Morning Commentary

March corn up 1 ¼ at $3.87

March beans down 6 ½ at $9.395

The DOW is up

USD is stronger

Crude oil up $.11 at $59.15

Good morning,

Corn bulls are happy to see the USDA make a large upward adjustment to “feed and residual” demand and are hoping to see increased export demand from the Chinese following this week’s anticipated signing of the “Phase 1” trade deal. Friday’s disappointment is still being digested as the USDA elected to raise the yield higher from 167 to 168 bushels per acre. Harvested acres were lowered conservatively from 81.8 down to 81.5 million. Total U.S. production is actually raised higher from 13.661 billion to 13.692 billion. The big positive is the fact “feed and residual” demand was raised higher by +250 million bushels. Unfortunately, exports are lowered by -75 million bushels, food, seed, and industrial demand lowered by -20 million. Ethanol demand was left “unchanged” at 5.375 billion bushels. Net-net, U.S. demand comes in higher than most expected with the sizeable adjustment to “feed and residual”. The crazy part is the fact we got the +250 million bushel increase in “feed and residual” but it only trimmed ending stocks by -18 million bushels. The trend is neutral.  Stable trade outside 379-395 is needed to provide fresh trending targets. 

Soybean bulls are hoping to see the official signing of the “Phase 1” trade deal, scheduled for this Wednesday, providing some additional bullish tailwind. Unfortunately, bulls were disappointed in seeing the USDA raise total U.S. production rather than lowering it like so many were anticipating. The USDA raised the U.S. yield higher from 46.9 to 47.4 bushels per acre. Harvested acres were however lowered from 75.6 million down to 75.0 million. But that still wasn’t enough to lower total U.S production, which was actually raised higher from 3.550 billion to 3.558 billion. I should note, beginning stocks were lowered a bit from 913 million down to 908 million. The demand side of the balance sheet was mostly a non-event with exports and crush left “unchanged”. Net-net, a bump higher in yield and a reduction in harvested acres and beginning stocks leaves U.S. supply “unchanged” at 475 million bushels. The trend is neutral.  Stable trade outside 931-952 is needed to provide fresh trending targets. 

USDA’s Agricultural Marketing Service (AMS) has proposed a replacement to the Grain, Inspection, Packers and Stockyards Act (GIPSA) the Department withdrew in 2017. AMS says the plan clarifies whether a packer, swine contractor, or live poultry dealer has made or given any undue or unreasonable preference or advantage to any person or locality in a way that would violate the GIPSA rule. Under the proposal, the criteria for unfair treatment of producers includes whether the preference can or cannot be justified on the basis of cost savings, or by meeting the terms or prices offered by a competitor. The Organization for Competitive Markets is critical of the proposal, saying USDA fails to own up to its longstanding position that the Packers and Stockyards Act is both an antitrust law as well as a producer protection law.  Specifically, OCM says it does not set out which actions are unfair, unjustly discriminatory, or deceptive by meat packers and processors. The proposed rule is open for public comment until March 13th. (Source: Brownfield Ag) 

Archer-Daniels-Midland Co., the agribusiness giant that helped draw the blueprint for the U.S. biofuel industry, is in advanced talks for a deal that could involve a sale or a joint venture for its ethanol dry mills. This is not the first time ADM, which started producing ethanol in 1978, has tried to divest its dry mills. In 2016, the company put the assets up for sale, evaluated bids and ended up deciding to keep the business. ADM moved its three ethanol dry mills into a wholly-owned subsidiary called Vantage Corn Processors last month. The move should facilitate a deal because it separates the three mills and makes clear any agreements that an interested party would have with ADM as the facilities are integrated with other assets. (Source: Bloomberg)


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