Morning Commentary

May corn up ¾ at $3.66

May beans up 1 ¼ at $9.0375

The DOW is down

USD is weaker

Crude oil down $1.52 at $55.14

Good morning,

Corn bulls fear the USDA could increase U.S. ending stocks in today’s monthly supply and demand report. Most are worried that corn used for ethanol could be further reduced as the industry struggles to find growth. There had been hopes that a Chinese trade deal would solidify the export business and bring about purchases of both U.S. ethanol and DDGs in larger quantity. The trade is also eyeing the massive selloff taking place in the wheat market. At the most recent USDA Ag Outlook Forum, early projections forecast a jump in planted corn acres from 89.1 million in 2018 to 92.0 million acres in 2019. This led the USDA to project the U.S. corn crop in 2019 at 14.9 billion bushels, essentially +3% larger than last year, with an increase in overall planted acres more than offsetting their lower yield. The early new-crop yield projection of 176.0 bushels per acre is based on a weather-adjusted trend assuming normal planting progress and summer growing season weather. Technically, the corn charts look very worrisome. The markets closed yesterday at their lowest levels in almost six-months and are dangerously close to falling below the lows posted back on September 18th. The previous low posted in the JUL19 contract was at $3.70 per bushel. The previous low in the new-crop DEC19 contract was posted at $3.83^2. I continue to believe we test those levels and post fresh new lows while we are in this transition period.

Soybean traders continue to debate Chinese trade negotiations, the impact of African Swine Fever, South American production and logistics, and upcoming U.S. planted acres. . Keep in mind, the early look at U.S. acreage is forecasting a -4.1 million acre reduction in soybeans, down from 89.2 million acres in 2018 to around 85 million in 2019. Soybean production is projected at 4.2 billion bushels, -8% below last year on lower harvested area and trend yields. The national average soybean yield of 49.5 bushels per acre they are using is -2.1 bushels below last year. Let’s also keep in mind, soybean exports for 2019/20 are projected at 2.03 billion bushels, up +150 million from the 2018/19 forecast. In other words, if soybean acres end up being more than anticipated and exports don’t come to fruition with the Chinese, the balance sheet could become much more burdensome. Technically, new-crop soybeans are trading right around their 200-Day Moving Average

Reuters reports that analysts expect Friday’s Cattle on Feed Report to show there were about 11.647 million head of cattle on feed as of Feb. 1, which finishes just above levels from a year-ago. I should mention that placements are expected to have dropped notably from year-ago levels during January, with marketings expected to have climbed.

With exports reaching $11.277 billion worth of ag goods during December and importing $10.680 billion of such goods, the U.S. ended with an ag trade balance of $597.182 million. That figure is less than a third of the $1.862 billion trade surplus notched in November.

USDA estimates farm debt will reach $426.7 billion this year. that would market the highest total since 1982. The debt-to-asset ratio, which has been rising since 2012, is expected to increase again in 2019 but remain low relative to historic levels. The sector’s risk of insolvency is now at its highest level since 2009, but it is not close to the debt-to-asset levels of the 1980s farm crisis.

U.S. ethanol exports reached a record 1.7 billion gallons in 2018 according to data released by the USDA’s Foreign Ag Service on March 6. When compared to 2017, ethanol exports increased by 23%. Exports of distillers grains also increased last year. According to the data, the U.S. exported ethanol to more than 80 countries last year. Brazil, Canada and India were the top export destinations for U.S. ethanol, with volumes reaching 513, 349, and 156 million gallons, respectively. The value of those ethanol exports reached $2.75 billion, up from $2.42 billion in 2017.


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