Morning Commentary

March corn down ½ at $3.8075

Jan beans up 4 ¾ at $8.815

The DOW is up

USD is stronger

Crude oil up $1.24 at $56.41

Good morning,

Corn  bulls this week will be trying to break through technical resistance at the $3.90 level in the MAR19 contract. Keep in mind, we haven’t closed the MAR20 contract above $3.90 since the first week in November. Brazilian weather has arguably improved and cash corn prices have been bid aggressively higher on record strong export demand. They are also starting to see a bit more competition for supply coming from the ethanol space. Net-net, the Brazilian farmer is seeing extremely strong demand for cash corn and probably itching to plant a few more second-crop corn acres. Without a Brazilian weather story of some sort this means more corn for Brazil and not a bullish catalyst. The trend for March corn is negative but a buy signal was generated Friday in the stochastics. Consistent trade below 382.5 on a closing basis will position the market to trade 365.75. A close over 388.75 alerts for a recovery phase.

Soybean  bears continue to point towards no official trade agreement between the U.S. and China, the world’s top buyer of soybeans, as being reason enough to keep swinging their bat. There’s some talk bears have their eye on the low posted in the contract back in mid-September at $8.65. The trend for January beans is negative. The market achieved the 879 target on Friday. Sustained trade below 879 is needed to take the next leg down. Be alert for bottoming action. A close over 908.75 alerts for a recovery phase.

Nearly one-third of projected U.S. net farm income this year will come from government aid and taxpayer-subsidized commodity insurance payments, according to a forecast issued by the USDA. The agency increased its net farm income forecast for 2019 by more than +10%, to $92.5 billion, driven largely by the Trump administration’s trade aid payments to farmers and federal insurance indemnities from extreme weather events, USDA Economic Research Service senior economist Carrie Litkowski said in a conference call with reporters. Without those payments, U.S. net farm income this year would have dropped by nearly -8%, to $63.6 billion. Total direct payments to the nation’s estimated 2 million farms are expected to surge to $22.4 billion this year, a +64% increase over 2018 and the highest rate paid out since 2005, Litkowski said. Farm income also was boosted by an estimated $6.5 billion paid out in federal commodity insurance indemnities, which does not include the premiums that farmers paid themselves, she said. That includes crop insurance payments Midwestern farmers received in the wake of record floods that devastated a wide swath of the Farm Belt this spring.

The EPA typically releases its final rule for annual biofuel blending mandates under the Renewable Fuel Standard the day before or after Thanksgiving — but the agency said last week that it won’t complete this year’s final rule until the winter. The agency issued a supplemental RFS rule this year, throwing a wrench into the usual timeline. “The comment period on EPA’s October 15th supplemental proposal will close on Friday, November 29th, after which the agency will review and respond to all comments and hopes to finalize the rule this winter,” EPA spokesperson Michael Abboud said in a statement. The White House is still getting an earful from biofuel advocates over the proposal. More than 800 advocates for biofuels signed comments to the U.S. Environmental Protection Agency in support of keeping the provisions of the federal Renewable Fuel Standard in place and enforced, according to officials with the Iowa Renewable Fuels Association. The signers urged EPA officials to “stick to President Trump’s deal” — 15 billion gallons of biofuels per year — and ensure biofuel demand is not destroyed by small refinery exemptions to the Renewable Fuel Standard, according to an association statement. In the past three years, according to the association, EPA officials have granted 85 small-refinery exemptions, effectively cutting more than 4 billion gallons of biofuel demand. (Sources: Politico, Biofuels International Magazine)

Deere & Co. last week warned of lower earnings next year after reporting a fall in quarterly profits, hurt by trade tensions as well as poor weather in the U.S. farm belt that has slowed equipment purchases by farmers. In response to an “uncertain” business environment, the company announced a voluntary separation program for its salary employees, which is estimated to cost it about $140 million next year, but is projected to contribute to annual savings of $150 million. The world’s largest farm equipment maker said it was also reviewing its overseas footprint and would focus on growing its more profitable parts and services business. Deere expects net income of $2.7 billion to $3.1 billion next year, lower than $3.25 billion in 2019 and compared with Refinitiv’s average analyst estimate of $3.5 billion for 2020. Deere has cut production and laid off workers to keep a lid on costs in the face of weak demand. It expects global agriculture and turf equipment sales to decline -5% to -10% next year. Industry sales of farm equipment in the U.S. and Canada are forecast to decline about -5% on lower demand for large equipment. Adjusted profit in the latest quarter came in at $2.14 per share, down from $2.30 per share last year. (Source: Reuters)


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