News Source: SETZ

Closing Comments; Friday, September 20th, 2019

Futures finished the week under pressure, with improved weather conditions and building doubt over a US/China trade resolution the leading causes of the set-back. Weather is non-threatening for the US which has limited the amount of risk premium needed in futures. A forecasted improvement to South American weather added market pressure, especially to soybeans. News that Russia has contracted African Swine Fever weighed on the markets as well.

Soybeans dropped today following news that President Trump is looking for a full trade resolution with China, not a partial deal. President Trump further stated that he does not need a trade war resolution prior to the 2020 election. News that the Chinese delegation cut their US visit short today added to the negative tone is soybeans. Delegates from China were set to visit US farms in Nebraska and Montana next week, but as of now, the visit to Montana has been canceled.

We are already starting to see projections released for next year’s acres in the United States. Thoughts are we will see plantings of 95 million on corn and 85 million on soybeans. There are two very different ways these projections are being viewed. One is that we will need plantings this high to make up for losses this year. Another is that unless we see a build in demand, acres this high will cause a significant build in corn and soybean reserves, and pressure values.

The real question is what these acreage sizes will have on corn and soybean reserves. If all other factors remain constant from this year, corn acres of 95 million would lead to a potential 2020/21 carryout of 3.4 billion bu. While this seems like a stretch, it is quite possible in today’s market environment. The same scenario in soybeans would point to a more tolerable carryout of 740 million bu.

While weekly export sales totals were impressive this week, they failed to get much of a reaction in the market. According to data from MidCo Commodities, cumulative US corn sales for the marketing year stand at 341 million bu. This is 16.6% of yearly projections. Historically we have sold 25.1% of our projected corn sales by this time. Cumulative soybean sales now stand at 411 million bu, which is 16.4% of out expected total. The five-year average on soybean sales for this time is 24.2%.

When it comes to US corn sales, Mexico has turned into our largest customer. Mexico booked 79% of the corn the US sold last week, and yearly sales to Mexico are 55% of total commitments. Trade is closely monitoring Mexico’s buying interest to see if it changes ahead of the proposed USMCA agreement.

Biofuel comments from EPA administrator Andrew Wheeler were concerning for the ethanol industry. Administrator Wheeler has stated that blending waivers have not impacted ethanol demand. Wheeler further states that ethanol demand has been on an uptick recently. This is contrary to what has been seen in recent weekly reports and data from others in the renewable fuel industry.

Trade is starting to receive early US yield data, but so far, has failed to react. This is not uncommon as early yield reports tend to be highly suspect, and this year is no different. Trade is also expecting to see high variability in US yields this year, which is what we are already seeing. One thing that is consistent is reports of “better than expected” yields in many regions. Trade will focus more on yields when harvest moves into the Corn Belt.

While not many traders expected one, the lack of a trade resolution with China this week was negative for markets. This was not just for grains and soybeans, but for livestock as well. There were hopes that China would give an indication of elevated meat demand from the US but this did not happen. The US is starting to see beef and pork supplies grow at a faster rate than demand which is weighing on futures. The lack any export sales to China this week was also negative for livestock futures today, especially hogs.

This commentary is the sole opinion of Karl Setzer, Senior Commodity Risk Analyst for AgriVisor, LLC. This is intended for informational purposes only and not to be used for specific trading recommendations. The information used to generate this commentary is gathered from a variety of sources believed to be accurate. If you have any questions or would like additional market information, feel free to send an e-mail to ksetzer@agrivisor.com. You may also follow Karl on twitter; @ksetzergrains

Weekly Market Review; Friday, September 20th, 2019

Trade Tensions with China Continue

Soybeans dropped this week following news that President Trump is looking for a full trade resolution with China, not a partial deal. President Trump further stated that he does not need a trade war resolution prior to the 2020 election. News that the Chinese delegation cut their US visit short added to the negative tone is soybeans. Delegates from China were set to visit US farms in Nebraska and Montana next week, but as of now, the visit to Montana has been canceled.

The real winner in a trade resolution with China may be the pork industry. China has proven several times in recent weeks that it can source protein products from several suppliers in the global market. This is not the case with pork, as the US is one of the only suppliers with adequate reserves for export. If China’s pork supplies are dropping as fast as thought, the country may wish to make purchases ahead of its fall and winter holidays rather than cut into government stocks.

Chinese corn reserves are starting to gain market attention. Chinese officials have announced they will not be expanding ethanol manufacturing this year in part from low corn reserves. At the end of the 2017 market year China had a reported 8 billion bu of corn in reserves. Since then, this has now shrunk to roughly 2.2 billion bu. While this is enough corn to satisfy current needs, it will limit any expansion to corn processing.

More concerns are being voiced over the state of the rural US economy. Many farmers did not get 100% of their acres planted across the Corn Belt this year which is greatly impacting their cash flows. Some of these farmers may not see revenue for another year. Even with government payments, this does not cover the ongoing expenses that continue to roll in. Some producers are considering the planting of alternative crops, mainly winter wheat, to try to generate incomes sooner than normal next year because of this.

These fears are being confirmed by farm debt figures. According to USDA economists, US farm debt with hit $415.7 billion this year. This is the highest level since 1982. The high figure is a result of real estate debt outpacing asset growth and compounds concerns over low commodity values. Net farm income for the year is expected to increase from earlier estimates though as farmers start to receive Market Facilitation Payments.

Farmer selling across the United States has lightened up considerably in the recent weeks. Many farmers claim to have all the old crop inventory of both corn and soybeans marketed that they currently wish to. This is even in the regions where crops look good as producers feel if they hold on they will be rewarded once harvest begins, as they do not feel yields will be as high as currently expected. While this has caused basis values to firm, a reduction to demand has limited their appreciation.

While the US has had good new crop export numbers in recent weeks, trade is questioning how long they will last. China has made it quite clear they wish to source as many soybeans as possible from Brazil for the next marketing year. China reportedly has 50% of needs for October already covered. Given the decline in Chinese soybean imports on a whole, this may leave little business for the United States. Instead the US may be used to fill holes in Brazilian sales and need to find more non-traditional buyers to cover projected demand.

Export demand on a whole is a factor that continues to weigh on corn and soybean futures. To date US corn sales currently total 283 million bu for the 2019/20 marketing year. This compares to 597 million bu being sold a year ago, and even that pace was concerning at the time. Soybean sales currently total 349 million bu, also behind the 623 million bu of sales from last year. Wheat bookings are more positive as sales are 83 million bu ahead of last year at 441 million bu.

The Brazilian government has announced that soybean plantings in the country will expand 1.1% this year. This is the slowest growth rate to soybean production in Brazil over the past 13 years. Brazil will still seed an expected 90.7 million acres of soybeans, and cold even produce a larger crop than in recent years. Analysts in Brazil still expect to see a 7 million metric tons larger soybean crop than this year.

Argentine officials have also updated their acreage estimates ahead of the upcoming planting season. It is believed that farmers in Argentine will shift plantings towards soybeans this year rather than corn. This is mainly from an economical stance, as the cost of production for soybeans is just 30% of that for corn. The instability of Argentina’s government is also a factor in the rise in soybean production as the crop carries a higher value in the global market.

This commentary is the sole opinion of Karl Setzer, Senior Commodity Risk Analyst for AgriVisor, LLC. This is intended for informational purposes only and not to be used for specific trading recommendations. The information used to generate this commentary is gathered from a variety of sources believed to be accurate. If you have any questions or would like additional market information, feel free to send an e-mail to ksetzer@agrivisor.com. You may also follow Karl on twitter; @ksetzergrains

Morning Comments; Friday, September 20th, 2019

Corn, soybeans, and wheat consolidated overnight as little interest has been shown in establishing new positions in the market. There is a void of fresh fundamental news for trade to work with that is not already factored into futures which is limiting market movement. These include export interest, global weather, and trade developments with foreign buyers, including China. The market needs a fresh round of news to alter current positions. Two things that will closely be watched today are the talks between the US and China that are taking place in Washington and developments regarding President Trump’s biofuel package that has come under considerable opposition. We will continue to see interest placed on global weather as well, especially for South America to see if forecasted rains start to develop for Brazil.

