Morning Commentary

Dec corn up ¾ at $3.5125

Nov beans up 1 at $8.3425

The DOW is up

USD is stronger

Crude oil up $.21 at $68.80

Good morning,

Corn prices continue to anchor near the lows with the DEC18 contract orbiting around $3.50 per bushel. Bears are not only talking about the record USDA yield estimate, but are also talking about the potential for more corn acres in 2019. Early estimates seem to be ranging from +1 million to +5 million more corn acres next year on what’s thought to be a sizable reduction in soybean acres.

Soybean prices remain underwater and have not been able to get their head back above $8.50 in almost three-weeks. Not only is the flat price strangling us, but so is the widening basis, as commercials try to choke off the inflow of supply. Capacity restraints, record planted acres, trade tariffs, African Swine Flu, and now a record setting U.S. yield, have all collided to create a near perfect storm. Bears continue to point to the obvious, which is more than a doubling of the U.S. carryout from 400 million to now over +800 million, while at the same time adding +300 million in U.S. production on the recent jumps in the USDA yield forecast the past couple of months. Lets not forget, Brazil just harvested a record crop, with its yield record setting as well and up almost +15% compared to their 10-year average. As for African Swine Fever, there’s some global officials who are concerned about a possible pandemic as it has now spread into Belgium and parts of Western Europe.

From what we understand, a second round of tariff-related aid to U.S. farmers could be announced in December, as reported by Reuters and according to a white paper released by the U.S. Department of Agriculture on Thursday. USDA recently launched a disaster assistance discovery tool through its new website that walks producers through five questions to help them identify personalized results of which USDA disaster assistance programs can help them recover after a natural disaster. For complete details and eligibility requirements regarding USDA’s disaster assistance programs, contact a local USDA Service Center. More information about USDA disaster assistance, as well as other disaster resources, is available on the USDA Disaster Resource Center website.

USDA released a white paper to explaining how the calculated estimated damage from the trade disruptions. In the paper, USDA confirmed their approach is the same they often use in adjudicating trade dispute cases and gave an example of the recent U.S.-Country of Origin Labeling dispute case. They also confirmed that in order to determine the amount of assistance they divided estimated trade damage levels by 2017 crop year production in order to calculate a per unit rate. Interestingly, USDA added that a second round of aid could come in December and would account for other factors, such as new tariff levels, regional basis effects, or the market conditions that may have mitigated some of the trade damages.

China has banned the use of food waste as pig feed in provinces that have reported African Swine fever outbreaks as well as neighboring regions. Banning the use of kitchen waste for pig farmers would also hurt the small farmers, who often resort to scraps to cut costs, particularly when pig prices are low. Chinese officials are going to continue to chase down these problems with their smaller pig farms in order to try and get this issue under control. (Source: AP)

ADM, the Illinois-based commodities giant, a major ethanol producer, accounted for roughly 61% of the 9.5 million barrels sold at the Chicago hub between November and August. Previously, ADM had been a regular buyer: In September and October of last year, ADM bought 810,000 barrels, 32% of the 2.495 million total trades in Chicago during that stretch. ADM’s shift came amid an upheaval in the domestic ethanol market as U.S. demand flatlined and export markets, including China and Brazil were cut off due to the trade war. (Source: Reuters)

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