Morning Commentary

Dec corn down ¾ at $3.8625

Nov beans down 4 ¾ at $9.105

The DOW is down

USD is weaker

Crude oil down $.70 at $52.05

Good morning,

Corn  bulls are looking at a U.S. crop that is only 58% “mature” and a massive winter storm forecast to hit the upper-Midwest late this week. Yesterday, the USDA showed 93% of the U.S. corn crop is “dented”, just 58% of the crop considered “mature” vs. the average of 85% by this date. And just 15% of the crop was reported as “harvested” vs. what’s historically closer to 27% by this date. I should also note, overall crop-conditions were lowered slightly from 57% to 56% rated “Good-to-Excellent”.  Interestingly, it’s several of the bigger producing states that are seeing a significant lag in maturity: North Dakota just 22% mature vs. 75% average; South Dakota just 36% mature vs. 80% average; Minnesota just 39% mature vs. 83% average; Illinois just 59% mature vs. 94% average; Iowa just 52% mature vs. 88% average. The trend for December corn is positive. Stable trade above 377.5 is likely to prompt a rally towards 400. Closing under 367.5 signals renewed weakness.

Soybean  bulls are talking about the same thing as corn bulls… a large winter storm forecast to hit the North and an extremely late-maturing U.S. crop. The USDA reported just 14% of the crop has been “harvested” vs. 34% on average. Iowa 5% harvested vs. 26% on average; Illinois 11% harvested vs. 40% on average; Minnesota just 8% harvested vs. 43% on average; South Dakota just 5% harvested vs. 36% on average; North Dakota 8% vs. 48% on average; Nebraska 14% vs. 30% on average; Kansas 5% vs. 15% on average; Missouri 6% vs. 18% on average. The USDA showed just 72% “dropping leaves” vs. 87% on average. I should also note, the USDA lowered its weekly crop-condition estimate from 55% down to 53% rated “Good-to-Excellent” vs, 68% rated GD/EX last year. Solely from a technical standpoint, the tight consolidation in the upper reaches of the Sep 30th/Oct 1st rally is constructive for future upside. Preliminary open interest declined 5,700 lots as massive liquidation in Nov was only partially offset by gains in Jan. The trend for November beans is positive. Stable action over 912 is bullish for a run towards 940. Be cautious of a setback from 934.5 on the first test. Closing under 896 alerts for a setback.

Cattle markets firmed last week with the majority of the southern trade coming in at 107.00/CWT. The northern feeding regions printed 108.25/CWT live and 170.00/CWT dressed. Volumes of cattle traded to packers last week neared 100,000 head and should go a long way towards maintaining a current level on marketings. It seems that as we start this week, most are looking for cash markets to move higher yet again. Historically wide price spreads have incentivized moving cattle back and a tighter Sep/Oct market-ready numbers situation has possibly developed. Show list numbers were strong this week and should come as no surprise as this is the typical response to higher cash markets. Interestingly, Texas, Kansas, and Nebraska are all at or above 10-year high show list numbers. Overall, the news and potential fundamental developments within the cattle and beef sectors are favorable. Premiums are being built into the deferred futures contracts and breakevens being purchased are firming up as a result of these premiums. Futures markets have filled upper gaps on daily charts left from the selloff response to the beef plant fire in August. The longer-term technical setup suggest additional upside is possible and that momentum should remain up. However, shorter-term outlooks point towards overbought action that could easily retrace some of the recent gains. Live cattle open interest has moved sharply lower in the face of the rally. The commercial hedger remains rather unhedged compared to a historical normal. The non-commercial trader is beginning to liquidate some of the short position but may still have a ways to go. Trey Warnock – Amarillo Brokerage

U.S. and Japanese leaders signed two separate trade agreements dealing with agriculture and digital trade Monday. U.S. officials estimated the deal would reduce tariffs for roughly $7 billion worth of American agricultural products including cheese, wine, beef, pork, wheat, and almonds. The U.S. would in turn lower tariffs on Japanese industrial goods under the agreement, which would also set stricter terms for digital trade between the two sides. The agreement did not touch on current auto tariffs or additional ones that Trump threatened Japan with last year on the basis of national security concerns. The agreement was announced on a preliminary basis in August. On the sidelines of the United Nations General Assembly in New York last month, the US and Japan signed an agreement-in-principle. The move on Monday afternoon concluded the final text of the deal. (Source: Business Insider)

JBS USA will remove the growth drug ractopamine, which is banned by China, from its U.S. hog supply in hopes of accelerating pork exports to the country. The meat packer’s move away from the feed additive shows how companies are maneuvering to take advantage of an expected shortage in China, the world’s largest pork consumer, due to African swine fever (ASF). JBS USA, owned by Brazil’s JBS SA, said it removed ractopamine from internally owned production systems in August 2018. Now the company will also prohibit the drug from diets of hogs owned by farmers who sell livestock to JBS USA. Rival U.S. pork producer Smithfield Foods, which is owned by China’s WH Group, already raises all of the hogs on its company-owned and contract farms without the drug. Tyson Foods Inc previously told Reuters it was looking at diversifying its pork supply to include ractopamine-free hogs as demand expands. Ractopamine is used in some countries to raise leaner pigs, but China does not allow its use or tolerate residues in imported meat. The European Union also bans ractopamine. (Source: Reuters)


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