Morning Commentary

Dec corn up 1 ¼ at $3.70

Nov beans up 4 ¼ at $8.725

The DOW is up

USD is weaker

Crude oil up $.58 at $56.71

Good morning,

Corn bulls struggle to find much help! Weather has become more competitive, especially in areas that were needing a drink. At the same time demand for both exports and ethanol are being more heavily debated. Export competition is more challenging as the South American currency has depreciated heavily against the U,.S. dollar. Corn used for ethanol is also being more heavily debated following the recent waivers given to the small refineries. At the same time, Poet announced yesterday that it will idle production at its bioprocessing facility in Cloverdale, Indiana. The process to idle the plant will take several weeks, after which the plant will cease processing of over 30 million bushels of corn annually.  Last night, the Pro Farmer Tour presented an average corn yield for Indiana at 161.46 bushels per acre vs. the current USDA estimate of 166 bushels per acre.  The tour also released its estimate for Nebraska last night, reporting an average yield of 172.55 bushels per acre vs, the current USDA yield of 186 bushels per acre.

Soybean bulls are battling a similar set of circumstance to corn, i.e. improved U.S., weather, questionable demand, and questionable production. The Pro Farmer Crop Tour released their results for Indiana and Nebraska last night. They estimated the Nebraska crop with a 1,210.83 pod count. The USDA currently has the Nebraska yield estimated at 58 bushels per acre vs. 59 bushels per acre the previous year. The crop in Indiana this year was reported to have averaged 923.94 pods vs. the 1,311 pods averaged last year. The USDA has the Indiana crop currently estimated at 50 bushels per acre vs. the 58.5 estimated last year.

Cattle traders are wondering what the near-term future holds for cattle markets. The event of the past week certainly caught the industry at an awkward time where numbers are historically large, leverage has been given up from expanding bunk space relative to tightening packing capacity and exposure to extreme risk for cattle feeders with less than ideal risk management in place. Volatility is most likely a certain player going forward. The back and forth action of the speculative community buying the early action and selling it late when there is no follow through will give way to commercial players selling at levels that may not provide satisfactory margin and then exiting when there is any hope of upside potential. This is not necessarily a unique situation but a very challenging one. As mentioned last week, it will be really important to make high quality decisions for you and your operation during these times. Cash traded 5.00-6.00/CWT lower on very light volume last week. Basis is strong versus the Aug19 LC contract and might support the front spreads but the uncertainty with Tyson’s Finney County plant is keeping a lid on the nearby contracts versus the deferred contracts. Show lists for cattle to be sold this week were sharply higher with gains being made in all feeding regions. Much was made of last week’s estimated slaughter being 651,000 head. This was slightly larger than the previous week and just under this time a year ago. The quandary for many was how this was possible with the reduced capacity from a large fed beef plant being dark. Many things could be pointed out here including the potential for revisions later on. However, I think this was the short-term hope and expectation from the industry. It will be important for the packing sector to flex every way possible in order for us to smoothly navigate the next few months. The futures charts obviously look concerning with the recent declines. An optimist would point out oversold conditions and gaps to be filled as upside targets. The less optimistic might give a nod to the lack of managed money participation and little willingness to follow through on rallies as of late. Trey Warnock – Amarillo Brokerage Company

Pig breeders in China who have managed to keep fatal African swine fever off their farms since outbreaks began a year ago are now set to reap rewards, with some in line for record profits of $200 per hog thanks to soaring prices. The virus has reached every province of the world’s top pork producer. The pig herd shrank a third in July from the same month a year ago, according to the Ministry of Agriculture and Rural Affairs, though many observers believe half the herd is already gone. Since June, slumping production has triggered a price surge. National average hog prices passed the 2016 record of 21 yuan per kilogram earlier this month to hit 24.6 yuan ($3.48) per kg on Aug. 19, according to data from Shanghai JC Intelligence Co Ltd. The high prices will eat into profits at processors like WH Group, which last week reported a -17% decline in first half profits and warned that prices are set to keep climbing(Source: Thomson Reuters) 


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