Morning Commentary

Dec corn down ½ at $3.6575

Nov beans up 1 ¾ at $8.61

The DOW is down

USD is stronger

Crude oil up $.89 at $55.82

Good morning,

The stock market remains volatile as recession fears are reignited thanks to a deepening yield curve inversion and sending the 10-year yield to its lowest level against the 2-year rate since May 2007.

Corn  bulls continue to struggle as prices consolidate and seem content trading just above contract lows. Technical traders are curious if the current DEC19 low can hold at $3.63^6 per bushel or will the bears want to shake the bulls a bit more heavily by testing the $3.50 level? Most bigger traders I know that have been out on their own private crop tours are all saying the same thing, there’s massive variability in the fields and wide-ranging degrees of maturity which makes it nearly impossible to get an accurate guess.

Soybean  bulls continue to battle both weather and trade negotiations. Most traders who have been out on extensive crop tours continue to talk about a U.S. yield somewhere between 41 and 46 bushels per acre depending on late-weather. This is obviously below the USDA’s current estimate of 48.5 bushels per acre, but who’s left standing that’s willing to bet on the USDA’s next move? With Tuesday marking the cutoff for Friday’s COT, funds are thought to be short 93,600 lots. If realized, funds are holding their largest short position since mid-June. The trend for November beans is neutral-negative.  A close under 854.5 signals a drop towards 840. A close over 879.25 is the minimum needed to provide fresh upside targets.

Cash fed cattle prices continue to trade at a premium to the nearby futures contracts at this time. Last week’s cash trade 1.00/CWT higher in general and on slightly larger volume compared to the previous week, but still lighter volumes that what would be expected. The expectation for this week’s trade is likely steady at this point with some light trade reported so far in CO at 106.50/CWT. The beef spot beef market ended last week slightly lower and approximately 3.00/CWT off recent highs, but the comprehensive report shows a stronger week over week market with slightly lighter total volume. Comprehensive export sales printed as strong of a number since the first quarter of this year. Coming into this week the market was mulling over Friday’s Cattle on Feed data and fresh news of a U.S.-Japan agreement on principle that would eliminate some burdensome tariffs. All of these bits of news certainly matter and are of consequence, however, the market has become desensitized to headlines for the most part and seems to be in the “show me” stage. The Cattle on Feed summary is 100% of a year ago on feed numbers with 98% of last year’s placements and 107% versus last July’s marketing’s. Interestingly, the south cattle on feed numbers continue to outpace northern numbers. TX cattle on feed is the largest versus NE numbers since late 2011 keeping in mind this is the seasonal time period when we expect this to top out. Very little fresh factual news has bubbled up related to Tyson’s Holcomb, KS, plant so far. The futures markets started off the week on a firmer note and then gave up most/all of those gains yesterday on lighter volume. Many are confused or concerned about the recent action in futures markets. We certainly cannot predict or time the market long term, but it would seem that the market has a commercial player that is awkwardly positioned in a physically long spot and a non-commercial trader that is very close to flat. We lack that story or spark to move markets in a significant way. Long term it seems that cattle certainly have room to advance, but the short term situation is cluttered with uncertainties related to macro and micro issues. In some ways this sheds some light on why futures continue to chop and the trade appears noncommittal. Trey Warnock – Amarillo Brokerage Company

U.S. Secretary of Agriculture Sonny Perdue will be in Illinois today, August 28. His visit starts in Decatur at an Ag Policy Summit hosted by U.S. Representative Rodney Davis (IL-13). Perdue will later tour the Farm Progress Show, also in Decatur, and participate in a live interview with Max Armstrong and Orion Samuelson. The secretary is also scheduled to brief stakeholders on a new USDA Waterways Report and participate in a Q&A session with Assistant Secretary James in Alton, Illinois.

Chinese pork meat imports are projected to sharply rise from 2.1 million tonnes in 2018 to 3.3 million tonnes in 2019 and 4.2 million tonnes in 2020, because of the African swine fever outbreak, according to broker and consultancy INTL FCStone. FCStone estimated during a commodities outlook conference in Sao Paulo that China’s pork meat production will fall to 38 million metric tons in 2019 from 54 million metric tons in 2018. It expects the production to fall further to 34 million metric tons in 2020, as the country will continue to struggle to control the devastating disease. Additionally, China’s southwestern province of Sichuan, the country’s top pig-farming province, is removing some restrictions on hog production to help stabilize supplies. Sichuan produced more than 65 million pigs in 2017, according to official data, or more than 9% of the country’s total, making it China’s leading producer. To achieve a provincial target of 40 million hogs a year, local authorities should promote standardized and modern farming, and support farms that produce 2 million hogs or more each year with integrated feed plants and slaughtering facilities, said the notice published on the department’s website. They should also remove any obstacles to projects under construction and allow them to be completed as soon as possible, it said. Sichuan also plans to abolish the 1-hectare (2.5-acre) limitation on land use for pig raising and related facilities and allow for “reasonable use” of land to meet the needs of the pig industry, including permitting pig farms on some grades of protected forest land. (Source: Reuters)

A big surplus of U.S. biofuel blending credits would likely blunt potential price increases in the market if the Trump administration follows through on its proposal to boost blending volumes mandates, four industry sources said. Prices for the credits known as Renewable Identification Numbers, or RINs, tanked this month after the Environmental Protection Agency decided to grant 31 biofuel waivers to oil refiners, exempting them from their obligation to blend ethanol into their gasoline. The administration has since sought to quell anger over the waivers in the agricultural industry and is considering boosting next year’s blending volumes mandates to compensate for the impact of the waivers. While that move could help bolster demand for corn-based ethanol, its impact – especially on the RIN market – could be muted by a buildup in the so-called “RIN bank” over the past few years: There were 2.19 billion carryover RINS from 2018 for use for compliance in 2019, according to EPA estimates, compared to 2.59 billion for 2018, 2.22 billion for 2017 and 1.54 billion for 2016.

Syngenta has officially opened its new Trait Conversion Accelerator, a $30 million expansion at its Nampa, Idaho, research and development and seed production facility. As the name implies, Syngenta expects to use the highly-automated, controlled environment corn breeding facility to speed up the time frame currently needed to introduce new corn traits for farmers. Currently, Syngenta has the third-largest, global germplasm pool, which is augmented by seven breeding collaborations. David Hollinrake, regional director for Syngenta in North America, says farmers will see more corn traits, as a result of its Agrisure technology, coming to the marketplace in the company’s NK and Golden Harvest corn seed brands. Independent seed companies will also be able to license Syngenta technologies through its GreenLeaf Genetics.


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