Cooler temps, but no frost threat Cooler-than-normal temps are expected across much of the Corn Belt this week, especially in northern areas. While a frost/freeze isn’t expected, delayed corn and soybeans need sunshine and warmth. The cooler temps won’t help push crop maturation. Dorian not expected to have a big impact on row crops Hurricane Dorian is expected to make landfall late Sept. 2/ early Sept. 3 between West Palm Beach and Vero Beach, Florida, as a Category 4 storm. Dorian is expected to turn north and impact areas from far eastern Georgia up through the Carolinas, but widespread significant impacts to corn, soybeans, cotton and other row crops in the Southeast are not currently anticipated. ‘Giant’ biofuels package this week President Donald Trump is expected this week to unveil a plan that would encourage the use of E15 and lift the amount of conventional renewable fuels that have to be used in mandates by 500 million gallons. Biodiesel is also expected to see a 250-million-gallon increase for the 2021 compliance year. Infrastructure-related aid probably will be part of the package. But for the package to be truly “giant,” it has to be more than the leaked plans. One biofuel indus- try proponent told us the administration should make major biofuels purchases for government and military fleets to help offset the more than 4 billion gallons of biofu- els that have been exempted during Trump’s presidency. Another ethanol plant shutters The Corn Plus ethanol plant of Winnebago, Minnesota, will close sometime this week. This is the 16th ethanol plant to close its doors since the Trump administration increased small refiner exemptions under the Renewable Fuel Standard. U.S. Q2 GDP revised down The U.S. economy grew an annualized 2% rate in the second quarter. That’s down from the initial reading of 2.1% and below 3.1% growth in the first quarter. Mild corrective gains in corn, beans — Corn and soybean futures found light support from corrective short-covering last week. But the upside was limited, as funds are comfortable with their fairly aggressive net-short stance. Weekly corn export sales were better, signaling there was good physical demand on the sharp price break, but demand from paper orders above the market is lacking. To get funds to actively buy, it’s likely going to take a late-season frost/ freeze scare. Without that, the upside will remain limited to relatively mild corrective buying. Wheat futures slumped last week, as traders expect rising global supplies to cap export interest for U.S. supplies. Cattle futures continued to chop around the recent lows as traders await strength in the cash market. Hog futures rebounded from contract lows posted Aug. 23. U.S., Japan reach trade deal The U.S. and Japan “agreed in principle” to a new trade deal that would open more of Japan’s market to U.S. ag goods. U.S. officials say the new deal will eventually pave the way for an additional $7 billion in ag exports to Japan. Leaders of the two countries hope to finalize the deal in September. The deal should be especially beneficial to meat exports, as it would reduce tariffs and allow the U.S. to compete on more equal footing with members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. Japan is already the top buyer of U.S. beef and second larg- est market for U.S. pork exports. The deal will also benefit U.S. wheat, dairy products and ethanol. Topsy-turvy U.S./China outlook Expect the unexpected to continue. That’s the best outlook we have on the lingering U.S./China trade war. Just when relations look the worst, China makes some constructive comments, while Trump is likely mulling answering in kind by postponing threatened tariffs. At least talks are slated. The situation remains highly fluid, but no short-term resolu- tion is expected. Check www.profarmer.com for updates. Trade war linked to cut in ag exports USDA cut its ag export forecast for fiscal year (FY) 2019 by $2.5 billion from May to $134.5 billion, “mainly due to reduc- tions in exports of corn, soybeans, and other oilseeds.” Ag exports are forecast to drop 6.2% from FY 2018 and would be the lowest since FY 2016. USDA kept its ag import forecast at a record $129.3 billion. That would put the U.S. ag trade sur- plus at just $5.2 billion, down $2.8 billion from May’s forecast and sharply lower than the $15.8 billion surplus last year. That would be the smallest U.S. ag trade surplus since FY 2006. Big changes in farm income forecast USDA’s updated net farm income forecasts cut expenses $25 billion in 2018 and 2019. Net farm income is now expected to rise $4 billion from 2018 to $88 billion, about $20 billion higher than its prior forecast and the highest since 2014. News this week... 2 — Areas most at risk of an early frost/freeze. 3 — China moves to increase meat supplies. 4 — Analysis and perspective on our data from Crop Tour. August 31, 2019 Vol. 47, No. 35 Go to ProFarmer.com
Transcript
Cooler temps, but no frost threatCooler-than-normal temps are expected across much of the Corn Belt this week, especially in northern areas. While a frost/freeze isn’t expected, delayed corn and soybeans need sunshine and warmth. The cooler temps won’t help push crop maturation.
