Morning Commentary

Dec corn unchanged at $3.6725

Nov beans down 2 ¾ at $8.425

The DOW is down

USD is stronger

Crude oil up $.06 at $67.60

Good morning,

Corn bulls are hoping to see the USDA trim their current U.S. yield forecast. Last month the USDA bumped it aggressively higher from 174.0 to 178.4. Bulls contend the guess was overly optimistic and that higher variability in the fields are producing less than expected results.

Soybean bulls are pointing to Hurricane Florence, which has been upgraded to a CAT 4, and is expected to hit areas of North and South Carolina and parts of Virginia later this week. North and South Carolina combined are thought to producer just over 75 million bushels of soybeans. Throw Virginia into the mix and we are talking more like a combined 100 million bushels. This is certainly not a huge number, but with fresh bullish headlines limited, it’s getting some play. Bulls are also talking about one of the main soybean growing regions in China experiencing some complications due to an early-frost. Bears argue that the bulls are now grasping at straws as they find themselves drowning in a continued sea of bearish headlines. Most sources inside the trade are expecting the USDA to raise their current yield estimate of 51.6 even higher, probably north of 52 bushels per acre, perhaps even closer to 53 bushels per acre.

Weekly corn inspections were disappointing at 763,475 MTs last week, down from the 1.335 MMTs reported just a week before. The good news was the fact weekly soybean inspections showed almost 67,000 MTs for delivery to China. There was also some good news in the fact Chinese imports in August were up by about +14% from July to August. In other words, they have not yet cut back on their demand like so many bears have been forecasting.

A growing chorus of growers, analysts, bankers and even a USDA economist said it would make sense to establish a futures contract in Brazil to hedge growing risks as South American country and U.S. soybean prices diverse. Brazilian soybean port premiums soared to a record spread of around $2 above Chicago Board of Trade prices following a decision by China to slap a 25% tariff U.S. soybeans in July. This new contact could provide an alternative to the CBOT that dominates the global market for soybean pricing. Even USDA deputy chief economist Warren Presto said it would “economic sense” to seek a different location to trade Brazilian soy. The idea is being floated within China and they have yet to give full support but believe the option should be explored. (Source: Reuters)

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