Morning Commentary

Dec corn down 1 ¼ at $3.965

Nov beans down 5 at $9.31

The DOW is down

USD is stronger

Crude oil down $1.15 at $53.55

Good morning,

Corn & Soybean  traders are trying to sort out the “weather wild-cards” and “Washington wild-cards” that have recently been flipped over. The combination of cold temperatures to the North and late-maturing crops are creating wide-ranging guesses about yield drag and overall “quality”. Bulls continue to believe the U.S. corn yield will end up sub-165 bushels per acre despite the USDA’s recent adjustment higher to 168.4 bushels per acre. Bulls also see “export demand” for both U.S. corn and soybeans now perhaps being underestimated, especially if the recent trade talks with China and Japan actually turn into the buying that’s being talked about in the headlines. President Trump said the U.S. would call off planned tariff increases on Chinese goods next week while China would buy $40 billion to $50 billion worth of U.S. agricultural products. As a reference, pre-trade dispute (in 2017), China was purchasing less than $30 billion in U.S. agricultural products, hence this would be a sizeable jump in demand if it comes to fruition. Keep in mind, there have also been talks of a sizeable jump in demand from the Japanese. Remember, Japan recently agreed to lower or reduce tariffs on over $7 billion of U.S. grown farming products, including beef and pork. The big question now is how and when does everything unfold? With the USDA just recently lowering last year’s production numbers, there’s some concern in the air they may not have the data available and all of the necessary analysis completed for many more months. Harvested acres and weights could certainly be very tricky in calculating this year, so timing becomes a big concern for the bulls. We also have to wonder when the new trade deals will actually start to have an impact on demand?  The Chinese trade deal will happen over time in three stages, with more divisive issues to be addressed later. President Trump said he and Chinese President Xi Jinping could meet and sign the first phase of a deal in mid-November, at the Asia-Pacific Economic Cooperation summit in Chile and it would be difficult to imagine the U.S. escalating tariffs thereafter if an agreement is reached. The trend for November beans is positive. The market achieved our 944 target overnight. Stable action over 944 is needed to drive the next leg higher. Closing under 916.75 alerts for a return to corrective action. The trend for December corn is neutral positive.  Closing under 379.5 alerts for a return to defensive trade and a test of key support at 369. Stable action above 398.25 is needed to restart a bull drive.

The Illinois Department of Agriculture is submitting additional dicamba regulations to the EPA for 2020. Illinois Ag Director John Sullivan tells Brownfield there are two big changes on the state label, including a cut-off date 25 days earlier than the 2019 extended cut-off. “The cut-off date to apply it will be June 20th, 2020. We’ve also added a temperature trigger, so if the air temperature of the time of application is over 85 degrees Fahrenheit, application will not be allowed.” He says the temperature cut-off also applies if the local forecast for the date of application is above 85 degrees. Sullivan says they are making this announcement early so farmers have time to plan for spring management programs. He says the additions are in response to the rapid increase of dicamba related pesticide misuse complaints over the last three years. “In 2017 we saw complaints in the 300 range. In 2018, it jumped up to 500 and this year it was over 900 and that is simply not acceptable.” The additions will be sent to the US EPA for review. Applicators will be required to follow the federal and updated state dicamba labels. (Source: Brownfield Ag.)

Thousands Urge USDA to Act on GIPSA Rule: In May, the U.S. Department of Agriculture announced its intent to publish a new rule under the Packers & Stockyards Act (PSA), also known as the GIPSA rule. The rule would specify criteria the secretary of agriculture could consider in determining whether conduct or action by packers, swine contractors or live poultry dealers constitutes an undue or unreasonable preference or advantage and a violation of the PSA. Rural Advancement Foundation International-USA (RAFI-USA), the National Sustainable Agriculture Coalition (NSAC), the Government Accountability Project (GAP), the Organization for Competitive Markets (OCM) and Farm Aid have joined farmers Tony and Christy Grigsby in the fight for farmer protections and have, together, gathered signatures from more than 84,000 supporters demanding that USDA take strong action in its upcoming undue preference rule-making. Tony and Christy Grigsby were contract poultry farmers for more than 10 years in Alabama but say the “exploitative system of contract poultry farming” financially ruined them.

