Morning Commentary

Dec corn up 2 ½ at $3.5875

Nov beans up ¾ at $8.4625

The DOW is up

USD is stronger

Crude oil up $.10 at $73.35

Good morning,

As we start the 4th Quarter of 2018… Crude Oil is up +30% this year; Nasdaq up +19%; S&P 500 is up +9%; Cattle and Wheat up +5%; U.S. dollar up +4%; Cotton up +2%; Coffee down -26%; Copper and Rice down -16%; Silver and Platinum down -15%; Lumber and Soybeans down -13%; Gold and Spring wheat down -10%; Hogs down -9%; Corn down -7%; Sugar down -6%.

Corn bulls are hoping talk of heavy rains and flooding across the Midwest later this week will prompt traders to add some additional risk-premium to the market. Several key growing regions have already been battling overly wet conditions, so this could really create some complications in several areas. The USDA’s latest round of data showed a bit more corn than the trade was anticipating. Old crop corn stocks in all positions on September 1, 2018 were reported at 2.14 billion bushels, down -7% from last year, but higher than the trade was forecasting by about +130 million bushels. Of the total old-crop stocks, 620 million bushels are stored on farms, down -21% from a year earlier. Off-farm stocks, at 1.52 billion bushels, are up +1% from a year ago. Bulls are hoping President Trump might make an official announcement about year-round E15 on his trip to Iowa, next Tuesday, October 9th. Bears are pointing to recent negative comments by the American Petroleum Institute and thoughts they could try and block the move. The short term trend for December corn is nearing a negative turn on account of Friday’s reversal action.  A close over 366.75 is constructive.  Closing below 351.75 would signal a return to the lows.  Given a sell signal in Dec corn Friday, system traders will find buy stops around 366.75.  Said to be result of the new USMC trade deal and wetness in the western belt over the next couple of weeks, overnight strength stems from larger than expected trend fund shorts and a correction of Friday’s rally in the bean/corn ratio.

Soybean bulls were unable to hold last weeks momentum. The market continues to oscillate around the $8.50 area as it awaits the next set of headlines. From my perspective, the two biggest unknowns currently in play are Chinese imports and upcoming South Americana weather. South American weather seems mostly cooperative, hence several sources inside the trade have started gradually inching their early production estimates higher. China remains a large unknown. Bulls argue that soymeal prices inside China are going to explode higher at some point during the next three to six months. Bears argue that a campaign to lower protein rations, along with fallout from “African Swine Fever”, could reduce soymeal demand by -15 MMTs and ultimately soybean import demand by -10 MMTs in the coming months. Somewhat interesting, I heard the Chinese government raised their subsidy payment to farmers for culled pigs from $800 yuan to $1200 yuan per head, which is a jump from about $115 to $175 per head. Chinese officials are obviously trying to contain the virus. Here at home, the USDA’s latest data showed old crop soybeans stored in all positions on September 1, 2018 at 438 million bushels, up +45% from last year. Soybean stocks stored on farms totaled 101 million bushels, up +15% from a year ago. Off-farm stocks, at 337 million bushels, are up +58% from last September. Indicated disappearance for June – August 2018 totaled 781 million bushels, up +18% from the same period a year earlier. Planted area is unchanged at 90.1 million acres, and harvested area is unchanged at 89.5 million acres. The 2017 yield, at 49.3 bushels per acre, is up +0.2 bushel from the previous estimate. Total 2017 crop was raised from 4.392 billion to 4.411 billion bushels. The technical trend for Nov beans is threatening to turn negative with Friday’s reversal action amid overbought conditions.  Closing under 830 alerts for a move to new lows.  Consecutive closes above sliding resistance at 864.5 is needed to help the outlook.  Long November beans, system types will find sell stops below 839.25.  Despite the bounce in meal overnight, beans were held in check on account of a correction of Friday’s rally in the bean/corn ratio.

China has reported a case of H5N6 avian bird flu on a poultry farm in southwestern Guizhou province, the nation’s agriculture ministry said on Saturday. Local authorities culled 32,352 birds at the farm following the outbreak, according to a statement published on the website of the Ministry of Agriculture and Rural Affairs. (Source: Reuters)

A delegation of Taiwanese traders signed a letter of intent to purchase as much as 3.9 million metric tons of soybeans form farmers in Minnesota and Iowa over the next two years. The purchases are valued at up to $1.56 billion. If the sales go through, it could be a big boost for U.S. soybean exports to Taiwan, the sixth largest U.S. soybean export market last year (2017 U.S. soybean imports to Taiwan were 1.4 mmt). (Source: Reuters)

The Information Technology and Innovation Foundation has filed a citizen petition with the Food and Drug Administration that seeks to prohibit the term “non-GMO” on consumer foods and goods. the petition said such claims, particularly the butterfly log from the Non-GMO Project are “false or misleading” in that they imply non-bioengineered/non-GMO products are healthier than bioengineered/GMO products. (Source: ITIF)


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