Dorian not expected to have a big impact on row cropsHurricane Dorian is expected to make landfall late Sept. 2/early Sept. 3 between West Palm Beach and Vero Beach, Florida, as a Category 4 storm. Dorian is expected to turn north and impact areas from far eastern Georgia up through the Carolinas, but widespread significant impacts to corn, soybeans, cotton and other row crops in the Southeast are not currently anticipated.
‘Giant’ biofuels package this weekPresident Donald Trump is expected this week to unveil a plan that would encourage the use of E15 and lift the amount of conventional renewable fuels that have to be used in mandates by 500 million gallons. Biodiesel is also expected to see a 250-million-gallon increase for the 2021 compliance year. Infrastructure-related aid probably will be part of the package. But for the package to be truly “giant,” it has to be more than the leaked plans. One biofuel indus-try proponent told us the administration should make major biofuels purchases for government and military fleets to help offset the more than 4 billion gallons of biofu-els that have been exempted during Trump’s presidency.
Another ethanol plant shuttersThe Corn Plus ethanol plant of Winnebago, Minnesota,
will close sometime this week. This is the 16th ethanol plant to close its doors since the Trump administration increased small refiner exemptions under the Renewable Fuel Standard.
U.S. Q2 GDP revised down The U.S. economy grew an annualized 2% rate in the second quarter. That’s down from the initial reading of 2.1% and below 3.1% growth in the first quarter.
Mild corrective gains in corn, beans — Corn and soybean futures found light support from corrective short-covering last week. But the upside was limited, as funds are comfortable with their fairly aggressive net-short stance. Weekly corn export sales were better, signaling there was good physical demand on the sharp price break, but demand from paper orders above the market is lacking. To get funds to actively buy, it’s likely going to take a late-season frost/freeze scare. Without that, the upside will remain limited to relatively mild corrective buying. Wheat futures slumped last week, as traders expect rising global supplies to cap export interest for U.S. supplies. Cattle futures continued to chop around the recent lows as traders await strength in the cash market. Hog futures rebounded from contract lows posted Aug. 23.
U.S., Japan reach trade deal The U.S. and Japan “agreed in principle” to a new trade deal that would open more of Japan’s market to U.S. ag goods. U.S. officials say the new deal will eventually pave the way for an additional $7 billion in ag exports to Japan. Leaders of the two countries hope to finalize the deal in September.
The deal should be especially beneficial to meat exports, as it would reduce tariffs and allow the U.S. to compete on more equal footing with members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. Japan is already the top buyer of U.S. beef and second larg-est market for U.S. pork exports. The deal will also benefit U.S. wheat, dairy products and ethanol.
Topsy-turvy U.S./China outlookExpect the unexpected to continue. That’s the best outlook we have on the lingering U.S./China trade war. Just when relations look the worst, China makes some constructive comments, while Trump is likely mulling answering in kind by postponing threatened tariffs. At least talks are slated. The situation remains highly fluid, but no short-term resolu-tion is expected. Check www.profarmer.com for updates.
Trade war linked to cut in ag exports USDA cut its ag export forecast for fiscal year (FY) 2019 by $2.5 billion from May to $134.5 billion, “mainly due to reduc-tions in exports of corn, soybeans, and other oilseeds.” Ag exports are forecast to drop 6.2% from FY 2018 and would be the lowest since FY 2016. USDA kept its ag import forecast at a record $129.3 billion. That would put the U.S. ag trade sur-plus at just $5.2 billion, down $2.8 billion from May’s forecast and sharply lower than the $15.8 billion surplus last year. That would be the smallest U.S. ag trade surplus since FY 2006.
Big changes in farm income forecast USDA’s updated net farm income forecasts cut expenses $25 billion in 2018 and 2019. Net farm income is now expected to rise $4 billion from 2018 to $88 billion, about $20 billion higher than its prior forecast and the highest since 2014.
News this week...2 — Areas most at risk of an early frost/freeze.3 — China moves to increase meat supplies. 4 — Analysis and perspective on our data from Crop Tour.
