Morning Commentary

March corn up 2 at $3.8625

March beans up 3 ½ at $9.5075

The Dow is up

USD is stronger

Crude oil up $.04 at $59.65

Good morning,

Corn traders eagerly await tomorrow’s USDA report which is scheduled for release at 11:00 am CST and will include the quarterly grain stocks update, final crop estimate for the recently harvested U.S. crop, as well as an updated global balance sheet forecast. Bulls are hoping to see the USDA make a sizeable cut in U.S. acres and yield. While bears are looking for reductions in demand to help offset some of the production losses. The trend is neutral.  Stable trade outside 379-395 is needed to provide fresh trending targets. 

Soybean traders have all eyes on tomorrow’s USDA report. Bulls are excited about the fact ending stocks are going to be substantially lower than last year +900 million, instead this year probably somewhere in the 425 to 450 million range on lower U.S. production. Bears, however, are quick to point towards producers in Brazil more than likely harvesting another record crop in the next few weeks. Bears are also pointing to the fact U.S. producers could easily grow an extra +400 to +800 million bushels of soybeans in 2020 on a much greater number of planted acres. The trend is neutral.  Stable trade outside 931-951 is needed to provide fresh trending targets. 

China has suspended its plan to implement a nationwide gasoline blend containing 10% ethanol this year, three sources briefed on the matter said, following a sharp decline in the country’s corn stocks and limited production capacity of the biofuel. The reversal is a heavy blow to domestic producers that have built new plants, as well as biofuel exporters, including the United States and Brazil, which were looking to benefit from growing Chinese demand. China was expected to increase imports of U.S. ethanol after the recent announcement of Phase 1 of a trade agreement. Beijing announced in September 2017 that the national gasoline supply would contain 10% ethanol from 2020. Beijing’s mandate – known as the E10 target – was conceived as a way to digest the country’s huge state corn reserves and reduce pollution in the world’s largest car market. China is now unlikely to require large ethanol supplies without the mandate. The United States exported about 20% of its fuel ethanol to China in 2016, trade worth about $300 million that year. American shipments have since plunged to a trickle, which was expected to be reversed following the announcement of Phase 1 of the recently announced trade deal. (Source: Reuters)

Farmland values are expected to remain steady in 2020, despite continued uncertainties with the ag economy. “There is still a below average amount of land on the market for sale, and buying interest is adequate is most places,” says Randy Dickhut with Omaha-based Farmers National Company. Dickhut says a few recent sales have even exceeded expectations, including a $13,000 per acre sale in Iowa and an $8,800 per acre transaction in northeast Kansas. “But lower quality land gets a little harder to sell. So it’s kind of a mixed bag, but typically it’s a little better than you might imagine.” Dickhut says historically low interest rates and federal MFP payments continue to provide support, offsetting concerns about the overall ag economy. “The economics are still a challenge—uncertainties are a challenge,” he says. “But in the end, I think a lot of people just want to hang on to their farmland—even if they were thinking about selling it.” (Brownfield Ag)

China’s sow herd rose +2.2% in December over the previous month, a government minister told reporters on Wednesday, in a sign of improving production after African Swine Fever slashed the herd by at least -40% by last October. However, a pick-up began in October and the sow herd has now increased by +7% since September, Yu Kangzhen, vice minister of the Ministry of Agriculture and Rural Affairs said. Yu did not reveal December data on live hogs, but said that the number of pigs sent for slaughter rose by +14.1% from a month earlier, as farmers liquidated their herds ahead of the Lunar New Year festival later this month. (Source: Reuters)

Deere & Co. on Wednesday said it will cut costs and ramp up investment in data-driven agriculture technology and its services business to make itself more profitable. In a pitch to investors, Chief Executive Officer John May said the measures are expected to boost operating profit margin to 15% by 2022 from 12.5% projected for this year. The Moline, Illinois-based company reported lower profits in the latest quarter and has warned of lower earnings this year. In response to weak demand, the company has cut production and laid off workers. May said Deere is reviewing its overseas manufacturing footprint in markets that have peaked or where it has over-invested. He did not provide the names of those facilities. The company is also carrying out a voluntary separation program for its salaried employees, now projected to result in savings of $120 million, lower than $150 million estimated earlier. May expects the cuts to add 1 percentage point to Deere’s profits by 2022. The company is aiming to get a similar profit boost from investments in precision agriculture. Similarly, it is betting on its parts and maintenance services business to contribute to added profits over the next two years. The segment currently accounts for a fifth of the company’s sales. (Source: Reuters)


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