Highlights

* Favorable weather to finish September

* Ethanol plants continue to idle

* US/China close to temporary trade deal

* Dry weather reported around the globe

* Early US yields highly variable

* Hearing “better than expected” in many areas

* Concerns over details of USMCA trade deal

Corn

* Ethanol production uncertainty growing

* Margins back to negative, more plants idle

* Brazil corn production growing

* High weekly exports at 57.6 mbu

* Data shows 230 mbu of US corn at risk of early frost

Soybeans

* Chinese buying over for now

* US/China trade meeting in Washington

* Harvest to start, bring hedge pressure

* High weekly export sales of 63.5 mbu

* US sales at 16.4% of projections, normal is 24.2%

Wheat

* Australia losses from drought rising

* Australia now has frost threat on wheat

* Production in other areas off-set Australian losses

* Dry weather slows Ukraine planting

* EU raises export forecast

Livestock

* Cattle on feed after the close

* Sep 1st on feed estimated 99% of year ago

* Aug placements 93.7%, marketings 98.3%

* China releases more meat from reserves

* China clears Argentina for more beef trade

This commentary is the sole opinion of Karl Setzer, Senior Commodity Risk Analyst for AgriVisor, LLC. This is intended for informational purposes only and not to be used for specific trading recommendations. The information used to generate this commentary is gathered from a variety of sources believed to be accurate. If you have any questions or would like additional market information, feel free to send an e-mail to ksetzer@agrivisor.com. You may also follow Karl on twitter; @ksetzergrains

Closing Comments; Thursday, September 19th, 2019

Trade was on both sides of unchanged today, with soybeans stepping up as the market leader. Soybeans took their support from the beginning of trade talks with China and hopes this will lead to more trade between the two countries. Solid export numbers also supported soybean futures, and benefitted corn as well. Wheat was the lager today as global competition for the US is not expected to subside any time soon. All commodities were held in check by favorable US weather forecasts for the next two weeks.

Export sales for the week ending September 12th were better than expected for both corn and soybeans. For the week the United States sold 57.6 million bu of corn and 63.5 million bu of soybeans. These were also well above the volume needed per week to reach yearly projected totals. Their support was limited though, as cumulative sales are still well behind a year ago. The sales were mostly figured into the market already as well. Wheat booking were on the low end of estimates last week with just 10.53 million bu.

Although early, we are starting to receive scattered yield estimates from across the United States. These are highly variable which does not come as a surprise. In several cases early yields are being reported as “better than expected” but below a year ago. The real question is crop quality, mainly test weight, which is just as variable as yield.

The United States and China met in Washington today for much anticipated trade discussions. China has booked several bushels of US soybeans recently which trade is taking as a signal of a “good will” measure ahead of this. Significant results are not expected to come from this meeting though, as it comes off as more of an opening for more intense talks that are scheduled for October. Officials from both sides are laying out the groundwork for that meeting, with several topics to be covered.

Weather was again a factor in today’s trade, both domestically and globally. Temperatures across much of the US are expected to remain above normal for the next two weeks giving crops more time to fully mature. Dry conditions remain in Brazil, but updated models indicate rain systems will start forming in the next week to ten days. There is also more talk surrounding weather in Ukraine and Russia as dry conditions are limiting early wheat planting in those regions. At the same time, other regions such as the EU have upped crop forecasts due to more favorable weather conditions.

Even with less than favorable weather conditions we have seen elevated production estimates on the Brazilian corn crop. A group of Brazilian analysts are now projecting a Brazilian corn crop of 102.3 million metric tons this coming year. This is partially from yield, but also from a 3.4% projected increase to corn plantings. Current weather is not concerning to these analysts as 73% of Brazil’s corn comes from their Safrinha crop, which is their second corn crop.

President Trump held a meeting with several US Senators today regarding his biofuel policy. The major concern with these Senators is the waivers that have been granted to US refiners in recent months. These have lowered biofuel demand and caused many biofuel plants to close, especially ethanol plants. The goal of these Senators is to scale back the waivers, which is being met with opposition by the oil industry.

Argentina and China are working on details to expand beef trade between the two countries. China has announced they will allow more Argentine beef to be imported as they try to cover losses from African Swine Fever. Argentine has already exported twice as much beef to China as last year, and it is likely this will grow even more. China has also seen an increase in poultry demand following the ASF outbreak. This is concerning to the US beef industry as there had been hopes more meat would originate from the United States.

This commentary is the sole opinion of Karl Setzer, Senior Commodity Risk Analyst for AgriVisor, LLC. This is intended for informational purposes only and not to be used for specific trading recommendations. The information used to generate this commentary is gathered from a variety of sources believed to be accurate. If you have any questions or would like additional market information, feel free to send an e-mail to ksetzer@agrivisor.com. You may also follow Karl on twitter; @ksetzergrains

Morning Comments; Thursday, September 19th, 2019

Yesterday’s mixed closes carried over into the night session and we are still on both sides of unchanged this morning. This is mostly for corn and soybeans as wheat futures have stabilized. All losses have been trimmed, giving us the indication funds are not willing to continue selling at these values. Uncertain global weather is preventing losses at this point, as is a rebound in the outside market. This is especially the case on corn as that commodity tends to mirror crude oil movement. Thoughts we will see high weekly export sales numbers today are benefitting futures as well. Uncertainty over future demand, both for export and domestically are restricting any advancement. Sparse fresh news and questions over trade relationships in the global market are also limiting factors for trade.

Highlights

* US temps to remain above average

* Fed lowers interest rate ¼ point

* Little down time for Saudi oil

* US asks for tighter sanctions on Iran

* US/China meet on trade deals

* Bio fuel credits up 30% in past week

* ASF continues to spread in Asia

Corn

* Test weights on new crop corn mixed

* Ethanol production drops, stocks build

* US ethanol production -4.5% from year ago

* Brazil predicts 102.3 mmt crop

* Brazil now sees 3.4% expansion to plantings

Soybeans

* Demand concerns build

* Chinese buying streak ends

* Rains forecast for Brazil

* Early US harvest reported, no yield data

* Asian feed demand to drop

Wheat

* Quality concerns on remaining spring crop to harvest

* Global demand up for milling wheat

* Ukraine govt asked to raise export quota

* Russia undercuts global market with offers

* EU predicting larger exports this year

Livestock

* Another case of ASF in South Korea

* Thailand culling hogs, no ASF confirmation

* Lower on-feed number expected tomorrow

* Lower placements and marketings also

* Chinese consumers shift to poultry

This commentary is the sole opinion of Karl Setzer, Senior Commodity Risk Analyst for AgriVisor, LLC. This is intended for informational purposes only and not to be used for specific trading recommendations. The information used to generate this commentary is gathered from a variety of sources believed to be accurate. If you have any questions or would like additional market information, feel free to send an e-mail to ksetzer@agrivisor.com. You may also follow Karl on twitter; @ksetzergrains

Closing Comments; Wednesday, September 18th, 2019

Trade was mixed for much of today’s session with soybeans weaker, wheat higher, and corn on both sides of unchanged. Wheat took its support from elevated demand and doubt over winter crop plantings. Soybeans were pressured for much of the day from doubts over long-term Chinese demand and a weakening technical picture. Benign weather forecasts for the US and elevated rains chances for Brazil added to today’s negative tone.

Trade has failed to react to the Chinese soybean purchases we have had over the past week. While these seem positive, there remain questions over China’s long-term buying interest. Not only is demand dropping in China from the spread of African Swine Fever, but China already has a large volume of purchases on the books from South America. Many traders are writing off the recent bookings as a “good faith” move ahead of upcoming trade meetings.

We are starting to see trade place more interest on how long this fall’s harvest could take. This is more on soybeans, as many of the US winter wheat acres are planted after soybeans are harvested. Any delay to soybean harvest could cause a delay in wheat planting, an di turn, reduce wheat acres in some areas. At the same time, we are likely to see more winter wheat planted in regions where fields were unplanted this year, mainly in the Eastern Corn Belt.

One of the numbers that trade continues to question from last week’s production update is the ear weight on corn. This was very high, even with lower test weights coming in from early harvested fields. This already has some analysts reducing their production forecasts ahead of the October report. The question remains if we can reduce corn production enough to offset any further declines to demand.

The same question is starting to surface in the soy complex. Pod counts in soybeans were higher than average in the September WASDE report. History shows that this number tends to decrease as harvest progresses, which in turn will lower our overall production. Given the resurfacing of Chinese demand, there are thoughts this could reduce our future carryout estimates.

Ethanol manufacturing for the week ending September 13th was released today with unfriendly numbers. Ethanol production for the week was down 20,000 barrels per day for a 1-million-barrel average. Even with this decline ethanol stocks grew by a large 739,000 barrels. US ethanol reserves now stand at 23.24 million barrels compared to 22.8 million barrels a year ago.

Just one day after South Korea announced its first case of African Swine Fever a second case was discovered. This was again along the North Korean border on a farm that holds 4,700 hogs. All these hogs were culled as a defense measure. South Korean officials were quick to claim this will have little impact on the country’s pork supply, with South Korea’s hog herd standing at 12.3 million head. Unfounded cases of ASF were also reported in Thailand today, which will undoubtedly be monitored very closely.