Beef Checkoff Money was Diverted to Lobby Group: Newly released documents in a lawsuit between a group of independent Montana cattle ranchers and the USDA show that millions of dollars from an industry marketing fund are being diverted to the top cattle lobby, which some ranchers have long claimed misappropriates those funds for political use. By law, the money ranchers pay into the checkoff fund is to be used to advertise beef both nationally and internationally. The court documents reveal that the state councils that collect the beef checkoff funds from ranchers pass on huge sums to the National Cattlemen’s Beef Association (NCBA), the beef industry’s trade and lobby group, and its affiliates. It is illegal for the NCBA to use that money for political purposes, including lobbying. The NCBA insists that checkoff money is not used for political activities or lobbying. Ranchers point to cases in which checkoff funds have been misused or the firewall between promotional and political activities has appeared porous. The lawsuit now extends to 14 states beyond Montana — Hawaii, Indiana, Kansas, Maryland, Nebraska, Nevada, New York, North Carolina, Pennsylvania, South Carolina, South Dakota, Texas, Vermont, and Wisconsin — whose state beef councils are, according to the ranchers, also private entities.

 

Morning Commentary

Dec corn up 6 ½ at $3.8675

Nov beans up 7 ½ at $9.31

The DOW is up

USD is weaker

Crude oil up $.60 at $54.15

Good morning,

Corn  bulls were again disappointed as the USDA opted to adjust the U.S. yield higher rather than lower like most in the trade were forecasting. In this report, the USDA bumped its yield forecast higher from 168.2 to 168.4 and has total U.C. corn production at 13.779 billion bushels, down -20 million bushels on a slight decline in harvested acres. Corn “demand” had some sizeable adjustments: Exports were reduced -150 million bushels; corn used for ethanol was lowered by -50 million bushels; feed and residual use was increased by +125 million bushels. Net-net, U.S. ending stocks are lowered by -261 million bushels from 2.190 billion down to 1.929 billion. Unfortunately, this is still considered overly burdensome and takes some of the recent risk-premium out of the market. An ending stock number sub-1.6 billion would have created a much different and more interesting balance sheet. The trend for December corn weakened to neutral. Closing under 379.5 alerts for a return to defensive trade and a test of key support at 369. Stable action above 398.25 is needed to restart a bull drive.

Soybean  bulls are happy to hear that President Trump is scheduled to meet Vice Premier Liu He, China’s lead trade negotiator, later today. Political insiders are hopeful that enough progress will be made for the U.S. to put off tariff hikes on $250 billion of Chinese imports scheduled to go into effect next week. There’s also hope that China will agree to some type of agricultural deal. Bulls are also happy to see the USDA lowered its yield forecast by -1 bushel per acre from 47.9 down to 46.9, harvested acres were also slightly reduced. Total U.S. soybean production was lowered by -83 million bushels. On the demand side of the equation, total domestic crush and exports were raised slightly higher. Net-net, a larger than expected reduction in ending stocks from 640 million down to 460 million was delivered by the USDA. The trend for November beans is positive. Stable action above 912 leaves the market poised for a run to 944. Closing under 900 alerts for a return to defensive trade.

Cocoa prices are surging as traders grapple with a new method for pricing exports designed to alleviate poverty among farmers in Ivory Coast and Ghana, the world’s largest growers of the chocolate ingredient. At a time when weakness in the world economy is hurting assets such as oil and industrial metals, cocoa has been one of the top performers in commodities markets. Uncertainty about the new way of pricing West African cocoa exports, designed to improve living conditions for farmers, is driving the rally. According to the World Bank, 80% of cocoa producers, or four million people and their families, live on less than $3 a day. In July, Ivory Coast and Ghana said they would introduce a “living income differential” of $400 a ton, to be charged on top of the London futures price. The neighboring nations have the ability to swing prices because they grow around 60% of the world’s cocoa. Both their harvests dwarf those of Ecuador and Nigeria, the next-largest producers. The premium applies to next year’s cocoa crop, which the two countries will start to ship from October 2020. However, it has already been used in export contracts because large Western chocolate companies have locked in purchases well in advance of receiving their cocoa. One factor pushing futures prices higher: Companies that normally buy cocoa directly from West Africa appear to have been buying beans from exchange stores instead. These stockpiles have depleted by 44% since the end of August, a steep decline in what is normally a source of last resort.

