Morning Commentary

Dec corn down 1 at $3.5775

Nov beans up 3 ½ at $9.655

The DOW is down

USD is stronger

Crude oil down $.77 at $40.74

Good morning,

Corn traders will be interested in this morning’s export sales data. The continued Chinese buying should help offset some of the weakness we are seeing in ethanol. Corn used for ethanol was down a bit in yesterday’s report and has struggled to gain much ground the past few weeks. Unfortunately, we are starting to see a slight build in overall supply. Most inside the trade expect corn for ethanol will again be trimmed. The production side of the balance sheet, the debate remains U.S. weather and final average yield. Most in the trade seem to be orbiting their guesses around the 175 number vs. the USDA’s August yield estimate of 181.8 bushels per acre. Bottom line, bulls need to be fed on a regular basis and there hasn’t been a lot new this week. The U.S. dollar posted new lows and has rebounded a bit the past couple of days.

Soybean bulls are hoping to see strong weekly export sales data this morning to go along with this week’s record crush data. There’s really no question that demand is robust. The big debate in the market is obviously U.S yield and forecasted finishing weather. I feel like the average yield is down in the 50 to 51-bushel range, but there’s still a lot of talk inside the trade from those who think we could still be north of 53 bushels on big pod counts and some blow out records that will be harvested in some locations. Bears point to the fact there are rains in the forecast for many dry areas.

The USDA in its latest Farm Income Forecast, says net farm income, a broad measure of profits, is forecast to increase +$19.0 billion (+22.7 percent) to $102.7 billion in 2020, after increasing in both 2018 and 2019. In inflation-adjusted 2020 dollars, net farm income is forecast to increase +$18.3 billion (21.7 percent) from 2019. If realized, in inflation-adjusted terms, net farm income in 2020 would be -25.4 percent below its peak of $137.6 billion in 2013, but +13.8 percent above its 2000-19 average ($90.2 billion). Net cash farm income is forecast to increase +$4.9 billion (+4.5 percent) to $115.2 billion in 2020. Inflation-adjusted net cash farm income is forecast to increase +$4.0 billion (+3.6 percent) from 2019, which would be +5.7 percent above its 2000-19 average ($109.0 billion). Cash receipts for all commodities are forecast to decrease -$12.3 billion (-3.3 percent) to $358.3 billion (in nominal terms) in 2020. Total animal/animal product receipts are expected to decrease -$14.3 billion (-8.1 percent) with declines in receipts for broilers, cattle/calves, hogs, and milk. Direct government farm payments are forecast at $37.2 billion in 2020, an increase of +$14.7 billion (+65.7 percent, in nominal terms).

A brokerage analyst says their recent survey of crop producers shows corn and soybean yields might be lower than expected. Rich Nelson is the chief strategist for Allendale. He says, “The yield numbers imply a moderate drop in supply here, but not anything drastic yet.” Nelson says their corn yield projection for the nation is less than what USDA projected. “The official survey is 178.28 bushels per acre for yield. That is down slightly from the 181.83 USDA had been using.” Nelson says in Iowa, their producers are looking at 185 bushels per acre of corn compared to USDA’s recent projection of 202 bushels, or about 227-million-bushel change, but he says they won’t really know until farmers get in the fields. Nelson says since 1970, there have been thirteen years with a dry August, and nine of those years could be compared to 2020. He says in six of those nine, the January yield numbers rebounded some after the harvest. (Source: Brownfield Ag)

Kansas City Southern is reportedly the target of an unsolicited buyout offer from a group of investors including The Blackstone Group, shining a spotlight on the railroad company with strong ties to cross-border trade with Mexico. The Wall Street Journal reported on Wednesday that a consortium including Blackstone and Global Infrastructure Partners has submitted a sweetened bid for Kansas City Southern after an earlier attempt was rebuffed by the company. Terms of the offer were not known, but the Journal had reported in July that a group including Blackstone was weighing making an offer that would have valued Kansas City Southern at about $20 billion. The transportation company had a market capitalization of more than $17 billion as of Wednesday’s trading. None of the parties involved had any comment on the report.


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