This commentary is the sole opinion of Karl Setzer, Senior Commodity Risk Analyst for AgriVisor, LLC. This is intended for informational purposes only and not to be used for specific trading recommendations. The information used to generate this commentary is gathered from a variety of sources believed to be accurate. If you have any questions or would like additional market information, feel free to send an e-mail to ksetzer@agrivisor.com. You may also follow Karl on twitter; @ksetzergrains

Morning Comments; Wednesday, September 18th, 2019

Corn, soybeans, and wheat continue their see-saw trend in the market with moderate advances being posted this morning following yesterday’s losses. Yesterday’s pressure came from several factors, including weak outside markets and favorable US weather. Thoughts that too much risk-premium has been removed from the market ahead of the South American growing season is giving trade support today as well. Trade is struggling to find a clear direction which will likely cause this action to continue. Technicals are lending little direction either as indicators point towards a sideways pattern. It would not be surprising to see this two-sided trade continue until we get into harvest and production can be better defined. Today’s attention will be split with geopolitical developments, weather, and any news out of the US Fed on interest rates providing direction. It will also be interesting to see if China shows up for soybeans for a 4th straight day.

Highlights

* Middle-East developments

* China buys US soybeans for three days straight

* Investors show interest in Brazil ethanol

* Hot, dry weather in South America

* ASF found in South Korea

* US reaches trade deal with Japan

* Saudi Arabia crude back on-line sooner than thought

Corn

* Chinese reserves tighter than thought

* China has army worm under control

* Brazil raises export forecast

* Early US yields mixed

* Corn continues to follow crude

Soybeans

* US crush 5 mbu ahead of USDA estimates

* China buys 26.3 mbu over past 3 days

* China approves soymeal from Argentina

* No US frost through 1st week of October

* Asian feed demand to drop

Wheat

* Planting starts on US winter crop

* Drought in Argentina, Australia

* Australia lowers export forecast 7.7%

* Late soy harvest may impact US winter crop acres

* Global market remains depressed

Livestock

* ASF in South Korea

* So Korea to cull 4,000 hogs

* COF on Friday

* China to auction pork reserves

* US wholesale beef is weaker

This commentary is the sole opinion of Karl Setzer, Senior Commodity Risk Analyst for AgriVisor, LLC. This is intended for informational purposes only and not to be used for specific trading recommendations. The information used to generate this commentary is gathered from a variety of sources believed to be accurate. If you have any questions or would like additional market information, feel free to send an e-mail to ksetzer@agrivisor.com. You may also follow Karl on twitter; @ksetzergrains

Closing Comments; Tuesday, September 17th, 2019

Trade was under pressure from the opening bell today as buyers failed to surface in the market. Benign weather forecasts, weaker outside markets, and better than expected crop ratings all weighed on the futures market. Not even a 3rd consecutive day of soybean sales to China could support that complex, nor could a low corn inventory report from China. We did see light technical support today, but not enough to reverse the trend of the market.

China was in the market for another quantity of US soybeans today and booked 260,000 metric tons. This was enough to put cumulative purchases over the past three days at 26.3 million bu. Trade is becoming a little skeptic of these purchases though and feel they could be more of a “good will” gesture ahead of the upcoming trade talks between the two countries. The fact soybean bookings trail last year by a significant volume are also limiting market reaction at this time.

More interest was placed on Chinese corn today. Chinese officials announced they will not be expanding ethanol manufacturing this year in part from low corn reserves. At the end of the 2017 market year China had a reported 8 billion bu of corn in reserves. Since then, this has now shrunk to roughly 2.2 billion bu. While this is enough corn to satisfy current needs, it will limit any expansion to corn processing.

Soybean expansion in Brazil is expected to be less than 2% this year, the slowest growth in recent history. For the past several years Brazilian farmers have grown plantings by at least 5%, but questions over Chinese demand has some rethinking expansion. Brazilian farmers do not want to plant soybeans, or any crop, if they do not have demand. This could end up being a great benefit for US soybean demand if China does continue their purchases.

Brazilian corn demand remains strong though with bookings at a record pace. Through last Friday, Brazil had sold 26.57 million metric tons of corn for export compared to 10.4 mmt a year ago. For the Brazilian market year that ends in February, Brazil is forecast to export a record 38 mmt of corn, and possibly more. Brazil is only forecasting 2020/21 corn exports at 34 mmt though, even though production is forecast to increase from a year ago.

US wheat values are facing competition from the global market. Even with production losses in Australia and less than perfect growing conditions in Argentina, world wheat stocks are adequate this year. This means countries like the US need to remain competitive with other sources to maintain a share of global trade. This is preventing a sustained rally in US wheat values.

News in the livestock industry today centered around the discovery of African Swine Fever near the North/South Korean border. This immediately caused the South Korean government to cull 4,000 hogs. South Korea also put an order out to halt all hog movement for the next 48 hours Hopes are this will at least slow the spread of the disease into other regions of the country.

This commentary is the sole opinion of Karl Setzer, Senior Commodity Risk Analyst for AgriVisor, LLC. This is intended for informational purposes only and not to be used for specific trading recommendations. The information used to generate this commentary is gathered from a variety of sources believed to be accurate. If you have any questions or would like additional market information, feel free to send an e-mail to ksetzer@agrivisor.com. You may also follow Karl on twitter; @ksetzergrains

Morning Comments; Tuesday, September 17th, 2019

Trade was on the negative side overnight as we see investors pull out of the market. Yesterday we had light buying take place, but this failed to follow through into the overnight session. A calming in the outside markets is limiting interest in the commodities as well. There is still a considerable amount of attention being placed on the energy complex and the developments taking place in the Middle East. This generated the buying we had yesterday, but as always, thoughts are the action was overdone. This is especially the case in the grains and soybeans where the US is now getting overvalued in the global market. Trade is shrugging off the Chinese soybean buying from the past two session as cumulative bookings are still well behind a year ago. Trade is also closely monitoring the Fed today as they prepare for another possible interest rate adjustment. This will likely alter all investing if it takes place. Weather remains a key factor in trade as well. Conditions in the US remain favorable for the ending of the growing season and appear to be improving in South America as well. This is especially the case for Brazil where the soybean planting season is set to get underway.

Highlights

* Middle-East developments

* China buys US soybeans for two days straight

* Chinese industrial development -4.4% in August

* No US frost threat for 2 weeks

* 7% increase to Brazil soy production questioned

* Bio-fuel plan to boost blending quota 10%

* 50% of Saudi oil exports shut off

Corn

* Corn 55% Good/Excellent

* Corn 18% mature, 4% harvested

* Corn following crude

* EU trims corn production

* Funds short 165,000 contracts

Soybeans

* 54% G/E, 95% set pods

* 15% of crop has dropped leaves, 38% is average

* Planting starts in Brazil

* Weather to improve in South America

* Chinese demand to fall even further

Wheat

* Sparse fresh news

* Drought in Argentina, Australia

* Feed demand plateaus

* Global values dropping

* Australia books wheat from Canada

Livestock

* Chinese hog herd -38% in August

* 2019 hog herd forecast to drop 70% in China

* Sow herd to decline 60% this year

* Chinese pork values +78% in the past year

* US beef demand stalls

Closing Comments; Monday, September 16th, 2019

The market started the day session on the firm side today as light buying surfaced in the commodities. One reason for this was spillover support from the energy complex and its relation to the commodities. Ongoing concerns over South American weather and another sale of soybeans to China were also supportive. Advances were capped by a lack of buying enthusiasm and favorable US weather to finish the growing season, including the lack of a frost threat.

China made another purchase of US soybeans overnight of 256,000 metric tons. This puts two-day purchases from China at 16.8 million bu, a good sign as the two countries begin trade war negotiations. The question now is if China will keep buying, as even though US soybeans are currently the cheapest in the global market, China’s total needs are being questioned. US soybean sales also have a lot of ground to make up, as yearly sales trail those of a year ago by a large 280 million bu.

The primary reason China’s total soybean demand is being questioned is the contraction we are seeing in the Chinese hog herd. Data from the Chinese Ag Minister shows the country’s hog herd had shrunk by 38% at the end of August. Newly released forecasts indicate China could lose 70% of its hogs by the end of the year, with its sow herd down 60%. As a result, feeder pigs in China have rallied 100% in value from a year ago. This contraction will reduce China’s overall feed grain demand, regardless of the source or political relations.

President Trump has tentatively approved a bio-fuel package that will hopefully appease the renewable fuel industry, as well as many US farmers. The plan is calling for a 10% increase in bio-fuel usage for the year of 2020. This would put total bio-fuel demand at 22 billion gallons. While the ag industry is supportive of this move, it is being met with opposition by the nation’s oil industry, which will likely lead to concessions being made.