August 31, 2019 Vol. 47, No. 35
Go to ProFarmer.com
August 31, 2019 / News page 2
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Canadian wheat, canola crop estimates smaller than expectedCanadian farmers will likely harvest a 31.3-million-metric-ton (MMT) all-wheat crop this fall, according to Statistics Canada (StatsCan). That would be down 2.9% from last year, driven by a 1.1% decline in harvested area and a 2.1% decline in yield. The lower wheat production is due to less winter wheat and durum wheat production. Spring wheat produc-tion is expected to increase from last year.
StatsCan estimates the Canadian canola crop at 18.5 MMT, down 9% from last year and the smallest crop in four years amid reduced acreage. Lower acreage is the result of ongoing trade issues that have limited access to Chinese export markets.
IGC ups global grain, corn crop pegsThe International Grains Council (IGC) raised its 2019-20 global total grain production forecast by 11 MMT from last month, due mostly to a bigger U.S. corn crop estimate. IGC now forecasts global grain production to increase 17 MMT from last year to 2.159 billion metric tons. However, total grain ending stocks are projected to fall 27 MMT from 2018-19 amid a 25-MMT increase in use.
IGC increased its U.S. corn crop forecast by 2.4% to 341.5 MMT (13.455 billion bu.), which is 446 million bu. less than USDA’s August estimate. The council raised its 2019-20 global corn production projection by 8 MMT from July, but the crop is still expected to fall 29 MMT from year-ago. It expects world corn ending stocks to drop 40 MMT from last year.
IGC raised its 2019-20 global wheat crop estimate by 1 MMT from last month and now it forecasts a 31-MMT year-over-year increase in production. But global wheat use is expected to rise, resulting in projected ending stocks increasing only 6 MMT from 2018-19.
Ukraine picking up Russia wheat slack Ukraine’s wheat production is forecast up 3.2 MMT (13%) this year to 27.8 MMT. Those extra supplies are already finding their way to export channels, as exporters take advantage of slowed Russian wheat shipments. While Russian wheat exports since the start of the 2019-20 market-ing year on July 1 are down 1.4% from last year, Ukraine’s shipments are up 55% at 4.1 MMT.
Ukraine’s ag ministry reportedly proposed raising its wheat exports to 19 MMT, including 11 MMT of milling wheat for 2019-20, up 3 MMT (18.8%) from last year.
Corn, bean crops need extra weeks We saw it on Crop Tour and USDA’s weekly crop progress data continues to confirm that large portions of the U.S. corn and soybean crops need extra weeks on the end of the growing season to reach maturity. As of Aug. 25, USDA said 39% of the corn crop (26.1 million acres) was not yet in dough stage and 73% (65.7 million acres) had not yet dent-ed. USDA’s data showed 6% (4.6 million acres) of soybeans were not yet blooming and 21% (16.1 million acres) were not setting pods. That’s a lot of acres that are at risk of an early or even normal end to the growing season.
Most at risk are the northern states, where the normal first freeze date is earliest. Dough stage for corn was only 47% in North Dakota, 56% in South Dakota, 74% in Minnesota, 48%
in Wisconsin and 45% in Michigan as of Aug. 25. Soybeans setting pods were 89% in North Dakota, 73% in South Dakota, 94% in Minnesota, 73% in Wisconsin and 65% in Michigan.
The map above shows the historical median date of the first fall freeze (32°F or lower). Though most agronomists believe it takes at least two hours of temps between 24°F and 28°F to kill crops, fields exposed to temperatures in the 30s, even if not sub-freezing, experience “shock” that slows development.
USDA updates FSA certified acreage USDA’s Office of the Chief Economist (OCE) released an update to FSA certified acreage Aug. 27, noting that the level of planted and failed acres as of Aug. 22 increased by 821,000 for corn and 783,000 for soybeans. NASS uses the failed acreage data as a “minimum measure of acres aban-doned” for determining harvested acres.
“NASS does not account for prevented planting [PP]acres in its forecasts of planted and harvested acres, yield or production,” as they have been removed from the production equation. As of Aug. 22, FSA data now shows there were around 19.8 million total PP acres, including 11.4 million for corn and 4.5 million for soybeans.