 

MORNING COMMENTS

 

Good Morning   

 

Current Markets as of         8:10     Friday, October 10, 2019

 

Month                        High                   Low                         Change                           Last

Dec 19 Corn               $3.95               $3.92 ½                      $ – ½                           $3.93 ¾                                                               

Dec 20 Corn               $4.09               $4.07 ¾                    $ – ¼                           $4.08 ½                                                                        

Nov 19 Beans             $9.27               $9.18 ¾                     $ + 2 ¼                       $9.26                           

Nov 20 Beans             $9.73 ¼          $9.65 ¾                   $ + 2                            $9.71 ¾      

Oil    $53.10   Higher      Gold   $1,500   Lower     Dow $26,270   Lower      Wheat $5.04 Higher 

The Des Moines ethanol low rack price is $1.7109. This is $0.1882 lower than the unleaded gas low price of $1.8991. 

****USDA CONFIRMS 398,000 TONS OF BEANS SOLD TO CHINA IN 19/20**** 

Dec Corn Support is $3.53 and resistance is $4.88.  Nov Beans Support is $8.52 and resistance is $8.82. Funds sold 35 Million (7,000 Contracts) of corn and bought 15 Million (3,000) contracts of beans Friday. Just under 87,000 contracts traded last night. 

The grain markets are mixed to slightly higher as we head towards the October WASDE report. In addition to today’s report, traders will keep a watchful eye on trade talks with China, as well as the updated weather reports 

There is an abundance of conflicting reports around today’s US/China trade talks. South China Morning Post reporting the US and China didn’t make any progress in deputy level trade talks this week. The report went on to add higher level talks would now be only one day. There has been no release from US officials concerning the length of the talks. 

The average trade estimate for today’s October WASDE report has 2019/20 soybean stocks estimated at 521 million bu. versus USDA September estimate of 640 million. Corn stocks are pegged at 1.784 billion bushels versus the September estimate of 2.050 billion 

Weather:  Heavy rains started up last night in the central/southern corn belt with snows moving in to the northern Plains and NW belt, making for an active radar picture this morning as expected; the system will continue through Friday before mostly clearing out for the weekend into next week, with dry weather lingering as long as the 6-10 day for a solid harvest window. Temps will be dropping sharply and holding safely below-normal right up into late October 

OPENING CALLS:

Steady as the market waits for the WASDE.

 

Have a great Weekend!   Darren, Brady and David

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

Morning Commentary

Dec corn up 1 ¼ at $3.97

Nov beans up 8 ¾ at $9.2925

The DOW is up

USD is weaker

Crude oil up $.46 at $53.09

Good morning,

Corn  bulls continue to talk about extreme winter weather conditions hitting the northern Plains. We are hearing talk that the areas in question are responsible for about 10% of total U.S. corn production. And with a late-maturing crop and very little harvested in these areas, there’s certainly some production risk being considered. Also being heavily debated is the USDA’s next adjustment to the balance sheet which is scheduled for release tomorrow at 11:00 am CST. The upcoming October Supply and Demand report has all of a sudden become much more important following the recent big surprise in the USDA’s Quarterly Grain Stocks estimate. Instead of the trade sitting around talking about an overly burdensome 2.1 to 2.2 billion bushels in U.S. ending stocks we are now talking about a much more interesting 1.4 to 1.6 billion bushel ending stocks number. The current USDA yield estimate of 168.2 bushels per acre is also being heavily debated. The trend for December corn is positive. The market is poised for a test of 400. Setbacks that hold the old high at 392.75 will maintain strong upside momentum. If Thursday’s report is bearish, the market is in a prime topping area.

Soybean  prices have rallied roughly +70 cents in the past month. The USDA’s September yield estimate of 47.9 bushels per acre isn’t being as heavily debated. Interestingly, though, weekly crop conditions are being lowered and the weather is getting much more uncertain with such a late-maturing crop. Actually, a bit larger percentage of U.S. soybeans will be in harm’s way this weekend than corn. Arguably 11% to 12% of the nation’s soybean production will be located in states or areas that could be experiencing extreme winter conditions. The trend for November beans is positive. The market is poised for a run to 934.5, perhaps 940+. Closing under 895.75 alerts for a correction.

