Morning Commentary

Dec corn up 4 ½ at $3.5875

Nov beans up 5 at $8.6275

The DOW is down

USD is stronger

Crude oil up $.80 at $58.64

Good morning,

Corn  bulls are happy to see the USDA cut their condition rating by -3% from 58% down to 55% rated “Good-to-Excellent” vs. 68% rated GD/EX last year at this stage of the game. At the same time the USDA reported that 89% of the U.S. corn crop was in the “dough” stage vs. the 5-year average of 97%. The USDA also estimates that 55% of the crop is “dented” vs. the 5-year average of 77%. They are estimating just 11% of the crop is “mature” vs. the 5-year average of 24% mature by this date. The trend for December corn is bearish. Rallies capped at 367.5 leaves the market positioned to trade 348.75.  Stable trade over 379.75 is needed to provide fresh upside targets.

Soybean  bulls continue to point to a large number of acres planted extremely late. Producers in many key locations are saying the pods still need a lot longer to fill. The USDA released data after the close yesterday that showed 8% of the entire U.S. crop is still yet to “set pods”. The trade is also keep a closer eye on weather in Brazil, where bulls argue that some acres may face delayed planting because conditions are simply too dry. Interestingly, at the same time, soybean prices have tumbled to their lowest level since mid-May. The trend for November beans is negative. A close below 852.5 signals a fall towards 840. Stable action above 879.25 is the minimum needed to provide fresh upside targets. Yesterday’s action could be classified as a long-legged doji, signaling at minimum consolidation and potentially a change in market direction.

Cash Fed Cattle markets were much softer last week as attitudes continue to suffer and leverage between cattle feeders and packers is challenging to say the least. Volumes of cattle traded last week was larger than the previous week and might be some indication that the short-term marketing situation is not as backed up as it was. Cattle trading for out front delivery bounced to the highest levels noted so far this summer. Continuing to remain current and take advantage of stronger than normal basis will be vitally important to not creating a problem later in the year. As we start this week, the sentiment for cash is not overly optimistic and Oct19 LC futures already have a decline priced in. The weekly comprehensive beef report was lower on money and volume. Actually, total beef volume moved during this past holiday week was much lower than average and lowest in the last few years. Having said that show lists for cattle to be sold this week were smaller and the kills continue to come in strong. News to start the week was a bit unsettling. China has reportedly approved multiple plants to export protein from Brazil. This is an indirect impact at this point and is likely more of a psychological barrier than anything else. On an unrelated matter, some reports indicate that a KS beef packer is experiencing some mechanical and cooler issues that is hampering production to some degree for a short time this week. If history is any indicator, this market will bottom when the news and attitudes are at their worst. Futures started the week on a softer tone. To some degree the previously mentioned cash trade and concerning news may have played a role in this. Additionally, CME raised LC and FC margins as of the close on Friday. The increased capital requirements certainly could have been the last straw for some traders. New lows were put in today for spot LC and the technical setup is oversold. Those that are friendly are pointing out the historically cheap prices and wide packing margins as well as nearing seasonal lows to the summer/fall. Bears are following the trend and looking for additional downside stemming from packing capacity constraints, awful sentiment and potential for additional selling as a result of uncertainty. Trey Warnock – Amarillo Brokerage Company

The Philippines has reported its first cases of African swine fever, becoming the latest country hit by the disease that has killed pigs from Slovakia to China, pushing up pork prices worldwide. The Philippine outbreak began with the identification of infected pigs in two towns near the Philippine capital, Manila, and authorities have culled more than 7,000 pigs within a 0.6-mile radius, said the agriculture minister, William Dar. He said the country was not facing an epidemic and urged Filipinos to continue eating pork, which is a critical market and accounts for 60% of meat consumption in the Philippines. Authorities suspect the swine fever cases stemmed from backyard hog raisers who feed pigs “swill”, leftover food scraps from hotels and restaurants. The ministry added the virus could also be traced to smuggled frozen meat and returning overseas Filipino workers who brought back infected meat products. (Source: The Guardian)


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