Morning Commentary

Dec corn up 6 ½ at $3.8675

Nov beans up 7 ½ at $9.31

The DOW is up

USD is weaker

Crude oil up $.60 at $54.15

Good morning,

Corn  bulls were again disappointed as the USDA opted to adjust the U.S. yield higher rather than lower like most in the trade were forecasting. In this report, the USDA bumped its yield forecast higher from 168.2 to 168.4 and has total U.C. corn production at 13.779 billion bushels, down -20 million bushels on a slight decline in harvested acres. Corn “demand” had some sizeable adjustments: Exports were reduced -150 million bushels; corn used for ethanol was lowered by -50 million bushels; feed and residual use was increased by +125 million bushels. Net-net, U.S. ending stocks are lowered by -261 million bushels from 2.190 billion down to 1.929 billion. Unfortunately, this is still considered overly burdensome and takes some of the recent risk-premium out of the market. An ending stock number sub-1.6 billion would have created a much different and more interesting balance sheet. The trend for December corn weakened to neutral. Closing under 379.5 alerts for a return to defensive trade and a test of key support at 369. Stable action above 398.25 is needed to restart a bull drive.

Soybean  bulls are happy to hear that President Trump is scheduled to meet Vice Premier Liu He, China’s lead trade negotiator, later today. Political insiders are hopeful that enough progress will be made for the U.S. to put off tariff hikes on $250 billion of Chinese imports scheduled to go into effect next week. There’s also hope that China will agree to some type of agricultural deal. Bulls are also happy to see the USDA lowered its yield forecast by -1 bushel per acre from 47.9 down to 46.9, harvested acres were also slightly reduced. Total U.S. soybean production was lowered by -83 million bushels. On the demand side of the equation, total domestic crush and exports were raised slightly higher. Net-net, a larger than expected reduction in ending stocks from 640 million down to 460 million was delivered by the USDA. The trend for November beans is positive. Stable action above 912 leaves the market poised for a run to 944. Closing under 900 alerts for a return to defensive trade.

Cocoa prices are surging as traders grapple with a new method for pricing exports designed to alleviate poverty among farmers in Ivory Coast and Ghana, the world’s largest growers of the chocolate ingredient. At a time when weakness in the world economy is hurting assets such as oil and industrial metals, cocoa has been one of the top performers in commodities markets. Uncertainty about the new way of pricing West African cocoa exports, designed to improve living conditions for farmers, is driving the rally. According to the World Bank, 80% of cocoa producers, or four million people and their families, live on less than $3 a day. In July, Ivory Coast and Ghana said they would introduce a “living income differential” of $400 a ton, to be charged on top of the London futures price. The neighboring nations have the ability to swing prices because they grow around 60% of the world’s cocoa. Both their harvests dwarf those of Ecuador and Nigeria, the next-largest producers. The premium applies to next year’s cocoa crop, which the two countries will start to ship from October 2020. However, it has already been used in export contracts because large Western chocolate companies have locked in purchases well in advance of receiving their cocoa. One factor pushing futures prices higher: Companies that normally buy cocoa directly from West Africa appear to have been buying beans from exchange stores instead. These stockpiles have depleted by 44% since the end of August, a steep decline in what is normally a source of last resort.


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