Weather again made headlines today as the chance of a significant frost event for the US over the next two weeks has been greatly diminished. Forecasts indicate the Corn Belt should experience above normal temps through the end of September, with may receiving additional rains as well. This will push frost events into October, which is not unusual. The difference this year is that crops are still lagging their normal maturity, and even a normal frost date could impact crop development.

South American weather is becoming more of a market factor now that we are at the point where soybean planting can take place in Brazil. While conditions have been dry in recent weeks, private analysts are not reducing their projections for the country’s soybean crop. The average estimate is at 122.6 million metric tons, roughly a 7 mmt increase from this year’s crop. While this is possible, the country will need to experience near perfect growing conditions to achieve it.

Export inspections for the week ending September 12th were released today with less than favorable numbers. Corn inspections for the week totaled 16.6 million bu, soybeans reached 24.5 million bu, and wheat came in at 16.8 million bu. Corn and soybean volumes were down on the week, and all total were under the amount needed to reach yearly USDA projections. One good takeaway from the report was that nearly half of the soybeans inspected were destined for China.

The National Oilseed Processors Association, or NOPA, crush report for August was released today. For the second month crushing topped the average trade estimate with 168.08 million bu. This was also the 7th largest monthly total as the industry tries to catch up following spring floods that gave us below normal usage. Soy oil inventory was down slightly from the previous month, while meal demand was down considerably.

This commentary is the sole opinion of Karl Setzer, Commodity Market Risk Analyst for AgriVisor. This is intended for informational purposes only and not to be used for specific trading recommendations. The information used to generate this commentary is gathered from a variety of sources believed to be accurate. If you have any questions or would like additional market information, feel free to send an e-mail to ksetzer@agrivisor.com. You may also follow Karl on twitter; @ksetzergrains

Morning Comments; Monday, September 16th, 2019

Trade is on the defense to start the week with the biggest declines coming in the soy complex. This is coming from more favorable weather forecasts for South America as soybean planting gets underway in those countries. Today is the first full day the government permits soybean planting in Brazil and soils have been abnormally dry there for several weeks. We are now seeing the addition of rains in forecasts starting in the next two weeks. While we are unlikely to see soybean planting at a rapid pace, to see some early activity is likely. Benign weather forecasts to finish out the growing season in the US are also weighing on futures today. The greatest source of pressure today is what is taking place in the energy market. Over the weekend there were attacks on Saudi oil wells, and this caused crude to spike higher overnight. While the market has calmed a bit, crude is still up nearly 10% in early trade. This is causing speculators to abandon their commodity positions in favor of the energy complex. Watch for developments on this issue to drive today’s session, as well as any fresh news on the weather. We will also start to see trade positioning for the September stocks report that will be released at the end of the month.

Highlights

* US/China trade developments

* President Trump may consider a partial deal

* Geo-political developments in the Middle East

* Slow start to US export program

* Acreage changes to be made in Oct WASDE

* Basis weakens

* Larger Russian grain export forecast

Corn

* US highest priced in global market

* Still seeing buyers show up

* Cumulative sales 310 million bu behind last year

* Technical support

* Less competition from feed wheat

Soybeans

* Chinese demand

* US sales 280 mbu behind year ago

* Dry in SAM

* Planting to begin in Brazil

* Brazil firm predicts 122.6 mmt crop

Wheat

* Sparse fresh news

* Global reserves adequate

* Quality of US spring crop

* Sales 75 mbu ahead of last year

* Favorable weather for winter crop seeding

Livestock

* China needs US pork

* Wholesale beef higher

* Higher 202 beef production expected

* Pork production in 2020 to hold steady

* Market wants to see more Chinese business

Morning Commentary; Monday, September 9th, 2019

Futures are mostly weaker to start the week. Much of what we will see to start this week’s trade will be positioning ahead of Thursday’s updated supply and demand numbers. Estimates ahead of this release are not as low as some analysts have been expecting, which is keeping futures under pressure. In fact, so far most private yield and production data has been little changed from the USDA August numbers. Trade is also focusing more on demand which has been less than hoped for in recent weeks. The lack of a trade deal with China and mostly favorable weather outlooks are again pressuring trade to start this week. Commodities are starting to lean towards oversold though, which should limit downside movement at this time.

Highlights

* WASDE on Thursday

* Private yields close to USDA

* US Weather mostly favorable

* Drought building in South America

* Commodities are oversold

* Market hopes for bio-fuels package this week

* Canada to file WTO complaint against China

Corn

* Higher carryout likely on Thursday

* Market focused on acres

* Technically oversold

* US corn cheaper than SAM

* Funds short 140,000 contracts

Soybeans

* Brazil crop 122 mmt, exports 75 mmt

* Exports nearly equal to Chinese needs

* No US sales to China last week

* Brazil selling soybeans through US harvest

* Funds short 79,000 contracts

Wheat

* No follow through buying

* Rains disrupt US harvest

* More quality concerns on US spring crop

* US offers above global market

* Funds short 57,000 contracts in Chicago, 39,000 in KC

Livestock

* US beef exports +38% last week

* Japan buys 5,600 mt US beef

* US pork sales -31% last week

* China bought 1,400 mt of US pork

* Domestic demand is slowing

Closing Comments; Tuesday, September 3rd, 2019

Trade started out the new month on the negative side as buying interest was non-existent. Fresh technical selling surfaced on the grains today which dropped both corn and soybeans to fresh contract lows. Soybeans managed a better close as funds were unwilling to expand their short position on that commodity. Much of the talk in the market today surrounded the new tariffs the US and China placed on each other over the weekend. China also filed a claim against the US with the World Trade Organization over recent tariffs. Bottom line is trade tensions between the two are getting worse, not better. The lack of a foreseeable weather threat to our crops was also negative for trade today. Losses were held in check by the fact funds are already short as we start to prepare for the September WASDE report.

As we round out the old crop marketing year trade focus has shifted to new crop demand. Export sales of corn and soybeans are currently at a fourteen-year low which is becoming more of a worry. New crop sales of corn now stand at 218 million bu and soybean bookings are at 206 million bu. While there is plenty of time for these to catch up, we will need to start seeing demand build soon as South America is already making new crop sales. This is especially concerning on soybeans to China where needs are reportedly covered through at least mid-October. Wheat demand is much better, with sales at 407 million bu compared to 330 million bu a year ago at this time.

When it comes to export demand, all eyes are on China. Not only has China cut back on US imports, but from Brazil as well. This is the fallout of the African Swine Fever spreading through the country and diminishing demand. It is quite likely this will change the demand structure of the world market for the next several years. That said, China did account for over half of the soybeans inspected for export last week.

Trade is also showing concern over domestic commodity demand, mainly corn for ethanol. The USDA is projecting a robust 5.475 million bu of demand for ethanol manufacturing for this marketing year, but analysts are not in agreement on this number. This is mainly from the fact we have seen sixteen US ethanol plants go off-line in recent months due to poor margins, with some of these claiming they will remain idled indefinitely. This slowing demand and sluggish exports are starting to negate some of the concern over slower production for this growing season.

A result of this slowing demand has been a weakening of basis across the interior market. We have also started to see a slight increase in country movement ahead of the upcoming harvest. This is especially the case in areas where crops look good, primarily in the Western Corn Belt. Export demand has also started to soften as we see less than hoped for demand from the global market as well.

Export inspections for the final week of the marketing year were mixed. Corn inspected for export totaled 14 million bu. This leaves yearly inspections 243 million bu short of projections. Soybean inspections were considerably higher at 47.08 million bu, with China listed as the destination for 29.4 million of these bushels. Wheat inspections came in at a better than needed at 19.3 million bu, indicating we could see a larger demand figure in future balance sheets.

Livestock futures were higher today as buying resumed in those markets. Slowing slaughter numbers aided futures today as packers are starting to be pushed for coverage. A weaker cash market forced futures to do the work in encouraging movement today. Trade is also starting to question Chinese claims they will be able to avoid the US when it comes to meat imports to cover ASF losses.

This commentary is the sole opinion of Karl Setzer, Commodity Market Risk Analyst for AgriVisor. This is intended for informational purposes only and not to be used for specific trading recommendations. The information used to generate this commentary is gathered from a variety of sources believed to be accurate. If you have any questions or would like additional market information, feel free to send an e-mail to ksetzer@agrivisor.com. You may also follow Karl on twitter; @ksetzergrains

Morning Comments; Tuesday, September 3rd, 2019

Trade was mostly lower in the overnight session as we see a lack of buying interest on a whole. This is not just in commodities but in all market this morning. A stronger US dollar is also weighing on commodity trade this morning. We are also seeing less of a weather threat as no killing frost of freeze is currently predicted for the Corn Belt. This is taking some of the risk premium back out of the market that was added last week. There remain concerns over the cool temperatures across the Midwest though and what these mean for crop development. Demand remains a concern as we move from the old to new crop marketing year and what impact this will have on carryout. We will likely start to see changes to demand negate alterations to production in future supply and demand reports. Trade is expecting to see another improvement to crop ratings tonight, but more interest will be on development.

