Morning Commentary

March corn down ½ at $3.815

March beans down 5 at $9.19

The DOW is down

USD is stronger

Crude oil down $.75 at $51.62

Good morning,

Corn prices continue to consolidate towards the upper end of the most recent range. Bulls are happy to hear recent talks with the Chinese have gone well. There’s also continued weather extremes in South America adding some uncertainty to production estimates. Interestingly, CONAB bumped their corn estimate for Brazil a hair higher this morning. A massive eight day rally in crude oil prices and a weakening U.S. dollar have also provided an added tailwind. The trade is also anticipating another U.S. yield reduction by the USDA when the end-of-year is eventually released. Bears believe the USDA could offset some of the production losses by lowering the U.S., export estimate and perhaps lowering their forecast for feed and residual usage. If you feel you are undersold in either old-crop or new-crop, this is probably the time to be reducing exposure. This is certainly the high-end of the range since mid-August.

Soybean bulls have picked up two “wild-cards”, the weather in South America and Chinese trade negotiations, and are playing them as bullish. Talks out of both Washington and Beijing are positive, but there’s still no major specifics. The trade continues to guess in regards to total Chinese purchases of U.S. soybeans with most estimates ranging around 5.0 MMTs. Bears don’t see this as near enough to meaningfully reduce the balance sheet or tip the scales far enough for the bulls to gain full control. Also extremely uncertain, is total production for Brazil. Analyst and insiders are taking wild stabs but we are still a long ways from hearing harvest confirmation. The USDA was most recently forecasting a record crop for Brazil at 122.0 MMTs. Producers had gotten off to a terrific start with a record number of acres. Abnormally dry conditions and more extreme heat are causing concerns and uncertainty. I continue to hear more talk and chatter of estimates coming in sub-115 MMTs.

The EPA has come out and said they would complete a rule to boost sales of higher-ethanol blends of gasoline by the summer driving season, despite a partial government shutdown. The EPA currently bans the higher ethanol blend, E15, during the summer because of concern it contributes to smog on hot days – a worry biofuels advocates say is unfounded. The proposal is also expected to be coupled with a slew of reforms to the RINs market — the credit-trading market that underpins the nation’s renewable fuel policy. (Source: Reuters)

In Perdue University’s December Ag Economy Barometer survey, they questioned farmers regarding their usage of drones on their farms. 34% of survey respondents said a drone was used on their farm in the last year, with just over half (56%) of farms that used a drone in 2018 saying that drone usage provided added value to their farm operation, whereas 44% indicated that it did not add value. Drones were mainly used for field scouting (43%), but also field mapping (17%), photography (17%), hobby (17%) and to inspect farm structures (6%). Looking ahead to 2019, just 6% of farms surveyed said they plan to purchase a drone for themselves. (Source: Perdue Univ Ag Econ Barometer)


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