AverAge First FAll Freeze DAte
Courtesy of Midwest Regional Climate Center
By Aug. 10Aug. 11-20Aug. 21-31
Sept. 1-10Sept. 11-20Sept. 21-30
Oct. 1-10Oct. 11-20Oct. 21-31
Nov. 1-10Nov. 11-20After Nov. 21
August 31, 2019 / News page 3
Beef stocks build, pork stocks decline Beef stocks in frozen storage increased 49.5 million lbs. during July to 455.1 million lbs., according to USDA’s Cold Storage Report. That was far greater than the five-year average increase in beef stocks during the month. Beef stocks were still 29.1 million lbs. less than July 2018, but
12.4 million lbs. greater than the five-year aver-age for the month.
Pork stocks totaled 601.8 million lbs., down 17.7 million lbs. from June. The five-year average drawdown in pork stocks during July is only 1.6 million
pounds. But pork stocks were 49.8 million lbs. greater than last year and 27.9 million lbs. more than the five-year aver-age for the end of July.
Feedlots remain extremely current There were roughly 11.112 million head of cattle on feed as of Aug. 1, according to USDA’s monthly Cattle on Feed Report, near-steady with year-ago and just a bit lighter than
the average pre-report esti-mate implied. Placements in July fell 2.1% from year-ago levels, whereas traders expected a near-steady tally.
Marketings surged almost 7% versus year-ago levels, just a touch higher than anticipated.
The data confirms the tightness of feedlot supplies indi-cated by dressed weights and the wide Choice/Select beef price spread. Placements under year-ago were somewhat of a surprise given how well the cattle market had held together until early August.
U.S./Canada hog herd builds, cattle herd declines slightly The total U.S. and Canada hogs/pigs inventory was 89.47 million head on July 1, according to USDA, a 3% rise from last year. The bigger combined hog numbers are driven by rising U.S. hog supplies. Canada’s July 1 hog inventory totaled 13.95 million head, nearly unchanged from last year.
Combined U.S. and Canada cattle/calf inventories totaled 115.255 million head on July 1, down 0.1% from a year ago. Canada’s July 1 cattle inventory totaled 12.255 million head, a 1.3% decline from 2018, continuing the decade-plus decline in Canadian cattle numbers. The number of Canadian feeder cattle moving south into the U.S. market for finishing continues to grow.
USDA Average actual estimate (% of year-ago)
On Feed Aug. 1 1 00.2 100.8Placed in July 97.9 100.1Mkted in July 106.9 106.4
Cattle on Feed Report
Producer Crop Comments...Please send your crop comments to [email protected].
Polk Co., (central) Iowa:“While the corn looks good from the road, it is very variable in the field. Average ear size consists of 14 to 16 rows, average length of 31 kernel count and 7 inch average length. Kernels are small, maybe 1/2 to 2/3 normal size at denting time. All ears are denting. I will be very happy with 175 bu. per acre, but at what mois-ture? My beans are the tallest in this area and are thigh-high. Most fields knee-high. Plants appear to have plenty of pods but the pods are flat with no beans appearing yet. Yields will all be about timely rains with warm sunshine for the next four weeks at a minimum. A September frost would be devastating.”
Dawson Co., (central) Nebraska:“Corn is still exceptionally wet. The early planted fields are starting to dent. Later-planted fields are in early milk stage. Most of my fields stood back up pretty well from the recent wind.”
Brown Co., (northeast) Kansas:“Corn is beat up from recent hail and is just starting to dent. Soybeans have significant losses from the hail and aren’t bouncing back.”
Shawnee Co., (east-central) Kansas:“We have black layer. Countdown to harvest begins.”
Daviess Co., (northwest) Kentucky:“Yields look to be pretty good. Corn is still putting on weight. Kernel depth looks very good, as well.”
West-central Missouri:“Hearing some reports of 260-bu.-per-acre dryland corn yields in southern Tennessee. Very good yields in Arkansas, as well.”
Door Co., (northeast) Wisconsin:“Many corn fields showing signs of nitrogen depletion due to excessive rainfall. Hard to believe, but corn and soybeans now need rain badly. Will need approximate-ly 45 days for maturity.”
Meat stocks (Mil. lbs.)