The U.S. Dairy Export Council says export values for the first eight months of the year are up three percent from last year and are the highest in five years. Shipment volumes were about the same as June and July with gains seen in cheese and higher prices for ingredients. August gains were seen for fluid milk and cream, up 13 percent, whey protein isolate, up nine percent, and whole milk powder exports were double last year. Whey exports were down 21 percent mostly because of lost sales in China.  Nonfat dry milk and skim milk powder shipments were down 18 percent from last year.  Lactose was down 9 percent and cheese exports were down six percent. (Source: Brownfield Ag News)

 

Morning Commentary

Dec corn down ¾ at $3.8625

Nov beans down 4 ¾ at $9.105

The DOW is down

USD is weaker

Crude oil down $.70 at $52.05

Good morning,

Corn  bulls are looking at a U.S. crop that is only 58% “mature” and a massive winter storm forecast to hit the upper-Midwest late this week. Yesterday, the USDA showed 93% of the U.S. corn crop is “dented”, just 58% of the crop considered “mature” vs. the average of 85% by this date. And just 15% of the crop was reported as “harvested” vs. what’s historically closer to 27% by this date. I should also note, overall crop-conditions were lowered slightly from 57% to 56% rated “Good-to-Excellent”.  Interestingly, it’s several of the bigger producing states that are seeing a significant lag in maturity: North Dakota just 22% mature vs. 75% average; South Dakota just 36% mature vs. 80% average; Minnesota just 39% mature vs. 83% average; Illinois just 59% mature vs. 94% average; Iowa just 52% mature vs. 88% average. The trend for December corn is positive. Stable trade above 377.5 is likely to prompt a rally towards 400. Closing under 367.5 signals renewed weakness.

Soybean  bulls are talking about the same thing as corn bulls… a large winter storm forecast to hit the North and an extremely late-maturing U.S. crop. The USDA reported just 14% of the crop has been “harvested” vs. 34% on average. Iowa 5% harvested vs. 26% on average; Illinois 11% harvested vs. 40% on average; Minnesota just 8% harvested vs. 43% on average; South Dakota just 5% harvested vs. 36% on average; North Dakota 8% vs. 48% on average; Nebraska 14% vs. 30% on average; Kansas 5% vs. 15% on average; Missouri 6% vs. 18% on average. The USDA showed just 72% “dropping leaves” vs. 87% on average. I should also note, the USDA lowered its weekly crop-condition estimate from 55% down to 53% rated “Good-to-Excellent” vs, 68% rated GD/EX last year. Solely from a technical standpoint, the tight consolidation in the upper reaches of the Sep 30th/Oct 1st rally is constructive for future upside. Preliminary open interest declined 5,700 lots as massive liquidation in Nov was only partially offset by gains in Jan. The trend for November beans is positive. Stable action over 912 is bullish for a run towards 940. Be cautious of a setback from 934.5 on the first test. Closing under 896 alerts for a setback.

Cattle markets firmed last week with the majority of the southern trade coming in at 107.00/CWT. The northern feeding regions printed 108.25/CWT live and 170.00/CWT dressed. Volumes of cattle traded to packers last week neared 100,000 head and should go a long way towards maintaining a current level on marketings. It seems that as we start this week, most are looking for cash markets to move higher yet again. Historically wide price spreads have incentivized moving cattle back and a tighter Sep/Oct market-ready numbers situation has possibly developed. Show list numbers were strong this week and should come as no surprise as this is the typical response to higher cash markets. Interestingly, Texas, Kansas, and Nebraska are all at or above 10-year high show list numbers. Overall, the news and potential fundamental developments within the cattle and beef sectors are favorable. Premiums are being built into the deferred futures contracts and breakevens being purchased are firming up as a result of these premiums. Futures markets have filled upper gaps on daily charts left from the selloff response to the beef plant fire in August. The longer-term technical setup suggest additional upside is possible and that momentum should remain up. However, shorter-term outlooks point towards overbought action that could easily retrace some of the recent gains. Live cattle open interest has moved sharply lower in the face of the rally. The commercial hedger remains rather unhedged compared to a historical normal. The non-commercial trader is beginning to liquidate some of the short position but may still have a ways to go. Trey Warnock – Amarillo Brokerage