Highlights
* New Chinese tariffs take effect over the weekend
* Quality a concern for exports
* 16 US ethanol plants have now closed in recent weeks
* No immediate frost/freeze concern
* Trade hoping for Chinese meeting this month
* Govt payments raise farm income levels
* New crop marketing year begins

Corn
* More ethanol plants slowing
* Sales 128 mbu under estimates
* Only 218 mbu new crop sales on books
* Mexico counts for 62% of US corn sales
* IGC raises world production forecast

Soybeans
* Export sales 90 mbu over estimates
* US has 137 mbu unshipped sales
* 19/20 sales just 206 million bu
* Concerns over crop maturity
* Chinese tariffs take effect

Wheat
* 407 mbu of export sales
* Year ago sales were only 330 mbu
* IGC raises world production forecast
* US competitive in global market
* Flooding slows spring harvest

Livestock
* China releases meat from govt reserves
* Poultry demand up in China
* Grilling demand to slow
* Japan raises US beef purchases
* China did buy US pork last week

Closing Comments; Friday, August 30th, 2019

Trade was mixed to finish out the week and month, with wheat under considerable pressure, soybeans higher, and corn caught in the middle. Wheat was pressured today by news US competitors will be upping their wheat exports. Soybeans took support from weather concerns and the need for risk premium. Corn tried to follow soybeans higher but struggled with a need to remain competitive with wheat as a feed grain which would further lower our corn demand projections.

Wheat futures struggled today with expectations for elevated competition in the global market. France and Russia are projecting larger crops this year than last and have upped their export forecast as a result. Even with the US being competitive in the global market it is a must to remain competitive with these suppliers or face losing export demand. The US is running ahead of a year ago on wheat exports but needs to remain price competitive for this to continue. There were also concerns today over what the quality of the spring wheat crop will be following floods in the Plains.

We are seeing interest shift to fall weather forecasts, mainly how this year’s corn and soybeans will finish out the growing season. The majority of the Corn Belt sees its first frost or freeze of the year by mid-October. Given the slow maturity of this year’s crops, field scouts claim crops will need to make it to the end of October without this taking place to fully mature. While avoiding a frost until then is possible, it does not seem likely to happen at this time.

The real question when it comes to an early end to the growing season is what it may mean for production. In all likelihood, an early frost will not directly impact bushels. What it can do is lower test weight though, and bushels can be lost from this factor. There are also concerns over what impact this would have on protein content. Any reduction to quality can also be a deterrent when it comes to exports. This is especially the case when the global commodity pipeline is full.

Global trade was a story that received attention today as elevated US tariffs against China are set to go into effect this weekend. Trade is concerned over what this could do to future commodity demand, mainly soybeans and pork. China has announced they wish to settle the trade dispute, but the terms as to what it will would take to accomplish this are sketchy at this time. China has announced they will hold on their proposed tariffs which is a positive sign.

Ethanol was in the headlines all week with several stories being released. One of the biggest was that President Trump has a package he is putting together that will greatly benefit the ethanol industry. He claims that this will benefit US ethanol plants while still allowing small refiners to keep their waivers, which have been highly criticized by the ethanol industry. No details have been released on this proposal, which makes it less of a factor.

In related news, a Winnebago Minnesota ethanol plant has announced it will be shuttering operations due to poor margins. This brings the number of plants that have gone off-line since waivers were released to sixteen and has impacted future US corn demand forecasts.

Livestock futures were under pressure today as funds were sellers across the complex. This was the result of several factors, with a primary one being demand concerns. China was listed as a buyer of US pork last week, but the volume was small and likely done to secure coverage ahead of the September tariff increase. News that Chinese consumers are opting for poultry rather than pork or beef weighed on futures as well. Seasonal tendencies for demand to slow as we move into September was additionally negative.

This commentary is the sole opinion of Karl Setzer, Commodity Market Risk Analyst for AgriVisor. This is intended for informational purposes only and not to be used for specific trading recommendations. The information used to generate this commentary is gathered from a variety of sources believed to be accurate. If you have any questions or would like additional market information, feel free to send an e-mail to ksetzer@agrivisor.com. You may also follow Karl on twitter; @ksetzergrains

Morning Comments; Monday, August 26th, 2019

Soybeans are trading considerably higher overnight as we see fund short covering in the complex. This was brought on by several factors, with a leading one being reports China wants to work on a trade war resolution with the United States. This comes on the heels of both Chinese tariffs that were announced last week and the increase in US tariffs on Chinese goods. While this appears positive, the market has heard the trade war will end before only to be disappointed which is tempering any hint of a resolution. Simple oversold technical indicators are supporting soybeans as well. Corn is taking light support from news the US and Japan have worked a trade deal to help work through our reserves of that commodity. All commodities are finding support from lower yield estimates from last week’s crop tours, although reductions were not what some analysts and trade had hoped for. Reductions to domestic demand, mainly ethanol, are offsetting some of this production decline. Updated weather models and any changes to trade news will determine how we work through today’s session. ~F10

Highlights
* Global trade negotiations
* Pro Farmer indicates smaller crops than USDA
* PF corn crop at 13.36 bbu, soybeans at 3.5 bbu
* White House will not rescind ethanol waivers
* Concerns build over amazon fires
* Steady ratings expected tonight
* Markets leaning towards oversold

Corn
* Japan agrees to buy US corn
* Taiwan buys Brazilian corn
* Crop tour corn 543 mbu under USDA
* German grain production up on the year
* Feeders looking at wheat over corn

Soybeans
* China not buying agreed on bushels
* Reports of potential end of trade war
* Crops estimates 183 mbu under USDA
* Funds heavily short
* Cumulative sales ahead of expectations

Wheat
* So Korea buys US wheat
* Argentine crop near perfect
* Competing with corn for feed
* Spring harvest pressure building
* World supply growing

Livestock
* July cattle on feed 100% of year ago
* Placements just under trade estimates at 98%
* Marketings for July high at 107%
* US pork supply is growing
* US beef supply shrinking

Closing Comments; Friday, August 23rd, 2019

The big story in today’s trade was the announcement that China will be placing additional tariffs on US goods starting September 1st. These will cover $75 billion of US goods, including soybeans, meats, and crude oil. This news combined with economic concerns to weigh on the entire commodity market today, including livestock. This news overshadowed weather forecasts that are calling for unseasonably cool temperatures and crop tour data.

China surprised trade this morning by announcing it will be placing tariffs on several products starting September 1st. This will be either 5% or 10% depending upon the product. We will see the tariffs in two stages, with a second round coming on September 15th. In effect, this will put the soybean tariff at 30%. The tariff on US pork will now go to a hefty 72%. Basically, these rates mean US commodities will have to recede 5% to 10% in value to remain competitive in the Chinese market.

There are two ways of looking at these new tariff rates. China has already backed away from US imports as much as possible, so we may not see current demand decline that much. What these tariffs may do is prevent any new business from taking place, however. Trade was just becoming hopeful that a resolution may be reached with China, and these new levies have made that less likely. Chinese importers are also leery of making purchases of US products even with the tariffs attached as they fear government officials in China may hold them up in ports once they arrive.

While the US has had good new crop soybean export numbers in recent weeks, trade is questioning how long they will last. China has made it quite clear they wish to source as many soybeans as possible from Brazil for the next marketing year, and this was before today’s tariffs were announced. China reportedly has 50% of needs for October already covered. Given the decline in Chinese soybean imports on a whole, this may leave little business for the United States. Instead the US may be used to fill holes in Brazilian sales and need to find more non-traditional buyers to cover projected demand.

Trade is also monitoring corn demand. With just one week left in the marketing year, US corn sales trail expectations by 128 million bu. Not only will this deficiency impact old crop balance sheets, but new crop ones as well. When added to a slowing ethanol manufacturing pace, total corn demand is likely to recede this coming year. This has tempered some of the concerns the market has had on corn production issues this year.

Farmer selling across the United States has lightened up considerably in the recent weeks. Many farmers claim to have all the old crop inventory of both corn and soybeans marketed that they currently wish to. This is even in the regions where crops look good as producers feel if they hold on to old crop inventory they will be rewarded once harvest begins, as they do not feel yields will be as high as currently expected. While this has caused basis values to firm, a reduction to demand has limited their appreciation.

