Morning Commentary

July corn down ¼ at $3.64

July beans down 2 ½ at $8.2775

The DOW is down

USD is stronger

Crude oil down $.69 at $61.56

Good morning,

Corn  prices are being pulled between bullish sentiment surrounding U.S. planting delays and weather complications and the bearish bets being placed on a massively larger South American crop (+30 MMTs compared to last year) and talk of slowing U.S. growth in demand. There’s also the recent uncertainty surrounding Chinese trade negotiations. Bottom line, funds are holding a record bearish position as the South American crop production estimate continues to get larger and more questions are being asked about U.S. corn demand. Several sources inside the trade are thinking the USDA could make downward adjustments to their current corn export, feed and residual and ethanol estimates. Technical support in the old-crop remains near $3.50 per bushel. New-crop DEC19 support remains just above $3.70 per bushel. Look for both to be challenged and taken out if U.S. and Chinese trade negotiations further deteriorate. 

Soybean bulls are desperately hoping to hear that a trade deal with China has been reached by this Friday. Word on Wall Street is if nothing happens by Friday, U.S. trade representatives are prepared to tell President Trump to move forward with increasing tariffs and placing even more Chinese tariffs in play. This would create additional headwinds for the soybean market, with some arguing that prices will drop to the sub-$8.00 level.

Tyson Foods announced yesterday that quarterly profits beat Wall Street Estimates and projected the company could reap significant gains from the African Swine Fever spreading across Asia. The disease has been detected in China, Vietnam, Cambodia and other countries. China is expected to ramp up imports of pork from the U.S., Europe and Brazil to compensate for millions of pigs killed in the outbreak. Make no mistake, a decrease in global pork supplies would boost Tyson’s pork business. Tyson said revenues rose to $426 million or $1.17 per share in the second quarter, up from $315 million or 85 cents per share a year ago. (Source: Reuters)

In 2012, the U.S. and South Korea implemented their free trade agreement called KORUS, which reduced tariffs and non-tariff barriers. This helped sparked a huge increase in U.S. beef sales to S. Korea as the country received more than half of the increase in U.S. total beef export volume from 2017 to 2018 with 35% year-over-year growth. Further, South Korea received more than 20% of total U.S. beef export in 2018, reaching 638 million pounds in 2018 and making the U.S. the largest supplier of beef to South Korea. (Source: USDA, ERS)

USDA has named the three locations that are finalist in its bid to move ERS and the National Institue of Food and Agriculture out of D.C. — the greater Kansas City area, multiple site sin Indiana or the North Caorina research triangle. St. Louis and Madison, Wisconsin have been named runner-ups. Senate Ag Chairman Pat Roberts came out in support of moving the offices to Kansas City, highlighting its location in the middle of the country — close to stakeholders — should improve customer service and make efficient use of taxpayer dollars. Tim Cowden, president of the Kansas City Area Development Council, noted that the area is already home to more than 5,000 USDA employees and contractors and a dozen agency operations. (Source: Politico)


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