U.S. and Japanese leaders signed two separate trade agreements dealing with agriculture and digital trade Monday. U.S. officials estimated the deal would reduce tariffs for roughly $7 billion worth of American agricultural products including cheese, wine, beef, pork, wheat, and almonds. The U.S. would in turn lower tariffs on Japanese industrial goods under the agreement, which would also set stricter terms for digital trade between the two sides. The agreement did not touch on current auto tariffs or additional ones that Trump threatened Japan with last year on the basis of national security concerns. The agreement was announced on a preliminary basis in August. On the sidelines of the United Nations General Assembly in New York last month, the US and Japan signed an agreement-in-principle. The move on Monday afternoon concluded the final text of the deal. (Source: Business Insider)

JBS USA will remove the growth drug ractopamine, which is banned by China, from its U.S. hog supply in hopes of accelerating pork exports to the country. The meat packer’s move away from the feed additive shows how companies are maneuvering to take advantage of an expected shortage in China, the world’s largest pork consumer, due to African swine fever (ASF). JBS USA, owned by Brazil’s JBS SA, said it removed ractopamine from internally owned production systems in August 2018. Now the company will also prohibit the drug from diets of hogs owned by farmers who sell livestock to JBS USA. Rival U.S. pork producer Smithfield Foods, which is owned by China’s WH Group, already raises all of the hogs on its company-owned and contract farms without the drug. Tyson Foods Inc previously told Reuters it was looking at diversifying its pork supply to include ractopamine-free hogs as demand expands. Ractopamine is used in some countries to raise leaner pigs, but China does not allow its use or tolerate residues in imported meat. The European Union also bans ractopamine. (Source: Reuters)

 

Morning Commentary

Dec corn up 1 ¼ at $3.86

Nov beans unchanged at $9.1625

The DOW is down

USD is stronger

Crude oil up $.83 at $53.64

Good morning,

Corn  bulls added +13 cents last week to the market and are hoping to add a bit more. The colder weather forecast for the U.S. and talk of heavier snow late this week in the northern Plains could help add a bit more weather-related premium with the crop yet to reach full maturity. Brazil has gotten a bit of rain as of late to help ease some nearby concern but looking ahead there could still be some concerns about dry conditions. Most inside Argentina continue to talk about dry conditions but the planters have been rolling. The October USDA report is scheduled to be released this Thursday and is being highly anticipated. Most inside the trade seems to be looking for a slight yield reduction. The big question now is will the USDA continue to lower its yield forecast? This past Friday, Informa cut their corn yield forecast from 169.6 down to 167.5 bushels per acre. The USDA is currently forecasting an average yield of 168.2 bushels per acre. The trend for December corn is positive.  Stable trade above 377.5 is likely to prompt a rally towards 400.  Closing under 367.5 signals renewed weakness.  Nearing 22,000 lots shorter than indicated by the trade count, the COT report showed the fund short 145,000 contracts on a futures and options basis as of October 1st versus 185,000 the week prior.  Based on trade flow Wed-Fri, they’re now thought to be short 157,500 lots.  Commercials increased their net short by 50,000 lots during the last reporting period and now hold their largest short in a month. 

Soybean  bulls are coming off a big week adding +33 cents to its price. The bulls are now looking for confirmation that harvest is running extremely late and a significant portion of the crop is struggling to reach maturity. Most sources inside the trade are thinking the U.S. crop is 12% to 14% harvested vs. what’s traditionally 33% to 35% harvested by this date.  Informa recently lowered its soybean yield estimate from 48.4 down to 46.5 bushels per acre and total production down from 3.671 billion bushels down to 3.513 billion bushels. The trend for November beans is positive.  Stable action over 912 is bullish for a run towards 940.  Be cautious of a setback from 934.5 on the first test.  Closing under 896.5 alerts for a setback.  16,500 lots less short than indicated by the trade count, the COT report showed the fund short 26,000 contracts on a futures and options basis as of October 1st versus 61,000 the week prior.  Based on even trade flow Wed-Fri, they’re estimated to be short 26,000 lots.  Commercials increased their net short by 43,000 lots during the last reporting period and now hold their largest short since June 2018.

