Morning Commentary

Dec corn up ¾ at $3.7225

Nov beans up 7 ¾ at $8.9075

The DOW is up

USD is stronger

Crude oil down $.82 at $55.09

Good morning,

Corn bulls are talking about heavy rains over the weekend and some cooler temperatures in the northern Plains, weather that is not overly conducive for a late-maturing crop. Bears see U.S. weather as no major concern and are eager to see the massive Quarterly Stocks number that is scheduled to be released by the USDA today at 11:00 am CST. Many inside the trade are bracing for what could be the largest September Quarterly Stocks report in several decades (since 1988).

Soybean traders are bracing for what’s expected to be a record-setting supply estimate for September 1 Quarterly Stocks. Bears are looking for quarterly stocks to come in record large at between 980 and 990 million bushels.  Local bean yields are coming across Gold-Eagle scales at 54.5 to 62 bpa.  Not exactly bullish considering we thought the crop was smaller than 50 bpa.

The USDA’s Deputy Chief Economist says the overall farm balance sheet is relatively strong but there are rising indicators of financial stress. Deputy Warren Preston said at the recent AgriPulse Ag Outlook Forum in Kansas City that there’s been a slow rise in farm debt, fueled by farmers’ borrowing against their real estate equity. “It’s not necessarily for purchase of farm real estate. It’s farmers tapping into the equity in their real estates for operating loans.” Preston says farmers are tightening their belts, with production expenses declining. But he calls that a double-edged sword. “On the one hand, it’s good to see that farmers have that resilience and they have the ability to adapt. But on the other hand, it’s worrisome when that production expense includes the realized depreciation and a signal that farmers perhaps don’t have the income, are not investing in new capital.” Preston says farmers can’t mine that equity forever and at some point, there needs to be reinvestment in capital stock.

USDA reported the U.S. inventory of hogs and pigs as of September 1, 2019, was 77.7 million head, up +3% from 2018 levels and the highest September 1 inventory since the agency began keeping records in 1988. Breeding inventory stood at 6.43 million head, up +2% from last year and up slightly from last quarter. Market hog inventory came in at 71.2 million head, up +4% over 2018 and up +3% from last quarter. It is also the the highest September 1 inventory on record. The June-August 2019 pig crop was estimated at 35.3 million, and increase of +3% from last year and the largest June-August pig crop since estimates began in 1970.  The average pigs saved per litter was a record high of 11.11 for the June-August period, compared to 10.72 last year. (Source: USDA)

China’s pig farmers are raising fatter pigs to profit from soaring pork prices, boosting demand for key feed ingredient soymeal, and reducing some of the impact from a huge drop in the overall herd, said analysts and industry executives on Thursday. China’s pig herd shrunk by 38% in August compared with a year earlier, according to data from the Ministry of Agriculture and Rural Affairs, with a year-long epidemic of African swine fever killing millions of pigs and putting farmers off rebuilding herds. The herd loss is expected to push down demand for soymeal, the most common protein in pig feed, by 6% to 7% for the 2018/19 crop, said Li Qiang, chief analyst at Shanghai JC Intelligence Co Ltd, before a recovery during the next crop year. Soymeal consumption will increase by 2.8% to 66.3 million tonnes in the 2019/20 year, according to the closely watched estimates of Shanghai JC Intelligence. That’s partly because farmers are raising heftier pigs, to as much as 150 kg (330 pounds), to benefit from soaring pork prices, Li said. An increase in poultry production to help offset the pork shortage is boosting soymeal demand, too, according to an executive at a major feed producer, estimating soymeal use in poultry feed may have risen up to 20% in the current year. Frank Zhou, managing director of grains and oilseeds trading at Cargill’s China unit, said soymeal demand could jump 3% in the 2019/20 crop year if the disease situation and sow inventory stabilized this month. But Zhou cautioned that if sow and hog stocks keep falling, soymeal demand would decline as much as 4%. (Source: Reuters)


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