China to buy more pork, sell reserves China’s ag ministry plans to boost pork imports and release frozen pork, beef and mutton from state reserves to increase meat supplies. The outbreak of African swine fever that has swept across the country has shrunk China’s hog herd by nearly one-third, spurring concerns about pork supplies and causing retail pork prices to soar. Due to the severe shortage of pork, some regions have begun to restrict purchases of pork and are issuing ID cards to buy no more than 2 kg (4.4 lbs.) per per-son. It’s not clear how often the “meat cards” can be obtained.
Even with hefty tariffs in place, U.S. pork exports to China this year stand at 171,424 metric tons (MT) through Aug. 22, with another 95,554 MT of unshipped sales on the books. Shipments are eight times greater than last year and out-standing sales are 45 times greater than the five-year average.
August 31, 2019 / News page 4
We’ve had a week to let the dust settle and reflect on what we found on the Pro Farmer Midwest Crop
Tour. More importantly, we’ve had a week to analyze data from the nearly 3,000 corn and soybean samples scouts helped us gather Aug. 19-22.
It’s an open-minded, fact-finding missionThe goal of Crop Tour is to get a strong, objective view of
corn yield potential from one big corn field across seven Midwest states during the third full week of August. Still, it’s nearly impossible to block out all of the data we’ve gath-ered about the crop ahead of Tour. In fact, some of that data helps shape our opinion of crops outside the Tour areas.
Heading into this year’s Tour, we knew we would find an immature corn crop. The record-slow planting pace pushed back crop development. What we found was a crop that was at least a couple weeks behind, with the least mature fields needing around 45 days until they reach full maturity.
Data points to a sizably lower corn yield vs. last yearTour data showed total ear counts on all 1,474 corn sam-
ples collected down 4.7% from last year at 94.39 in two adjacent 30-foot plots. Lower ear counts are the result of many acres of corn being planted into less-than-ideal con-ditions once farmers could finally get into fields. We found many fields to have skips in rows and plants that didn’t produce an ear — the product of the very wet spring and record planting delays. Reduced ear counts are the prima-ry driver of this year’s lower yield potential.
Average grain length was also lower than last year at 6.71 inches, down 2.0%. Since we sampled a lot of immature corn, it’s difficult to know how much of the grain length we measured will be maintained through harvest.
Kernel rows around totaled 16.08, down 0.3% from 2018.Average row width measured on Tour was 29.79 inches,
up 0.2% from last year. All four of the measurements we calculate on Crop Tour
point to a smaller corn crop this year.
The average of all samples is our best numberAs we’ve detailed in the past, we have two corn yield calcu-
lations that use the same raw data (ear counts, grain inches, kernel rows and row spacing). We report the results of the standard calculation during Crop Tour and in our final analysis because, over time, it has proven to be more accurate.
The second calculation attempts to adjust kernel size based
on the number of kernel rows around the ear. (The higher the number of kernel rows, the smaller the kernel size.)
The average of all samples collected using the “stan-dard” calculation was 171.22 bu. per acre, 1.71 bu. above USDA’s August estimate. The average from the “adjusted” yield calculation came in at 155.44 bu. per acre. The simple average of those two averages is 163.33 bu. per acre.
The Pro Farmer corn crop estimate at 163.3 bu. per acre is the midpoint of those two calculations. With a +/- 1% range, the Pro Farmer yield forecast is 161.7 bu. to 164.9 bu. per acre.
We went with the midpoint of the two averages because this year’s crop is much less mature than normal, mean-ing we measured more potential than actual yield. Our yield formula works best when the crop is more mature. We readily admit that. In years when crop maturity is slow, the “adjusted” yield formula works better than the “standard” yield formula. The fact we didn’t lean down from the midpoint of the two acknowledges the amount of potential that’s out there if the crop is allowed to finish, especially in South Dakota, Ohio and areas of Indiana and Illinois, where crop maturity is furthest behind.
Breaking down Tour corn samples by yieldOf the 1,474 corn samples we pulled, 773 (52.4%) were
above 171.22 bu. per acre (the average of the standard yield calculation), while 701 (47.6%) were below that level.
Bottom line: We measured a lot of yield potential on this year’s Crop Tour. How much of that potential will be realized into the end of the growing season is still largely unknown and will depend on fall weather. An early end to the growing season would be devastating for a good portion of the Midwest corn crop. Even a nor-mal end to the growing season would spell trouble for a sizable amount of the crop. This year’s crop needs extra weeks to maximize the yield potential we measured.
