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)


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