Morning Commentary

Dec corn up ¼ at $3.835

Nov beans down 1 ¾ at $9.24

The DOW is up

USD is stronger

Crude oil up $.40 at $56.94

Good morning,

Corn  bulls are pointing to the fact only 52% of the U.S. crop is harvested which is well behind the traditional pace. North Dakota is just 10% harvested vs. 60% historically; Wisconsin just 21% harvested vs. 51% historically; Michigan just 25% harvested vs. 51% historically; South Dakota just 27% harvested vs. 66% historically; Iowa 43% harvested vs. 72% historically; Minnesota 43% harvested vs. 72% historically; Ohio 49% harvested vs. 69% historically; Indiana 57% harvested vs. 77% historically; Illinois 58% harvested vs. 88% historically. As you can see, many of our largest production states are running well behind average at less than 60% harvested. Technically, the market still feels mostly rangebound into Friday’s USDA report. The trend for December corn is neutral. Stable action above 398.25 is needed to restart a bull drive (420+/-). Closing under 381 alerts for a return to defensive trade and a test of key support below 370. The trade count showed funds selling 12,000 corn yesterday, leaving them short an estimated 142,000 lots on a futures in options basis.

Soybean  traders continue to debate U.S. and South American production, along with Chinese demand uncertainties. Here at home, the USDA reported 75% of the U.S. soybean crop is now considered “harvested”. Bulls point to the fact there’s still plenty of soybeans out in the field and battling the elements. Between Illinois, Iowa and Missouri there is thought to be about +300 million bushels still left to harvest. There’s arguably close to the same amount left harvest in the northern states between the Dakota’s, Michigan, Minnesota and Wisconsin. The trend for January beans is neutral-positive. Stable action over 959.5 is needed to drive the next leg higher. Closing under 919 alerts for a return to corrective action. The trade count showed funds buying 5,000 beans yesterday, leaving them long an estimated 48,000 lots on a futures in options basis.

Cattle markets continue to surprise some and encourage others. As of today, the futures markets are beginning the ninth consecutive higher week of trade after making spot lows around 98.00 in September and posting new highs of 120.325 today. For perspective, we made an approximate 295.00/head swing in two months. Cash trade moved 2.00-3.00/CWT higher last week with lighter volumes noted in the south and much heavier in the north. USDA reported some limited 115.00/CWT trade in the north today (11.4.19), which would be a steady firm with the higher end of last week’s trade. Live cattle basis has turned much more negative in recent weeks. Deliveries were drawn out against the Oct19 LC contract but did little to offset the pulling back of cattle due to the wide Oct-Dec19 LC spread. The short-term risk of a negative basis is a real possibility, but there is some seasonal evidence that basis can strengthen moving into the late 4th quarter. Last week’s spot beef cutout rallied 7.75/CWT and the comprehensive report showed a 6.50/CWT uptick with sizeable forward domestic sales. There has been some chatter lately about the trim market moving sharply higher. Lean 90 trim bounced in response to much higher imported 90 prices and potentially strong trim demand from Asian destinations. 50 trim has also moved seasonally higher and is nearing a potential top for the remainder of the year. The number of cattle for sale moving into November is not surprisingly large. The question will be how to quantify the potential offsetting demand and to what extent this impacts packer demand. Non-commercial roll out of Dec19 LC and into Feb20 LC is moving and will flip open interest in the coming weeks. The futures are technically strong but possibly overbought at these levels. There is a strong seasonal for the Feb LC contract to experience a material move lower starting in the late Oct/early Nov on average. The extent of the break certainly varies, but some analysis would suggest 10.00-12.00/CWT. Trey Warnock – Amarillo Brokerage Company

The Brazilian government said on Monday that China has approved seven meatpacking plants in the state of Santa Catarina for the export of pork innards. Exports can begin immediately, Agriculture Minister Tereza Cristina Dias said, adding that the approvals came as a result of talks held during President Jair Bolsonaro’s visit to China last month. The units authorized to export pork innards to China include one operated by BRF SA and two by JBS SA. The remaining four are run by privately owned food processors Cooperativa Central Aurora Alimentos and Pamplona Alimentos, each with two new plants approved. (Source: Reuters)


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