Soybean crop needs a lot of time, tooWe don’t calculate a soybean yield with Crop Tour
samples. Instead, we count pods in a 3-foot square. Reason: The number of pods it takes to make a bushel is different in each state. We found a very lightly pod-ded soybean crop across the seven states we sampled. Simply, the “yield factory” isn’t there this year. There aren’t enough pods to produce a trendline yield — even if some of the blooms we saw on Crop Tour turn into viable pods and fill with beans.
Putting a wrap on Crop Tour — Analysis and perspectiveby Editor Brian Grete, Sr. Market Analyst Jeff Wilson and Editor Emeritus Chip Flory
News alert and analysis exclusively for Members of Professional Farmers of America® 402 1/2 Main St. Cedar Falls, Iowa 50613-9985General Manager Joel Jaeger • Editor Brian Grete • Editor Emeritus Chip Flory • Sr. Market Analyst Jeff Wilson • Chief Economist Bill Nelson • Washington Policy Analyst Jim Wiesemeyer
Digital Managing Editor Meghan Vick • Inputs Monitor Editor Davis Michaelsen • Sr. Economist Dan Vaught • Sr. Economist Rob Hatchett • Sr. Economist Alan BarrettSubscription Services: 1-800-772-0023 • Editorial: 1-888-698-0487
Corn Game Plan: Corn-for-feed needs are now covered through September. Hold long hedges in December futures at $4.58 to cover all needs for October.
Meal Game Plan: On Aug. 28, we advised buying another two weeks of meal in the cash market to cover first half October needs. Sep-tember needs are already purchased in the cash market. Our target for extending cover-age is $285 in September soymeal futures.
Corn III’19 100% IV’19 33% I’20 0% II’20 0%
Meal III’19 100% IV’19 17% I’20 0% II’20 0%
DAILY DECEMBER MEAL
Analysis page 1
$317.30
$304.10
DAILY OCTOBER LEAN HOGS
Position Monitor
HOGS - Fundamental AnalysisSlaughter remains record large, pushing fresh pork lower. The cutout fell to $72.01 at midweek, down from $90.44 on Aug. 8 amid sharp declines in hams and bellies. Pork often bottoms around Labor Day, and this year should be no exception amid signs of renewed export demand and strong U.S. employment. Export sales jumped 85% above the prior four-week average on active sales to Japan and Mexico and a small sale to China. Beijing announced it is releasing pork and other meat stocks from state reserves to fill in production lost to African swine fever and cool inflation. That may be the signal China soon may be a larger buyer U.S. pork.
Game Plan: Stay patient for re-newed strength before hedging. Weaker wholesale prices should en-able the market to absorb seasonally increasing and record supplies.
CME LEAN HOG INDEX ($/CWT.)
CME FEEDER STEER INDEX ($/CWT)Position Monitor
CATTLE - Fundamental AnalysisFed cattle are slowly building a base of support to stage a rally into the fourth and first quarters. Beef demand remains very good as consumer spending has not been adversely impacted by the U.S./China trade war. Packer margins continue to hold near $400 per head and some of that money may begin to support stronger cash bids, especially with USDA now investigating the wide spread between beef and cattle prices following the fire at the Tyson plant in Kansas. The market needs a signed deal with Japan to boost export business, which has been light recently. Fund buying could surge as cash prices recover.
Game Plan: Prices are fi-nally starting to recover from the Tyson fire over-reaction. Fed cattle producers should wait for a strong recovery to consider hedges.
Initial resistance is now marked by the Aug. 13 high at $100.925. The
May 31 low of $103.175 is key
resistance.
The Aug. 14 low at $98.40 remains initial support. The continuation chart puts additional support around $95.75 (not shown).
The alignment of the 40-day moving average (green line) near $69.85
and the Feb. 13 high at $70.15 is initial resistance.
The Aug. 6 low at $64.475 is initial support. Key support remains at $61.50.
$100.925
$105.50
$73.80
$64.475
$70.15
$98.40
$103.175
DAILY OCTOBER LIVE CATTLE
$61.50
ANALYSIS August 31, 2019
Lean Hogs III’19 0% IV’19 0% I’20 0% II’20 0%
Initial resistance remains at the May 1 low of $304.10.
Last week’s action again confirmed the May 9 low of $295.70 as strong support.
