Morning Commentary

Sept corn up 5 at $4.4025

Aug beans up 5 ¼ at $8.93

The DOW is up

USD is weaker

Crude oil up $.61 at $58.23

Good morning,

Corn bears continue to talk about an improved weather forecast that appears to include ample moisture and less extreme heat. Bulls aren’t really arguing nearby weather, but still don’t believe the market has fully accounted or added in enough risk- premium for the widespread complications faced earlier in the planting season by many growers. In addition, there’s still some weather concerns brewing in parts of the western and central corn belt. Technical traders are still talking about a possible head-and-shoulders top perhaps being in play. The short term trend for December corn is neutral-positive. Stable action over 453 should prompt a run to 473. Sustained trade under 437 signals renewed weakness.

Soybean prices have given back about -30 cents to start the week as weather forecasts appear improved to some degree and overall demand from China has yet to develop or come back to fruition. The short term trend for November beans is neutral- positive. Sustained trade below 908 signals renewed weakness and a drop to 890.25. Stable action over 923.25 is the minimum needed to provide fresh upside targets. With November trading down to and holding two month trend line support, expect a bounce today.

Federal Reserve Chair Jerome Powell told senators that despite deteriorating conditions across the agricultural economy, banks remain in good shape to continue lending to farmers and ranchers. It appears that only applies to some farm belt banks, as Wall Street financiers seem to be moving towards the sideline.

Falling farm income and rising pressures from trade war have left agricultural loan portfolios of the nations top-30 banks declining by -$3.9 billion from their high in December of 2015. Remember, the banks were looking for another way to expand their loan portfolios following the housing meltdown of the late 2000’s and agriculture gave them a good ride for a period of time. The Wall Street Journal reported that JPMorgan grew its farm-loan portfolio by +75% to $1.1 billion, between 2008 and 2015. As farm incomes have tightened considerably, collateral is shrinking, and Chapter-12 Bankruptcies are increasing. It seems like the Wall Street banks are content moving on to greener pastures. The problem is that doesn’t change the amount of loans needed by many farmers across the country.

Capital One Financial Corp’s farm-loan holdings at FDIC-insured units fell -33% between the end of 2015 and March 2019. U.S. Bancorp’s shrunk by -25%. The agricultural loan holdings at BB&T Corp have fallen -29% since peaking in the summer of 2016 at $1.2 billion. PNC Financial Services Group Inc (PNC.N) – which ran full-page ads in farm trade magazines promoting “access to credit” during the run-up – has cut its farm loans by -12% since 2015.

Rural banks are now finding themselves between a rock and a hard place with some of their longtime clients are having to turn away those who have already refinanced a couple of times simply because the banks can’t take the additional risk. FDIC-insured banks reported back in March that over +1.5% of their farm loans were at least 90 days past due or had stopped accruing interest because the lender has doubts it will be repaid. The so-called non-current rate has actually doubled from the end of 2015.  Growers continue to look for answers in this challenging environment, and with every operation at a different place in their business cycle, there seems to be no silver bullet solutions. (Source: Reuters , WSJ, CNBC, Hoosieragtoday)  


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