the American Journal of Agricultural Economics details the relationship between farm size and productivity using data taken from Northern China corn producers. What the study found is that the land market reforms have helped to enlarge the average operational scale of household farms in China but did not increase land productivity. This implies that subsidizing large farms in China may not necessarily be a good policy. The article is available for a limited time. (Source: AAEA)

Morning Commentary

March corn unchanged at $3.7825

March beans down ¼ at $9.175

The DOW is down

USD is stronger

Crude oil down $.68 at $54.58

Good morning,

Corn traders are preparing for this weeks major USDA data dump. The biggest reports are scheduled for release this Friday, February 8th. Corn prices have moved very little in the past few weeks. The front-end of the trade, the MAR19 old-crop contract has basically traded between $3.70 and $3.90 since late-September. Outside of the normal headlines this week and the ongoing uncertainty still surrounding Chinese trade negotiations, we might also see a few more headlines regarding E-15. It seems like there’s been a bit more pressure being placed on the EPA to finalize the rules for year-round E15, especially as the industry struggle to compete with low-margins. Most inside sources are thinking the USDA will again need to reduce their corn used for ethanol estimate. There’s also some increasing debate about the USDA’s export estimate and if U.S. suppliers can meet the lofty expectations. The big question is will the reduction in U.S. old-crop yield and total production offset the reduction in total estimated demand? Don’t forget, despite weather worries, Argentina and Brazil are still looking at +20 to +25 MMTs more corn being produced in 2019. The short term trend is slightly positive.  The market remains in position to test the mid-upper 380 area.  The market continues to chop around weekly resistance at 380.  Closing under 375.5 would undermine the outlook.  Short, system types will find buy stops around 384.5.  Options are implying a 370-386.5 trading range this week.

Soybean prices continue to trade in a sideways channel near the upper end of their range. For what it’s worth, we haven’t seen the new-crop NOV19 contract close above $9.66 per bushel since mid-June of last year. There’s been some talk circulating the past few days that the Chinese have purchased another +2.0 MMTs, which is thought to be on top of the +5 MMTs they recently purchased. Most suspect the Chinese purchase around 10 MMTs before the window of opportunity closes. Keep in mind, President Trump has been holding to his March 1st deadline. It’s also important to recognize that the Chinese still have their 25% tariff in place on U.S. soybeans. .  The short term trend is positive.  A close over 925.75 provides targets at 937.25, perhaps the 941.  The 941 area will be key from a longer term perspective.  We need a close under 906.5 to undermine the outlook.  Given a buy signal Friday, system types will find sell stops around 913.25.   Options are implying an 899-936 trading range this week.

After China agreed to buy 5 million metric tons of U.S. soybeans, U.S. Ag Secretary Perdue announced the USDA is making available $200 million in funding to help ag organizations develop foreign markets for U.S. farm goods. This is the third branch of the trade relief program for farmers and ranchers burned by the U.S.-China trade war. Soybean farmers and exporters look to receive a large portion of that aid package. The American Soybean Association was the largest single recipient, taking in nearly $22 million, followed by the U.S. Meat Export Federation ($17.6 million) and the U.S. Grains Council ($14 million).(Source: USDA)

California ranks fifth in the nation in number of farms & ranches, with over 77,000 covering over 25 million acres. California is ranked first in the U.S. in the production of milk, butter, ice cream and nonfat dry milk. Over a third of the country’s vegetables and two-thirds of the country’s fruits & nuts are grown in California (Source: USDA)

 

Morning Commentary

March corn up 3 at $3.795

March beans up 13 ¼ at $9.285

The DOW is down

USD is weaker

Crude oil up $.20 at $53.99

Good morning,

Corn bulls are wanting to hear more details about Chinese trade negotiations and the possibility of China buying U.S. corn, ethanol and DDGs in large quantities. The Chinese have reportedly “made arrangements” to purchase more U.S. agricultural products, but still no detailed specifics exist. Bears are worried that the March 1 deadline is quickly approaching and will pass without a hard deal being inked. Bulls continue to believe a trade deal and or major compromise is near. Weather in South America looks to be more cooperative as the forecast improves. The short term trend is slightly positive.  Despite Thursday’s setback, the market remains in position to test the mid-upper 380 area.  Closing under 375.5 would undermine the outlook.  Given a sell signal Thursday, system types will find buy stops around 384.  Options are implying a 376.5-382.75 trading range the rest of the day.

Soybean bulls are happy to hear talk that China is planning to buy more U.S. soybeans. There was some initial confusion, but from what I understand, China is expected to purchase another 5 MMTs of U.S. soybeans, on top of the estimated 5 MMTs they have recently purchased. Keep in mind, Brazil has now harvested about 15% of their new-crop bushels and supply is moving to the ports and becoming more readily available. Meaning the window of opportunity for U.S. exporters is starting to more rapidly close. We certainly don’t want to scoff at another 5 MMT purchase, but with the U.S. balance sheet busting at the seams it will still be tough to paint a bullish picture. The good news is Brazil’s crop has faced some weather headwinds. Rather than Brazil harvesting another new record, like the USDA was forecasting at 122.0 MMTs, it looks like their production is going to pullback to around 112.0 to 116.0 MMTs. The short term trend is positive.  Target medium term trend line resistance at 936.  We need a close under 905.25 to undermine the outlook.  Given a sell signal Thursday, system types will find buy stops above 929.   Options are implying a 919-936 trading range the rest of the day.

Brazilian fertilizer company Heringer has decided to close several of its plants and distribution centers as part of a restructuring plan to lower its debt burden. Heringer, one of the largest players in the Brazilian fertilizer market, sent a message to workers on Thursday in at least 10 installations, including plants and regional offices, advising them that they faced closure, according to a e-mail message seen by Reuters. Workers in those units would be laid off. Heringer has around 3,000 employees. (Source: Reuters)

In 2018, for the first time, Brazil exported more than $100 billion worth of farm products. The total, up 6% from 2017, was driven mainly by soybeans, beef, and cellulose pulp, with China as the No. 1 market. This data was provided by the Brazilian Confederation of agriculture and Livestock (CNA).

According to a study commissioned by the U.S. Dairy Export Council, the U.S. share of Japan’s dairy market could drop by half over the next decade if the the United States does not negotiate trade agreements to overcome the advantages given to competitors by the TPP pact and an EU-Japan free trade agreement. (Source: USDEC)

 

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