$295.70
$309.00
August 31, 2019 / Analysis page 2
DAILY DECEMBER SRW WHEAT
WHEAT - Fundamental AnalysisSRW - Upward crop and export revisions from several nations pressured wheat prices. Weekly export sales were near the top end of trade estimates and total commitments for 2019-20 are up 23% from a year ago. Still, second-half sales will be difficult, with world supplies rising to a record.
Position Monitor
Game Plan: We plan to push cash sales on old-crop supplies to 50% complete by the end of November. Prices usually bottom in late Au-gust and early September. Better demand will be needed to sustain rallies.
Last week’s action confirmed initial resistance at the March 1 low of $4.80 1/4. Additional resistance
is layered between $4.91 and $5.09 3/4.
$4.45 1/4
$4.59 1/2A drop below initial support at the March 7 low of $4.59 1/2 will have bears targeting stronger support at the March 11 low of $4.59 1/2.
CORN - Fundamental AnalysisFutures clawed back a portion of their August losses on month-end positioning and crop maturation concerns. There are no serious freeze forecasts into mid-September but some of the cool nights recently may have sent plants the signal to hurry up and only fill viable kernels. The next USDA crop forecast is Sept. 12. Support emerged from better weekly ethanol production and stocks data, and from President Donald Trump’s promise of a “giant package” of ethanol aid and promotion. U.S. basis remains seasonally strong; South America basis is the weakest for this period since 2012. That has slowed exports, but it may also signal commercials expect a smaller U.S. crop.
Initial resistance at the top of the Aug. 13 chart gap at the psychogically important $4.00 level is backed by tougher resistance at $4.06.
$3.82
The Aug. 15 low at $3.82 is initial support. Stronger support is at $3.78 1/2.
$4.14 3/4
$4.00$4.06
$3.78 1/2
DAILY MARCH CORN
DAILY DECEMBER CORNPosition Monitor
Game Plan: On Aug. 30, we advised com-pleting the final 10% of old-crop sales. The marketing year came to an end and we won’t hold supplies past that deadline. But we still prefer taking a more patient approach to new-crop sales at this juncture. The crop is highly variable and lacks maturity. We con-tinue to advise using strong rallies to get cur-rent on new-crop sales.
The Nov. 27 low at $3.91 1/4 remains initial resistance. Additional resistance at the Dec. 14 high of $4.05 1/2 is closely backed by the 40-day moving average (green line) near $4.07 1/2.
Initial support at the Aug. 14 low of $3.70 is reinforced by the May 13 contract low at $3.63 3/4.
DAILY DECEMBER HRS WHEATDAILY DECEMBER HRW WHEATThe May 10 low at $4.17 1/2 represents initial resistance.
Initial resistance is at the Aug. 12 low at $5.19 1/4.
$4.46 1/2$5.30 1/4
$5.19 1/4$3.97 1/2
The $5.00 level (not shown) likely marks initial support
DAILY MARCH SOYBEANS
$9.28 1/2
$9.40 1/2
$4.17 1/2Initial support rests at the Aug. 14 low of $3.97 1/2.
$8.91 1/2
$9.07 1/2
$4.30
$5.55 1/4
$8.66 1/2
HRS ‑ Futures set new lows despite a smaller Canadian spring wheat crop forecast underscoring burdensome global supply. U.S. harvesting is picking up momentum. Spring wheat basis remains very weak and commercials are increasing discounts for any quality damage, with global stockpiles forecast at record levels. A bottom is near but a rally will be difficult.
HRW ‑ Traditional U.S. buyers of wheat have been active, but with world trade sluggish and most world prices making new lows last week, the outlook for sustained exports is limited. Heavy deliveries against the expiring September contract reflect limited demand. Rains forecast the next several weeks will aid early winter wheat seeding in the Plains.
Tough initial resistance at the April 24 low of $9.07 1/2 is being reinforced
by the 40-day moving average (green line) near $9.11 1/2.
Initial support is the April 30 low at $8.91 1/2. Key support is at $8.66 1/2.
SOYBEANS ‑ Fundamental AnalysisSoybeans quietly rebounded on fund short‑covering tied to slow crop maturity rates and cautious hopes for a resumption of a more harmonious relationship for U.S./China trade talk dialogue. The market is watching temperatures forecasts closely, waiting for USDA’s first in-field measurements of this year’s crop that will be included in the Sept. 12 production update. Brazilian bean basis has been firming the last two weeks and suggests supplies are getting tighter for deliveries late this year and into early 2020. Right now, U.S. export sales for the 2019-20 season are 58% behind last year’s pace. A strong U.S. dollar will continue to handcuff U.S. exports.