Temperatures across much of the United States are forecast to be below normal for the next two weeks. While this is not expected to damage our crops, what it may do is slow development even further than it already is. This will push crop maturity even closer to the first frost date for come locations. Even if this does not impact production, it could easily be a factor in crop quality.

Livestock futures posted sizable losses today in response to the tariff news as well. This was most negative for hog futures as the new tariff of 72% will greatly hinder any interest from Chinese buyers. When combined with high cold storage stocks, this left little buying interest in the pork complex. Cattle futures were also hit with tariff news but found support in a shrinking cold storage inventory.

This commentary is the sole opinion of Karl Setzer, Commodity Market Risk Analyst for AgriVisor. This is intended for informational purposes only and not to be used for specific trading recommendations. The information used to generate this commentary is gathered from a variety of sources believed to be accurate. If you have any questions or would like additional market information, feel free to send an e-mail to ksetzer@agrivisor.com. You may also follow Karl on twitter; @ksetzergrains

Weekly Market Review; Friday, August 23rd, 2019

China Issues Tariffs Against United States

China surprised trade this week by announcing it will be placing tariffs on several products starting September 1st. This will be either 5% or 10% depending upon the product. We will see the tariffs in two stages, with a second round coming on September 15th. In effect, this will put the soybean tariff at 30%. The tariff on US pork will now go to a hefty 72%. Basically, these rates mean US commodities will have to recede 5% to 10% in value to remain competitive in the Chinese market.

There are two ways of looking at these new tariff rates. China has already backed away from US imports as much as possible, so we may not see current demand decline that much. What these tariffs may do is prevent any new business from taking place, however. Trade was just becoming hopeful that a resolution may be reached with China, and these new levies have made that less likely. Chinese importers are also leery of making purchases of US products even with the tariffs attached as they fear government officials in China may hold them up in ports once they arrive.

The trade dispute between the US and China has been a great benefit for Brazilian corn exports. In the month of July Brazil exported a record 6.3 million metric tons of corn to China. Given this pace and the size of this year’s Brazilian corn crop it is believed China may import a large 40 million metric tons of Brazilian corn this year. At the same time, Brazil saw its soybean exports to China decrease 23% in July as China continues to see feeding losses from African Swine Fever. The underlying factor behind these numbers is how the US will get the export business back once China is comfortable with Brazilian imports.

The US economy is starting to suffer from the trade war however. The ten-year note recently crossed over and is now under the two-year rate. This shows there is limited confidence in the market and has caused recession talk to build. In 7 of the past 9 times this shift has been made a recession followed, usually within 22 months. While this can be negative for the financial market, it can generate safe-haven buying in the commodities as investors search for physical products to own.

Demand has been becoming more of a factor for trade over the past several weeks. Buyers have been passing over the US as a source for needs as the United States remains one of the highest priced sources for commodities in the global market. This has prevented the market from reacting to concerns over production losses, as some of the decreased output is being off-set.

Weather remains one of the top stories in today’s trade. NOAA data shows the last twelve months in the US have been the wettest on record. Average precipitation across the US from August 2018 to July 2019 was 37.73 inches. At the same time, soils have started to dry, especially in the Eastern Belt, where topsoil is now the driest since the drought year of 2012. That does not mean we are as dry as 2012, but that moisture content is being lost.

Trade is starting to look at long range weather outlooks for this winter. Models point toward a shift in patterns away from the current El Nino system to one that is more neutral. At the present time there is a 50% chance of having neither an El Nino nor a La Nina event this winter. If correct, this should bring favorable growing conditions to the global market, with most interest on South America and Australia.

We have seen a shift on market attitude that is keeping a lid on all futures. We have transitioned into a buyer’s market, meaning buyers now have the upper hand in price negotiations. This comes when there is more supply of a commodity than demand. Buyers tend to limit their purchases in such times as there is little fear of not finding product when needed. While this can create a flat market, it does open windows of opportunity for rallies, they just tend to be more limited, and led by the cash market rather than futures.

A considerable amount of interest has been placed on the domestic balance sheets, but not much on the global side. World corn stocks are forecast to decrease from 328.6 million metric tons for this year to 307.7 million metric tons next year. The global soybean supply is forecast to shrink from 114.5 for this year to just 101.7 million metric tons for 2019/20. Data is not as supportive for wheat where world stocks are expected to rise from 275.5 million metric tons to 285.4 million tons.

Political unrest in Argentina has been a benefit for the United States, but for how long is questionable. Primary elections indicate that President Macri may be replaced in the official election this fall. This caused the Argentine Peso to devalue considerably. Normally when this happens we see elevated commodity selling, as commodities are based off the US dollar, and a decline in the Peso or any other currency makes them more valuable. Argentine farmers believe the Peso will make further declines though and are unwilling to liquidate at today’s values.

This commentary is the sole opinion of Karl Setzer, Commodity Market Risk Analyst for AgriVisor. This is intended for informational purposes only and not to be used for specific trading recommendations. The information used to generate this commentary is gathered from a variety of sources believed to be accurate. If you have any questions or would like additional market information, feel free to send an e-mail to ksetzer@agrivisor.com. You may also follow Karl on twitter; @ksetzergrains

Morning Comments; Friday, August 23rd, 2019

Trade was mixed overnight with the grains posting minimal losses while soybeans were mostly steady. Consolidation continues in the market with traders showing little interest in pushing values too far in one direction. Weather is giving trade conflicting indications as even though rains have moved through the Corn Belt, conditions remain on the dry side. This is especially the case for Northern Illinois and Eastern Iowa. Trade is also closely monitoring temperatures, as cool conditions are limiting crop stress, but also slowing maturity even further. This is becoming more of a condition as normal frost dates approach. We did see China listed as a small buyer of soybeans in yesterday’s weekly report, but there are reports that this was the pricing of overruns on recent vessels, and not an actual sale given the small volume. China did not purchase any US pork last week which is also a concern for future developments. Much of what we see today will be simple pre-weekend positioning as trade digests more crop tour data and yield estimates.

Highlights

* September options expire today

* EPA waivers to be investigated

* Some MFP payments have been delayed

* US budget deficit to pass $1 trillion in 2020

* Weather mostly non-threatening

* China agrees to continue trade talks

* Fresh news is light

Corn

* Old crop exports falling short of projections

* SAM taking US corn export business away

* Crop tours indicate lower yields

* Cool temps slow progress

* Even normal frost dates may be an issue this year

Soybeans

* New crop sales picking up

* Brazil providing China new crop soybeans

* China has bought 50 soy vessels in past week

* Pod counts increasing

* Cumulative sales ahead of expectations

Wheat

* Demand ahead of expectations

* High values deter buyers

* Competitive with corn for feed

* US follows global market lower

* Buyers look for high quality wheat

Livestock

* Cattle on feed report after close today

* US beef in cold storage at 455.1 million pounds

* US pork in cold storage at 601.8 million pounds

* 52.6 million pounds of pork bellies in storage

* US has more pork, less beef in storage than year ago

This commentary is the sole opinion of Karl Setzer, Commodity Market Risk Analyst for AgriVisor. This is intended for informational purposes only and not to be used for specific trading recommendations. The information used to generate this commentary is gathered from a variety of sources believed to be accurate. If you have any questions or would like additional market information, feel free to send an e-mail to ksetzer@agrivisor.com. You may also follow Karl on twitter; @ksetzergrains

Closing Comments; Thursday, August 22nd, 2019

Trade was on both sides of unchanged today as position squaring dominated the markets. Selling pressure has stalled for now as the markets are sitting near over-sold levels. Soybeans showed the most strength early on today as even though old crop export sales were light, we did see solid new crop demand. China was listed as a buyer of new crop soybeans as well, albeit a minimal 66,000 metric tons. This demand faded as the session progressed and profit taking surfaced. Advances were also held in check today by a lack of buying enthusiasm and renewed concerns over the state of the US economy.

Export sales for the week ending August 15th were met with little reaction today. Corn sales were split with 4.7 million bu on old crop and 11.9 million bu of new crop. Soybean bookings were a light 950,000 bu on old crop but a solid 29.1 million bu of new crop. While China did take a small amount of new crop soybeans, a large amount was sold to an unknown buyer, which trade automatically pegged as China. Wheat sales were again a respectable 21.8 million bu.

While the United States did show some business was done with China recently, it pales in comparison to the purchases China has made from Brazil. In the past week China has booked a reported 50 vessels of Brazilian soybeans. Just yesterday China was thought to have locked in 12 cargoes of Brazilian soybeans. China is now thought to be covered on soybeans through mid-October, which is limiting their soybean demand at this time.

