Morning Commentary

May corn up 2 at $3.78

May beans up 1 ¾ at $9.1875

The DOW is down

USD weaker

Crude oil up $1.11 at $56.61

Good morning,

Don’t forget about today’s marketing meeting with Linn & Associates Pete Nessler at 10:30 in Renwick.

Corn prices are extremely close to breaking below their longer-term channel. The market needs to hold until the bulls can get their teeth into something more promising from the Chinese negotiations. Here at home, there’s continued talk of more corn acres in 2019, and arguments being made that demand growth is weakening lead by less ethanol, more competition for U.S. exporters, and more competition from feed alternatives. Lets not forget, Brazil and Argentine’s crop are estimated at perhaps each more than +12 MMTs to +15 MMTs larger than last year. Bulls are talking about dryness in southern Brazil and how more corn will stay in the country to help supply their new ethanol plants, thinking it won’t impact the export markets in any major capacity.  I personally think there’s still a U.S. weather story brewing. Rivers in several key locations are starting to flood and I suspect it gets much worse once Spring arrives and heavy snows to the north more aggressively melt. Overly wet fields at planting have never been the farmers friend, especially in North Central Iowa when prices are cheap, anhydrous is more than last year and cash-flow is extremely tight. The short term trend is negative.  Closing outside 376-388.75 should provide fresh trending objectives.  There are buy stops around 385.75 in the day session.  Options are implying a 371.25-383.75 trading range the balance of this week. 

Soybean bulls appear to be getting tired and in desperate need of some fresh headlines. We still haven’t seen the Chinese step in as big buyers of U.S. soybeans and the bears are pressing the market for more than simply talk and good intentions. There was also some talk and rumors floating around that still more negotiations need to be done before we can actually count the talk that the Chinese are going to buy billions of additional U.S. ag products. This has brought into question how soon the Chinese will be stepping forward to fulfill the recent verbal commitment for an additional 10 MMTs of U.S. Soybeans? The only buying reported yesterday was a couple of small old and new-crop purchases by Mexico. The short term trend neutral-slightly negative.  An inability to recover above 917.5 leaves the market vulnerable to a drop to the recent swing low at 907 and perhaps 896.5.  Closing over 930.25 would provide fresh upside targets.  There are buy stops around 932.25 in the day session.   Options are implying a 906.75-929.25 trading range the balance of this week. 

Large Cuts To USDA Are Coming? Well, Ag Sec. Sonny Perdue seemed to say that Monday. We are hearing that President Trump’s fiscal 2020 budget request will propose slashing non-defense programs by 5%. But the Agriculture Department could be looking at an even steeper proposed cut as Perdue said “I wish they would give us a 5% cut.” OF course, Congress usually disregards the president’s budget request, which in recent years has unsuccessfully called for cuts to USDA.

Agriculture Secretary Sonny Perdue said on Tuesday that U.S. trade negotiators have asked China to reduce tariffs on U.S. ethanol, but it was not immediately clear whether Beijing was willing to oblige. “They are engaged in conversation, they listen and hear us, but we are at this stage unable to determine the willingness factor,” he told reporters on the sidelines of an event in Washington. Remember that last summer Beijing imposed retaliatory tariffs of up to 70% on U.S. ethanol shipments, making exports to the key market uneconomical.


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