The May 2 low at $8.63 1/4 reemerged as initial support last week. Stronger support persists at the May 17 low of $8.46.
$8.80 1/2$8.88 3/4
$8.63 1/4
$8.46
$9.10 3/4
DAILY NOVEMBER SOYBEANSPosition Monitor ’18 crop ’19 crop
Game Plan: On Aug. 30, we advised complet‑ing the final 15% of old-crop sales. The mar‑keting year came to an end and Pro Farmer doesn’t hold supplies past that deadline. But we still prefer taking a more patient approach to new‑crop sales at this juncture. The crop is highly variable and lacks maturity. We still advise using strong rallies to get current on new‑crop sales.
Initial resistance at the April 29 low of $8.80 1/2 is backed by the alignment of the 40-day
moving average (green line) near $8.87 and the April 24 low at $8.88 3/4.
USDA Corn Grind for EthanolU.S. ethanol production slips.
TUE 9/32:00 p.m. CT
3
USDA Soy Crush ReportBig jump last month on demand.
2
U.S. Labor Day HolidayMarkets closed.
MON 9/21
WATCH LIST
TUE 9/32:00 p.m. CT
Cool temperatures are pushing plants to fill kernels and abort any that won’t make it to maturity. But it may take a freeze event before early October to pro-vide a new catalyst shifting funds to major buyers again. The continued firmness of cash basis is a sign that commercials remain concerned about 2019 crop size.
The other two major CFTC moves are in cattle and cotton. Funds are now hold-ing the smallest net-long cattle position in more than 5 1/2 years and are two weeks removed from their largest net-short cot-ton position on record. There is buying power available for both markets with the right catalysts. Better export demand is probably key for both markets. Adverse weather also could trigger a cotton rally.
Funds and large speculators have re-turned to holding a net-short position in corn after swinging from a record short in April of more than 344,000 contracts to a net-long position of nearly 179,000 contracts at the end of June.
As of Aug. 20, funds were net-short 82,266 futures and options compared with a net-long of 21,527 a week earlier. That posi-tion is likely near 100,000 contracts now.
Funds have not done well this year after getting caught short at the bottom and long at the top of the corn market.
Commercials have cut their net-short position in half as prices fell during the past six weeks, suggesting no weather premium remains at current prices given the immaturity of this year’s crop.
By Sr. Market Analyst Jeff WilsonFROM THE BULLPEN
U.S. Stocks: Equity market may be poised to rebound after thrashing about the past month amid heightened trade war rheto-ric and spreading negative global interest rates and inverted yield curves.
There’s now a new type of “inversion” that might be a good sign for equity bulls. For the first time since the financial crisis, stocks are earning more for investors than key long-term Treasury notes.
The U.S. 30-year yield dropped to a
record low and below the S&P 500′s divi-dend yield last week. It was the first inver-sion since March 2009 when the world was deep into a recession, according to data from Bespoke Investment Group.
If you can get an annual dividend yield from a company that’s going to pay you more than the 30-year Treasury yield, and the company has a long-term history of raising its dividend, it’s a bet-ter alternative than a 2% Treasury bond.
GENERAL OUTLOOK WEEKLY S&P 500 STOCK INDEX
DAILY DECEMBER COTTON
Game Plan: We will wait on an extend-ed price recovery to boost new-crop sales. You should have sold all your 2018-crop by this point.
Position Monitor AVERAGE COTTON BASIS (OCTOBER)
COTTON - Fundamental AnalysisFutures rebounded from new lows on declining crop conditions and speculation farmers will be tight holders of cotton at cur-rent values. Loan-rate economics are in play. Hurricane Dorian may spread rain into the Southeast. Gains are limited by sluggish exports and China trade talk concerns.
COTTON EXPORT BOOKINGS (’000 BALES)
The 40-day moving average (green
line) places initial resistance at
61.30¢.
Initial support extends from the Aug. 5 low at 57.26¢ to the Aug. 26 low of 56.59¢.
63.07¢
57.26¢
64.70¢
61.66¢
Initial resistance will likely emerge at the September 2018 high of 2,940.91.