The weekly drought monitor map was released today with mixed indications. Drought conditions have been partially remedied in Central Iowa over the past week, but conditions persist in Western Iowa and Eastern Illinois. More rains have moved through this region though, and thoughts are conditions will continue to improve. With below normal temperatures, additional crop stress has also been limited.

When it comes to weather, more interest has been placed on long-range outlooks. The US is currently forecast to experience normal to below normal temperatures for the next two weeks. This is already generating concerns over a potential early frost or freeze. While this is possible, it is unlikely to happen in the next two weeks. Still, many field scouts claim the US crops will need to get to mid or late October before their first frost, which is unlikely for many regions.

President Trump was scheduled to meet with Secretary of Ag Purdue and EPA Administrator this afternoon to discuss the US biofuel industry. The main topic of discussion is to be the recent 31 blending waivers that were granted to refiners. These waivers have been under intense scrutiny as they are being blamed for the poor economics in the ethanol industry. Hopes are these waivers may be rescinded or at the least reallocated.

Livestock futures were mixed today with cattle on the plus side and hogs under pressure. Cattle took their support from the spread between futures and the cash market, and how futures need to close the gap. Cash trade remains light on cattle though, with packers passing on many offers. Hogs were under pressure today from high slaughter numbers and lackluster demand.

This commentary is the sole opinion of Karl Setzer, Commodity Market Risk Analyst for AgriVisor. This is intended for informational purposes only and not to be used for specific trading recommendations. The information used to generate this commentary is gathered from a variety of sources believed to be accurate. If you have any questions or would like additional market information, feel free to send an e-mail to ksetzer@agrivisor.com. You may also follow Karl on twitter; @ksetzergrains

Morning Comments; Thursday, August 22nd, 2019

Trade was mostly steady overnight as neither buyers nor sellers showed up in force. This is a common action in a market that is attempting to consolidate after recent volatility. Mixed fundamental data is keeping trade interest to a minimum this morning as well. We continue to receive field reports that are showing crops are between 2 and 3 weeks behind normal in maturity, but this does not necessarily mean a yield reduction. We are also seeing bigger yield estimates as tours move into the heart of the Corn Belt which is not surprising. The question now is if these areas are good enough to compensate for the losses in others to give us the crop size currently being predicted. Technicals are currently oversold, but we are not seeing much interest in correcting this, which is also keeping the market stable this morning. Trade will be looking to the weekly export data for direction today, mainly to see if China was listed as a buyer of any commodity. The two main ones will be pork and soybeans. We will also see interest in weather to see if additional rains fall in the driest regions of the Midwest.

Highlights

* More ethanol plants idled

* EPA waivers to be investigated

* Weather mostly favorable

* More interest in cooling temperatures

* US rail traffic continues to decline

* Ethanol stocks close to year ago

* Currency valuations favor So Am over US for imports

Corn

* SAM export business growing

* Brazil corn exports record sized

* High variability in crops

* Demand slipping

* Cheap wheat pressures corn

Soybeans

* Pod counts rising

* Global oilseed questioned

* Limited interest in US offerings

* Lack of risk premium

* China sourcing all needs from Brazil

Wheat

* Global production rising

* Harvest deliveries increasing

* Spring crop in good quality

* US follows global market lower

* Buyers look at feed wheat over corn

Livestock

* Cattle on feed report is Friday

* Cold storage report today

* Russia finds ASF on Chinese border

* Boxed beef higher

* Buyers pass on beef asks at 107-108

This commentary is the sole opinion of Karl Setzer, Commodity Market Risk Analyst for AgriVisor. This is intended for informational purposes only and not to be used for specific trading recommendations. The information used to generate this commentary is gathered from a variety of sources believed to be accurate. If you have any questions or would like additional market information, feel free to send an e-mail to ksetzer@agrivisor.com. You may also follow Karl on twitter; @ksetzergrains

Closing Comments; Wednesday, August 21st, 2019

Trade started today’s session mixed with grains under pressure and soybeans on the plus side. Soybeans are taking strength from ongoing reports of low pod counts across the Corn Belt and oversold indicators. Funds are already heavily short in the soy complex and are not willing to extend this with the current market structure. The grains are struggling with demand issues, even though we did see an overnight sale of 328,000 metric tons to Mexico. This was countered by worries over domestic corn demand as more ethanol plants are announcing plans to be idled.

Ethanol production for the week ending August 16th decreased from the previous week by 22,000 barrels. This put average ethanol production for the week at 1.023 million barrels. Ethanol stocks decreased during the week by a large 516,000 barrels. This now puts reserves at 23.37 million barrels, just above last year’s 23.26 million barrels.

More US ethanol plants have announced they will be scaling back production until margins improve. POET announced this for an Indiana plant yesterday and now Marquis Energy in Wisconsin is following suit. There are also rumors of several other plants that are going to take extended periods of downtime ahead of the fall harvest. Some of these will remain idled well past that. Industry officials claim very few plants in the US are currently running at full capacity, casting doubt over the 5.475 billion bu corn demand figure the USDA is projecting for ethanol manufacturing.

More concerns are being voiced over the state of the rural US economy. Many farmers did not get 100% of their acres planted across the Corn Belt this year which is greatly impacting their cash flows. Some of these farmers may not see revenue for another year. Even with government payments, this does not cover the ongoing expenses that continue to roll in. Some producers are considering the planting of alternative crops, mainly winter wheat, to try to generate incomes sooner than normal next year because of this.

Trade talks between the US and China are reportedly progressing, but so far, we have seen little in the way of export demand changes. Chinese officials have announced they are comfortable with the Brazilian soybean availability and plan to source soybeans from them for the remainder of the old crop marketing year. The question is what will happen past this, with indications Brazil will remain China’s main origination point for all commodities if possible. This potential shift in demand is why US soybean futures continue to struggle, even with lower production expectations.

Chinese officials have announced the country will be taking measures to try and stabilize its domestic pork market. Pork values in China have skyrocketed following the outbreak and spread of African Swine Fever. This has started to cause inflation in the country which is impacting its economy. Officials are going to offer subsidies to move pork from high production areas into regions of demand to keep prices lower. It is quite likely China will need to increase meat imports as well, but where these will come from is questionable.

The spring wheat harvest is progressing with what is being termed an average crop. Yields are favorable and the quality of the crop is high, especially the protein content, which has elevated hopes of increased export demand. At the same time, this will only add to an already abundant global supply of wheat. This is the same story we are hearing from many of the world’s wheat producers and has been a source of pressure for the futures market. In turn this has pressured corn, as corn values need to recede to prevent a shift in demand, mainly for feeding.

This commentary is the sole opinion of Karl Setzer, Commodity Market Risk Analyst for AgriVisor. This is intended for informational purposes only and not to be used for specific trading recommendations. The information used to generate this commentary is gathered from a variety of sources believed to be accurate. If you have any questions or would like additional market information, feel free to send an e-mail to ksetzer@agrivisor.com. You may also follow Karl on twitter; @ksetzergrains

Morning Comments; Wednesday, August 21st, 2019

Corn and soybeans are on the positive side while wheat is weaker overnight. Soybeans are the leader of the market, taking support from lower crop expectations. This is stemming from crop tours that are finding low pod counts and smaller plants than average. This comes from the late planting season and slow development we have seen. It has been noted that plants are still setting pods though, and crop size can easily grow. Corn is struggling from a lack of demand, which is offsetting most production concerns. This is not just from export demand, but an increasing number of US ethanol plants that are idling production until margins improve. Some of these will likely remain idled indefinitely. Wheat futures are weaker in the overnight session as we see harvest pressure increase on the spring crop. So far yields are being reported as good with average protein content. Trade will continue to focus on trade developments today as mixed signals are being released on Chinese developments. We will also see continued interest in weather developments as well as several crop tour reports.

Highlights

* More ethanol plants idled

* Conflicting economic indicators

* Widespread rains for Corn Belt

* Crop maturity 10-15 days behind normal

* Potential remains for average crops

* China continues to pass on US offerings

* Futures are oversold

Corn

* Tour reports not as bad as thought

* Analysts predict 12.88 bbu crop

* Brazil corn exports +176% from year ago

* Tech support fades

* IL yield estimate down 30 bpa from year ago

Soybeans

* Plants still blooming, setting pods

* Low pod counts

* Funds heavily short

* Private estimate for 3.4 bbu crop

* China to buy from Brazil for remainder of marketing year

Wheat

* Spring crop harvest pressure

* China buys French wheat

* Global supply building

* Ukraine crop larger than year ago

* Global market values softer

Livestock

* Cattle on feed report is Friday

* COF and placements both at 100% of year ago

* Cold storage report on Thursday

* Cattle futures rising to meet futures

* Pork values under pressure

This commentary is the sole opinion of Karl Setzer, Commodity Market Risk Analyst for AgriVisor. This is intended for informational purposes only and not to be used for specific trading recommendations. The information used to generate this commentary is gathered from a variety of sources believed to be accurate. If you have any questions or would like additional market information, feel free to send an e-mail to ksetzer@agrivisor.com. You may also follow Karl on twitter; @ksetzergrains

Closing Comments; Tuesday, August 20th, 2019

Futures started today’s trade on the positive side but were mixed by mid-session. Crop tour results were a reason for this as even though the US corn crop is maturing slower than normal, there is still the potential for a good crop. Buyers passing over US grain offers applied additional pressure to those markets. Soybeans held to the positive side as low pod counts and a build in demand were supportive. Funds are also heavily short in the soy complex, preventing additional selling.

