Morning Commentary

Dec corn down 2 ¾ at $3.745

Nov beans down 6 ½ at $9.13

The DOW is down

USD is weaker

Crude oil down $.52 at $56.72

Good morning,

Corn  bulls have to be disappointed to see such large reductions in overall U.S. demand. Yes, the USDA cut its total production forecast, but as feared, the overall downgrades to demand offset the majority of the yield reduction. The USDA cut its total U.S. production forecast by -118 million bushels from last month down to 13.661 billion, lowering the yield estimate from 168.4 down to 167.9 bushels per acre. Area harvested was left “unchanged” at 81.8 million acres, still up slightly from 2018. On the flip side of the balance sheet, total demand is reduced by -100 million bushels: Feed and residual use down -25 million bushels; Exports are reduced -50 million bushels; Ethanol is lowered by -25 million bushels. Net-net, corn ending stocks are lowered by only -18 million bushels from last month. The trend for December corn is negative. Key support runs between 371.5 and 363.75. A gap is closed on the weekly all-sessions chart at 358.5. Stable action over 398.75 is needed to fuel a fresh bull wave. A close over 391.5 hints at a return to 398.75.

Soybean  bulls didn’t get the drop in yield they were looking from the USDA but the bears did receive a slight reduction in overall demand. The USDA reduced its U.S. crush forecast by -15 million bushels ultimately pushing ending stocks higher by +15 million bushels not lower like many in the trade had been forecasting. Bears are also pointing to arguably improved weather in South America and some ongoing trade uncertainties involving the Chinese. The trend for January beans is neutral-positive. Stable action over 959.5 is needed to drive the next leg higher. Closing over 947 hints at a return to 959.5. Closing under 919 alerts for a return to corrective action.

Governor Tim Walz is asking the federal government to declare a dozen counties in northwest Minnesota an agriculture disaster area to help farmers struggling with the fall harvest because of bad weather. The governor says the long-range forecast predicts flooding next spring — not good news for farmers having a tough time now. “So I think what you’re gonna have is two years back-to-back where it’s gonna be very, very challenging, ” Walz says. “The disaster declaration… I think that’s not a fix, it’s not an instant fix. It might provide some of that safety net to kind of soften the blow a little bit — but I’m concerned for next year.” Undersecretary Bill Northey said Thursday they’re already reviewing a request from neighboring North Dakota. “Doesn’t take a long time,” Northey says. “I think we’re getting very close on the North Dakota request [and] we’ll be able to announce whether those will get a declaration or not. Certainly we’ll quickly look at the Minnesota information and be able to address it there as well.” (Source: Minnesota News Network) 

The USDA is said to be moving forward with a second batch of direct payments for farmers and ranchers burned by retaliatory tariffs, according to Ag Secretary Sonny Perdue, who said the agency just got authorization for a second tranche. “We’ll be getting it ready hopefully at the end of this month or early December.” It was previously unclear if the department planned to offer another tranche of payments, with U.S. and Chinese officials working to finalize a partial trade agreement that would include a commitment by China to purchase huge sums of U.S. farm goods. USDA has already paid farmers $6.7 billion for their 2019 production, on top of $8.6 million that was provided for 2018. Perdue said further aid might not be needed in 2020 if the limited U.S.-China agreement is signed. “We’re hopeful that trade would supplant any type of farm aid needed in 2020,” he said. (Source: Politico)

New Antitrust Lawsuit Targets Pork Industry: A class-action lawsuit filed last week on behalf of pork consumers alleges that hog companies have colluded to artificially hike the price of pork and, as a result, their profits. The complaint also provides new insight into Agri Stats, a data-sharing company that sits at the center of the wave of antitrust allegations sweeping the meat sector. The complaint, along with a similar suit brought on behalf of commercial pork buyers, was filed in Minnesota District Court on Nov. 6. The pork companies named in the case include meatpacking giants Smithfield Foods, Tyson Foods, and JBS USA, as well as Hormel Foods and several other pork companies. Together, the defendants control more than 80 percent of the hog market, according to the complaint. The suit alleges that beginning in 2009, the companies colluded to reduce the supply of pork and thereby drive up their profits. Using reports produced by Agri Stats, which is also a defendant in the case, the companies were allegedly able to “have access to standardized data (cost, price, and supply information) from their erstwhile competitors which they used to extract the maximum amount of profits from the American consumer.” These allegations of antitrust violations in the pork industry join a wave of concern that over the past decade, the biggest corporate actors in the beef and poultry industries have coordinated their production and suppressed producer pay to hike their profits. (Source: Fern’s Ag Insider)

China is scouring the world for meat to replace the millions of pigs killed by African swine fever (ASF), boosting prices, business and profits for European and South American meatpackers as it re-shapes global markets for pork, beef and chicken. The European Union, the world’s second largest pork producer after China, has ramped up sales to the Asian giant although it can only fill part of the shortfall caused by ASF. Argentina and Brazil have approved new export plants to meet demand and are selling beef and chickens, as well as pork, to fill the gap. U.S. producers, however, have been hampered due to tariffs imposed by Beijing. Other Asian countries are also ready to step up imports as they, too, deal with outbreaks of ASF. Vietnam, the Philippines, North and South Korea, Laos, Myanmar and Cambodia are all struggling to contain outbreaks of the disease. Shortages in the world’s top pork consumer have been exacerbated by the upcoming Lunar New Year celebrations in late January, when pork, and pork dumplings in particular, play a central role in the food on offer. Rabobank estimates that China’s hog herd, the world’s largest, fell by half in the first eight months of 2019 and will likely shrink by 55 percent by the end of the year.


Your browser is out-of-date!

Update your browser to view this website correctly. Update my browser now