The Trump administration on Friday unveiled a plan to boost U.S. biofuels consumption starting next year to help struggling farmers. The plan would require an unspecified increase in the amount of ethanol that oil refiners must add to their fuel in 2020, and would also aim to remove further barriers to the sale of higher ethanol blends of gasoline like E15, the Environmental Protection Agency said in a statement. However, while the final plan won widespread praise from biofuel advocates, it was condemned by oil industry leaders who decried it as a politically motivated policy shift that punishes refiners, consumers and manufacturing workers. The EPA is set to formally propose changes this week.  The agency said it would seek public comment on ensuring more than 15 billion gallons of conventional ethanol are blended into the nation’s fuel supply beginning in 2020 and that statutory obligations for biodiesel also are satisfied. (Source: Reuters)

 

Morning Commentary

Dec corn down ¼ at $3.885

Nov bean u 2 ¼ at $9.14

The DOW is up

USD is weaker

Crude oil up $.52 at $52.97

Good morning,

December corn experienced its second day of light volume consolidation in the upper levels of the recent rally and settled a penny higher on Thursday.  The recent light volume/upper level contraction bodes well for additional gains in the near term.  Preliminary open interest was little changed yesterday as liquidation in Dec was offset by gains elsewhere on the curve.  Total open interest has declined 32,000 lots since the September stocks report.  The trend for December corn is positive.  Stable trade above 377.5 is likely to prompt a rally towards 400.  Closing under 367.5 signals renewed weakness. 

Soybeans: Experiencing a volatile two side trade on account of divergent product markets, November beans fell late Thursday to settle two cents lower on the day.  Preliminary open interest increased 1,900 lots as liquidation in Nov was more than offset by gains elsewhere on the curve.  In the three days following the September stocks report the market rallied 36.5 cents while total open interest rose 10,900 contracts.  The trend for November beans is positive.  Stable action over 912 is bullish for a run towards 940.  Closing under 896 alerts for a setback.  The trade count had the fund buying 2,000 beans yesterday, leaving them short an estimated 47,500 lots. 

 

Morning Commentary

Dec corn down 1 ¾ at $3.86

Nov beans down 5 ¼ at $9.085

The DOW is down

USD is weaker

Crude oil down $.26 at $52.38

Good morning,

Corn  bears are talking about improved harvest weather in the U.S. forecast, improved weather in Brazil, and weaker U.S. demand headlines via exports and ethanol. Bulls are pointing to the tighter balance sheet and uncertainties about the USDA’s current production forecast.

Soybean  traders are waiting for what could be an extremely volatile week ahead. Next Thursday we have the USDA’s October Supply and Demand report scheduled for release. At the same time, we should have Chinese trade negotiators flying into Washington for another round of trade talks.

South Korea on Wednesday confirmed two additional cases of African swine fever at a pig farms in Paju, a town near its border with North Korea, the country’s agriculture ministry said, bringing its total number of cases of the disease to eleven. South Korea is still looking into the source of the virus, but all of the cases have been found on hog farms near its border with North Korea, which reported an outbreak in May. Officials have been scrambling to halt the spread of the disease, disinfecting farms, trucks and roads, banning livestock movement and destroying some 93,500 pigs. They plan to slaughter at least 17,000 more pigs, including the animals at farms within a 2-mile radius of the two Paju farms were infections were newly confirmed. (Source: Reuters)

Several media reports say President Trump is expected to sign-off on a biofuels package Friday and publicize it next week. Ag Secretary Perdue told reporters at World Dairy Expo this week the administration plans to maintain the minimum 15 billion gallon level. “President Trump has insisted that we maintain 15 Billion gallons and even in spite of small refinery waivers that may mean increasing the offset which the EPA has on their rules. They can estimate what the award will be.” Iowa Governor Kim Reynolds says she hasn’t yet seen anything in writing yet. Reynolds was in the Oval Office last month, arguing for a policy that will increase federal biofuel production and blending requirements. The oil industry has been pressing against that, “I’m still going to take the president at his word. I know that he’s worked really hard to help make our farmers and the biofuels industry whole and so I look forward to seeing in writing the agreement that we verbally came to.” Reynolds says if it’s the plan they discussed, she has invited Trump to Iowa to make the announcement. (Source: Brownfield Ag)

