Morning Commentary

July corn up 6 ¾ at $3.9575

July beans up 7 ¾ at $8.395

The DOW is up

USD is stronger

Crude oil up $.28 at $63.38

Good morning,

Corn bulls continue to point towards extreme U.S. weather, record slow planting and pace of emergence, flooding, logistic complications, and a massively large number of re-plant acres. I was somewhat surprised to see the USDA estimate that 49% of the U.S. crop is now planted, which was a +19% jump from last week. Iowa 70% planted vs. the 5-year average of 89%, Iowa only 20% emerged vs. the 5-year average of 53%. The trade count had the fund buying 30,000 corn.  They’re now thought to be short 214,000 lots.  The short term trend for July corn is bullish.  Stable trade over 360.5 leaves the market in a bullish position.  Key resistance sits at 406.  Closing under 363 signals renewed weakness.

Soybean prices are higher as bulls point to heavy delays in planting and extremely wet conditions in the field. The USDA showed the U.S. crop just 19% planted vs. the 5-year average of 47% by this date. Soybeans considered emerged total just 5% vs. the 5-year average of 17% by this date. The short term trend for July beans is neutral.  Stable action over 848.25 points to a rally towards 883.75.  Closing under 811.5 signals renewed weakness.

Cattle:  It has been widely circulated that the U.S and Japanese governments reached an agreement to end the long standing restrictions of U.S. beef imports into Japan from cattle over 30 months of age. In short, these restrictions came back in 2003 as a result of the first U.S. announcing their first identified case of Bovine Spongiform Encephalopathy (BSE). Beef exports to Japan have been steadily increasing. In fact, the most recent 2018 data would suggest that exports to Japan are the largest since 2003. The U.S. Meat Export Federation (USMEF) and United States Department of Agriculture (USDA) collectively estimated last week that the allowance of beef products from cattle over 30 months of age would be significant for the U.S. beef industry in terms of dollars. However, this decision does not currently negate tariffs on U.S. beef imported to Japan nor does it address Trans-Pacific Partnership (TPP) issues. At this time, the U.S. is not a partner to TPP and does not enjoy the reduced tariffs that other competing countries enjoy. Futures markets have transitioned into a sideways chop in recent sessions and volumes have been much lighter. The commitment of traders report continues to show massive liquidation of non-commercial length and commercial short positions. This is possibly one the most rapid liquidations of the size noted on record. The futures face fundamental headwinds into late-summer and early-fall. The number of cattle for sale will continue to be large and any reduction in harvest pace, exports or marketing’s will further challenge the situation. Technically, the momentum is down and longer-term averages are beginning to roll over, signaling perhaps further downside. Conversely, the friendly talk associated with widening market potential into Asian destinations, summer domestic beef demand and a seemingly bottoming futures market is enough to keep the market guessing. For this week, it appears we have failed at the upper end of the range today (5.20.19) and are at risk of testing the resolve of the bulls. (Source: Amarillo Brokerage)

China has confirmed a new outbreak of African swine fever in the southwestern province of Sichuan as the highly contagious disease spreads through the world’s largest hog herd. The Sichuan outbreak is reported to have killed 78 animals on a farm of 429 pigs. China has reported more than 120 outbreaks of the incurable disease in all of its mainland provinces and regions. (Source: Reuters)

Corn Prices In China Hit Six-Month High On Armyworm Threat: The rally on price was triggered by reports of armyworms as investors speculated on the expectation that the pest will spread to the northeast and damage crop s in prime growing season. Prices also supported notion that China will no longer look to import more corn from the U.S. after the recent setback in China-U.S. trade talks. Understand, the fall army worm can ravage grain crops like corn and sorghum almost overnight and has already been detected in several Chinese provinces earlier this year.

Brazils Corn Ethanol Industry is Booming: Five years ago what looked like a pipe-dream, when investors launched the a corn based ethanol project, now has doubled in capacity at the initial plant, along with having built a second one. I should also mention that the group has announced plans for three more as Brazilian farmers are increasing corn production. Also, I’m told that two other companies are building 100% corn-based ethanol plants in Brazil. From what I understand, all five FS plants will be located in Mato Grosso, Brazil’s top grain state, where corn production has increased by 275% in the last ten years.

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