Attention on the US crops is starting to shift from condition to maturity. Crop samples indicate the US crops are roughly one to two weeks behind normal in maturity. This immediately generates thoughts the crops will yield less, but that is not necessarily the case. All a slow maturity means is that it will take the crops longer to mature. While an early end to the growing season can affect yields, it can be more of an issue for crop quality. The possibility of either of these happening would warrant higher risk premium values in futures than we are currently seeing.

Chinese trade developments were again a headline in market news today. The Chinese government has announced it will be making loans to business to help ward off the negativity from the trade dispute with the US. This generated ideas that the talks between the two sides are not as optimistic as reported, and China is preparing for an extended period without exports to the US.

Reports that the White House may be considering a payroll tax relief package added to the fears the trade war may not be ending as soon as hoped. This also created ideas that the US economy is not at strong as what has been indicated by some forecasters. There has been no confirmation nor any details of this though, which limited its impact on today’s markets.

The real question being asked when it comes to Chinese trade is how much business the United States may see even if the trade war ends. China has developed a comfort level with other commodity suppliers, mainly Brazil, and may continue to do business with them after the current trade dispute ends. Given the decline in Chinese demand for soybeans Brazil may be able to supply them with all needs. The US may see elevated meat exports to China though as the country continues to cull hog herds to combat African Swine Fever.

While most attention when it comes to Brazilian competition in the world market is on soybeans, Brazil has taken away a large portion of US corn business as well. Data shows that Brazilian corn exports for the marketing year total 20.7 million metric tons compared to 7.5 million metric tons for the same period a year ago. This pace is not expected to slow with August corn exports on track to total a record 8.84 million metric tons. Yearly Brazilian corn exports cold top the USDA projection of 37 million metric tons at this pace.

Weather forecasts continue to impact market direction. Heavy rains moved through the Western Corn Belt overnight and more is in the forecast for today. These are working their way through the driest parts of the Corn Belt as they head east and will help alleviate drought conditions. Rains are also moving through the Eastern Belt today, although more scattered than in the west. Cooling temperatures are also reducing crop stress.

Livestock futures were higher today as fresh fund buying surfaced in those markets. Thoughts we will see elevated demand ahead of the Labor Day weekend added to market support, as did hopes for ongoing Chinese pork imports. Proof that the fire at the packing place in Kansas has not impacted slaughter numbers was supportive for cattle futures, as were weaker feed grains.

This commentary is the sole opinion of Karl Setzer, Commodity Market Risk Analyst for AgriVisor. This is intended for informational purposes only and not to be used for specific trading recommendations. The information used to generate this commentary is gathered from a variety of sources believed to be accurate. If you have any questions or would like additional market information, feel free to send an e-mail to ksetzer@agrivisor.com. You may also follow Karl on twitter; @ksetzergrains

Morning Comments; Tuesday, August 20th, 2019

Corn, soybeans, and wheat are rebounding in the overnight session, taking support from a slight decline in crop ratings and crop tour results. Both corn and soybean ratings declined 1 point from the Good/Excellent category last week when ratings had been expected to hold steady. Crop tour results indicating a slow progression to this year’s crop is also being viewed as beneficial for futures as it brings about concerns over maturity prospects. AgriVisor’s Joe Camp has found this to be the case on his tour that took him through South Dakota yesterday, as the crops appear to be about 3 to 4 weeks behind average on maturity. More unplanted fields than expected are also casting a larger shadow of doubt over last week’s USDA acreage figure in the monthly WASDE report. Above all, a need for risk premium is giving commodities some much needed support. Advances are being held in check by ongoing demand worries as even though trade relations with China appear to be progressing, China has made it clear they intend to purchase as much product from South America in the future as possible. This will depend heavily upon price though, as China has a strong tendency to buy commodities from the cheapest source regardless of political relations.

Highlights

* Crop condition declines

* Crop maturity slow

* Very little risk premium in market

* President Trump dismisses recession fears

* China to bypass US in global market

* Market starved for fresh news

* Futures are oversold

Corn

* 56% G/E, 15% dented

* Market is oversold, several chart gaps to fill

* Crop reports vary significantly

* Demand remains low

* Funds nearly even

Soybeans

* 53% G/E, 68% set pods

* Low pod counts

* Funds heavily short

* China to book soybeans from Brazil

* China sells soy oil out of govt reserves

Wheat

* Spring crop harvest delays

* Abundant global reserves

* Global weather concerns remain

* Importers using quality in price negotiations

* Global market values softer

Livestock

* Chinese pork at 3 year high

* China likely to increase meat imports

* China purchase for govt reserves bypass tariffs

* Cattle slaughter up last week

* Hog slaughter up 143,000 head last week

This commentary is the sole opinion of Karl Setzer, Commodity Market Risk Analyst for AgriVisor. This is intended for informational purposes only and not to be used for specific trading recommendations. The information used to generate this commentary is gathered from a variety of sources believed to be accurate. If you have any questions or would like additional market information, feel free to send an e-mail to ksetzer@agrivisor.com. You may also follow Karl on twitter; @ksetzergrains

Closing Comments; Monday, August 19th, 2019

Corn, soybeans, and wheat all hung to the negative side today as any form of buying was non-existent. We continue to see a removal of risk premium from the market as weather worries fade. Traders showed more interest in the outside markets today which further pressured the grains and soybeans. An expected improvement to crop ratings was also a negative factor for market values. Commodities are all becoming over-sold though, which offered support to today’s action.

Weather was a key factor in today’s session. Rains moved through some of the driest regions of the Western Corn Belt over the weekend, mainly in Iowa. Some parts of the Western Belt picked up 2 inches of rain over the weekend and more is being forecast. These rains did not make it into the Eastern Belt though and precipitation was much more localized. Temperatures are forecast to cool later this week and rain chances are increasing, adding to the negative reaction is the market.

Trade developments were expected to give the market more support than they did today. Officials from both the United States and China claim they are working on a resolution to the current trade dispute and are planning on resuming talks in the next week or two. The White House also granted a 90-day temporary license to the technology firm Huawei to continue conducting business in the US which helped solidify these announcements. At the same time, China is clearly favoring Brazilian soybeans over those of the US for import, which limited any trade development news support.

The easing of trade tensions was a great benefit for the outside markets as well. Investors removed some of their “safe haven” monies from the commodities today and placed them back in the financial market. This added to the negative tone in the commodity complex.

Managed money investors on a whole are re-evaluating their commodity positions. Funds started the day long 44,500 contracts long in the corn complex. This was 35,000 fewer long contracts than what the funds held at the start of last week. Funds started the week with a large short position of 66,500 soybean contracts, but this has not deterred them from additional selling. Funds are nearly even on their wheat position which is keeping the contract in a sideways trading pattern.

Export inspections for the week ending august 15th were on the low end of expectations for corn at 20.09 million bu. Soybean inspections topped trade expectations with 42.56 million bu. Of these, nearly 17 million bu were destined for China. With two weeks left in the old crop marketing year it is likely we will see a large amount of corn and soybean purchases rolled to new crop. Wheat inspections for the week fell within trade expectations at 18 million bu.

While the grains and soybeans were under pressure today, livestock futures posted solid advances. Hogs were the leader of the complex as the market tries to build on china’s large purchases from last week. Thoughts that easing political issues may lead to more pork exports were also supportive. Pork values in China have rallied to a three-year high which is supporting the global hog market. Cattle futures were also higher today as demand starts to increase ahead of the upcoming Labor Day weekend.

This commentary is the sole opinion of Karl Setzer, Commodity Market Risk Analyst for AgriVisor. This is intended for informational purposes only and not to be used for specific trading recommendations. The information used to generate this commentary is gathered from a variety of sources believed to be accurate. If you have any questions or would like additional market information, feel free to send an e-mail to ksetzer@agrivisor.com. You may also follow Karl on twitter; @ksetzergrains