 

Morning Commentary

Dec corn down 1 ¾ at $3.8625

Nov beans up 2 at $9.08

The DOW is up

USD is stronger

Crude oil up $.55 at $54.62

Good morning,

Corn bulls were excited to see the lower than expected USDA Quarterly Stocks estimate. Several sources inside the trade suspect the USDA made the surprise adjustment lower because they had either overestimated last year’s production, underestimated feed and residual demand, or perhaps some combination of the two. However you want to slice it, September 1 corn stocks were -331 million bushels below the USDA’s August forecast. The USDA is currently forecasting a 168.2 bushel per acre average yield. Bears will argue that overall demand still remains a major headwind as both U.S. exports and corn used for ethanol are highly debatable. The USDA also reported that corn stored “on-farm” was up +22%, while “off-farm” stocks are down -10% from a year ago. The trend for December corn is positive.  Stable trade above 376.75 is likely to pressure the fund short and prompt a rally to near 400.  Closing under 366 signals renewed weakness. 

Soybean bulls are happy to see a wet U.S. forecast, cooler temps, and a tighter U.S. balance sheet. In case you missed the headline, the USDA lowered last years production estimate by trimming harvested acres and lowering the average yield by -1.0 bushel per acre to a 50.6 bushel average. In turn, this probably drops the new-crop ending stocks estimate into the sub-550 million bushe range and makes the balance sheet much more interesting. The trend for November beans is positive.  The market is poised to test 912 perhaps 920.  Stable action over 912 is bullish.  Closing under 891 alerts for a setback. 

Fed steer and heifer trade was again firmer last week. The south traded a range of 103.00-106.00/CWT and the north traded mostly 104.00-107.00/CWT and mostly 165.00/CWT on a dressed basis. National volumes of cattle traded was essentially unchanged with something north of 90,000 head trading. Market ready numbers consolidated over the last three weeks either as a function of lower cash prices or a result of placement patterns. Either way this may have been enough to tighten cash markets to the point where higher money was required. However, show list numbers bounced this week and may once again put pressure on flat price cash markets as well as basis. Spot beef markets lost ground last week and is at surface level beginning to dig into packing margins a bit. The spread between Choice and Select beef remains historically wide for this time of year. Futures markets set up quite well for a rally in recent weeks with charts and momentum both fueling the upside. At this point we have a cattle complex that is becoming a bit overbought and a sharply higher corn market adding risk to feeder cattle. It is very hard to tease much out of the CFTC COT data at this time, but we can see that for the first time in 4 weeks the non-commercial short did not grow and actually shrunk by almost 2000 cars. On a related note, the non-commercial long is relatively small but did see some liquidation in last weeks data. Point is, a non-commercial liquidation would likely be biased towards a short covering rally. I would surmise that bulls are touting stronger fundamentals and a nicely trending chart while bears are spooked of overcooked markets and looking for some back and fill action. Trey Warnock – Amarillo Brokerage

Too many hens laying too many eggs are pushing down prices for the consumer staple, hurting sales at producers such as Cal-Maine Foods Inc. and adding more stress to the U.S. farm economy. Jackson, Miss.-based Cal-Maine, the nation’s top egg producer, said Monday that prices for its eggs fell 30% to about 92 cents a dozen in its quarter that ended Aug. 31. The result cut Cal-Maine’s sales by 29%, year over year. Chickens in the U.S. produced more than 65 billion table eggs through August this year, up 3% from that period last year. The egg glut is adding to pressure on a U.S. agricultural economy in turmoil. The trade war has sapped demand for soybeans and other crops from China, a top customer, after years of high production. That has led to a bounty of stockpiled grain that is contributing to the expansion of U.S. livestock herds and flocks. Retailers have been quick to pass the drop in egg prices on to customers, advertised for sale in some parts of the country for as little as 48 cents a dozen, the USDA said. Analysts expect producers will have to cut back production in part by sending birds to slaughter to bolster prices. Cal-Maine said it had 36.5 million laying hens in August, according to security filings, down from 36.8 million a year earlier.

