Morning Commentary

Dec corn down 2 ½ at $3.6875

Jan beans up 5 at $8.88825

The DOW is up

USD is weaker

Crude oil down $.91 at $59.02

Good morning,

Corn continues to trade in a sideways channel. Going back to October 1st, the DEC18 contract has not traded outside of the $3.60 to $3.80 per bushel range. In fact, we haven’t closed back above $3.80 since early-August. Bulls are pointing to the historical tendency that shows when the USDA cuts its yield forecast from October to November, it tends to move a bit lower by the yearend report. Bears point to cooperative weather in Brazil and more overall export competition from South America and Ukraine. The strength of the U.S. dollar, now at a 16-month high, is also limiting upside growth in exports. Also creating additional headwind has been the recent fallout in crude oil prices which have been putting more margin pressure on ethanol.

Soybean traders continue to debate the amount of U.S. production that will be lost to extreme harvest weather against the lack of Chinese demand. Most sources suspect the USDA will show the U.S. harvest at near 90% complete vs. 83% last week.  The question is, how many acres are left in the fields and subject to extreme cold and bad weather? As for China, there’s nothing new on the trade front. Unfortunately, there’s some talk and headlines circulating that a major Chinese animal feed maker has now found African Swine Fever in their feed. Technically, most inside the trade are talking about strong nearby support in the JAN19 contract between $8.40 and $8.60 per bushel. Many seem to think this area can hold until the end of month G20 meeting in Argentina between President Trump and Chinese President Xi. From there it’s anyone’s guess? If a trade deal is negotiated and confirmed, there’s talk we could see a jump to near $10.00 in the days immediately following. If no deal is made and the trade conflict looks to be longer-term, there’s talk inside the trade that U.S. soybean prices could tumble to sub-$8.00 in a matter of days.

Major Chinese animal feed maker Tangrenshen Group reported on Sunday that feed produced by one of its units had been contaminated with African swine fever, raising fears of its spread further across the country. This is the first reported contamination of feed supplies in China and increases the concerns for pig farmers trying to avoid the disease. Beijing had said that the Swine fever was caused by feeding kitchen waste to pigs. However, many industry experts have long suspected feed supplies could be contaminated with the disease. (Source: Reuters)


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