 

Morning Commentary

Dec corn up ¾ at $3.7225

Nov beans up 7 ¾ at $8.9075

The DOW is up

USD is stronger

Crude oil down $.82 at $55.09

Good morning,

Corn bulls are talking about heavy rains over the weekend and some cooler temperatures in the northern Plains, weather that is not overly conducive for a late-maturing crop. Bears see U.S. weather as no major concern and are eager to see the massive Quarterly Stocks number that is scheduled to be released by the USDA today at 11:00 am CST. Many inside the trade are bracing for what could be the largest September Quarterly Stocks report in several decades (since 1988).

Soybean traders are bracing for what’s expected to be a record-setting supply estimate for September 1 Quarterly Stocks. Bears are looking for quarterly stocks to come in record large at between 980 and 990 million bushels.  Local bean yields are coming across Gold-Eagle scales at 54.5 to 62 bpa.  Not exactly bullish considering we thought the crop was smaller than 50 bpa.

The USDA’s Deputy Chief Economist says the overall farm balance sheet is relatively strong but there are rising indicators of financial stress. Deputy Warren Preston said at the recent AgriPulse Ag Outlook Forum in Kansas City that there’s been a slow rise in farm debt, fueled by farmers’ borrowing against their real estate equity. “It’s not necessarily for purchase of farm real estate. It’s farmers tapping into the equity in their real estates for operating loans.” Preston says farmers are tightening their belts, with production expenses declining. But he calls that a double-edged sword. “On the one hand, it’s good to see that farmers have that resilience and they have the ability to adapt. But on the other hand, it’s worrisome when that production expense includes the realized depreciation and a signal that farmers perhaps don’t have the income, are not investing in new capital.” Preston says farmers can’t mine that equity forever and at some point, there needs to be reinvestment in capital stock.

USDA reported the U.S. inventory of hogs and pigs as of September 1, 2019, was 77.7 million head, up +3% from 2018 levels and the highest September 1 inventory since the agency began keeping records in 1988. Breeding inventory stood at 6.43 million head, up +2% from last year and up slightly from last quarter. Market hog inventory came in at 71.2 million head, up +4% over 2018 and up +3% from last quarter. It is also the the highest September 1 inventory on record. The June-August 2019 pig crop was estimated at 35.3 million, and increase of +3% from last year and the largest June-August pig crop since estimates began in 1970.  The average pigs saved per litter was a record high of 11.11 for the June-August period, compared to 10.72 last year. (Source: USDA)

China’s pig farmers are raising fatter pigs to profit from soaring pork prices, boosting demand for key feed ingredient soymeal, and reducing some of the impact from a huge drop in the overall herd, said analysts and industry executives on Thursday. China’s pig herd shrunk by 38% in August compared with a year earlier, according to data from the Ministry of Agriculture and Rural Affairs, with a year-long epidemic of African swine fever killing millions of pigs and putting farmers off rebuilding herds. The herd loss is expected to push down demand for soymeal, the most common protein in pig feed, by 6% to 7% for the 2018/19 crop, said Li Qiang, chief analyst at Shanghai JC Intelligence Co Ltd, before a recovery during the next crop year. Soymeal consumption will increase by 2.8% to 66.3 million tonnes in the 2019/20 year, according to the closely watched estimates of Shanghai JC Intelligence. That’s partly because farmers are raising heftier pigs, to as much as 150 kg (330 pounds), to benefit from soaring pork prices, Li said. An increase in poultry production to help offset the pork shortage is boosting soymeal demand, too, according to an executive at a major feed producer, estimating soymeal use in poultry feed may have risen up to 20% in the current year. Frank Zhou, managing director of grains and oilseeds trading at Cargill’s China unit, said soymeal demand could jump 3% in the 2019/20 crop year if the disease situation and sow inventory stabilized this month. But Zhou cautioned that if sow and hog stocks keep falling, soymeal demand would decline as much as 4%. (Source: Reuters)

 

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