News Source: SETZ

Closing Comments; Tuesday, July 23rd, 2019

Trade was mixed for much of today’s session as fund balancing took place. Fresh news in the market was light which prevented significant moves from being made. The grains took support from the decline in the corn rating of 1 point last week. While not substantial in most years, any decline from an already low number such as this years will get more attention. Soybeans fell today as no confirmation of Chinese buying rumors could be found. All contracts were pressured from benign weather and technical weakness. A hesitation to establish fresh short positions and the need for risk premium gave the market its strength.

Rumors continue to surface surrounding Chinese business. The latest one is that some Chinese firms have been granted 30-day waivers on tariffs to purchase up to 6 million metric tons of US soybeans. If true, this would be a great benefit for Chinese crushers as it would give them positive margins rather than the pressure they are currently seeing.

After the close today it was announced that Trade Representative Lighthizer and a group of US officials will be heading to Shanghai next Monday to meet with a Chinese delegation on trade issues. While no official word has been released, it would not be surprising to see a “good will” purchase of some sort come from this visit.

A tweet from the USDA’s Risk Management Agency sparked interest in today’s trade. According to the RMA, prevent plant acres could total between 15 and 20 million this year. This is being based on several factors and historical trends. If correct, this would cause a massive shift in not just domestic but global balance sheets. What is unknown is how this total would be divided between the crops.

The United States is seeing more pressure than expected from Brazil in the global corn market. The USDA currently predicts Brazilian corn exports for the year at 35 million metric tons. Given the recent trend of buyers passing on US offerings in favor of those from Brazil, and that Brazil has nearly 8 million metric tons more corn in reserve than a year ago, we may see more export competition than expected.

This pressure from Brazil may not ease any time soon. Brazilian officials are predicting corn production for the 2019/20 year at 104 million metric tons. This would be 3 million metric tons more than the crop that is currently being harvested. Brazil is also forecasting a record soybean crop next year at 123.8 million metric tons compared to this year’s 118.2 million metric tons.

Technicals were mixed for today’s trade. Every attempt to rally today was met with selling interest, especially in the soy complex. The relative strength index levels on corn, soybeans, and wheat all indicate weaker trends. These stand at 43% for corn, 40% on wheat and 49% on soybeans. Until this attitude changes it may be difficult to sustain a rally in the market.

Livestock futures were higher today as fund buying finally surfaced in that complex. This was especially the case for lean hogs as not only are slaughter numbers down but so are weights. Cattle benefitted from weaker feed grains and elevated demand on the consumer side. This was verified by the draw-down in cold storage reserves on beef. The balancing of cash positions versus futures also benefitted today’s livestock trade.

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, July 23rd, 2019

Overnight trade was slightly higher as we had a reprieve from yesterday’s selling pressure. The decrease in the US corn crop rating of 1% was also supportive as trade was expecting a slight improvement. The soybean rating was unchanged when a small increase was predicted there as well. Long range weather forecasts indicating we could see a return to considerably higher temperatures also supported trade. A tweet from the USDA’s RMA indicating prevent plant acres on corn could reach 20 million this year is also gaining the attention of the market. Advances are being limited by near perfect weather at the present time and building concerns over commodity demand, especially on corn and soybeans.

Highlights

* RMA; Prevent plant corn acres could reach 20 million

* Chinese investing in US is down

* Cooler, wetter Midwest weather

* Market starting to position for August WASDE

* US/China tensions grow

* France asks EU for drought aid

* India to import record volumes of edible oils

Corn

* Crop rated 57% G/E; -1% on the week

* Corn is 5% in dough stage; 10% is average

* Basis remains firm on lack of farmer selling

* Weather favorable for pollination

* Export inspections -12.5% from year ago

Soybeans

* Crop rating unchanged at 54% G/E

* Pods set on 7% of soybeans, 28% is average

* Inspections -24% on the year

* Chinese buying talk cast aside

* Buyers opt for SAM soybeans over US

Wheat

* Winter crop 69% harvested, spring crop 76% G/E

* Russia lowers wheat export forecast 1 mmt

* Quality tour begins this week

* Global harvest pressure

* $4.99 trendline support breaks

Livestock

* China takes pork from Argentina

* Replacement beef heifers -4.3% on the year

* US pork in corn storage 622.4 mil pounds, 561.9 in 2018

* Pork bellies in cold storage at 56.5 mil pounds, 53.3 in 2018

* Beef in cold storage at 394.5 mil pounds, 448.6 mil in 2018

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, July 22nd, 2019

Overnight weakness carried over into today’s trade as the buying enthusiasm that supported the market to end last week did not surface. The heat across the United States broke down over the weekend, giving way to favorable growing conditions for US crops. This is especially the case for corn as it works its way through the pollination stage. Conditions are also non-threatening for the soybean crop at this stage. Chinese rumors of buying US commodities did not give the market much support either. The day’s losses were held in check by a hesitation to remove too much risk premium at this stage of the production season.

Weather was again a main factor in price discovery today. Conditions have turned to a favorable pattern for much of the US and are expected to remain so. While we may see a build in temperatures towards week end, nothing is in the forecast that would be considered unseasonable at this time. In fact, conditions are quite favorable as corn starts pollinating. Forecasters are keeping an eye on long range models though, as some do indicate elevated temperatures could return in early August.

Starting last Friday there were several reports of China showing interest in US commodities that surfaced. More of these came out over the weekend, including a list of some of the products China may be looking at for import. These had little impact on trade as it is not the first time this story has surfaced yet no significant buying has followed. Officials are now stating this may have simply been a “shopping list” of products China might be interested in if the trade dispute with the US would end, not what they intend to buy in the immediate future.

Export inspections for the week ending July 18th were on the light side for corn, soybeans, and wheat, as totals for all three were under amounts needed to reach yearly projections. Corn inspections came in at 17.25 million bu, soybeans reached 20.5 million bu, and wheat was at 15.9 million bu. With six weeks left in the marketing year, corn inspections are down 12.5% and soybeans are 24% under a year ago.

The protein content of this year’s Brazilian soybean crop is getting market attention. Reports indicate the protein content has dropped slightly from last year’s 37.1% to an average of 36.8%. The initial reaction is this would deter Chinese demand, but that may not be the case. The lower protein content is still within Chinese requirements and competitive with the US. The price difference, including tariffs, is also a factor that favors Brazilian soybeans over the US.

After a strong technical day on Friday, futures suffered a set-back in today’s session. All three of the main contracts had technical support break, maintaining the weak tone of the market. This gives support to thoughts that we are in a sideways trending market and may be set on finishing out head and shoulder patterns on the charts. If correct, we will see further technical declines in the near future.

Much of what took place in the livestock markets today was position balancing. Cattle futures have been under-valued compared to the cash market which caused buying to surface in that complex. The opposite has been true in hogs, where futures have been at a sizable premium to the cash contracts. Livestock did benefit from cheaper feed grain values and a slight uptick in wholesale 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; Monday, July 22nd, 2019

Futures were weaker in the overnight session as last Friday’s buying did not carry over into the weekend. Favorable weather is a main factor for this as the heat that was impacting the Corn Belt last week broke down as expected. Last Friday we had an influx of risk premium just in case forecasts changed over the weekend. Current conditions are favorable for crop production and now this risk premium is again being removed. Trade is keeping an eye on month end forecasts though, as some models are indicating we could see a return of elevated temperatures. Weekend rumors of Chinese buying are not holding much support for the market as these were also reported last Friday. Fresh news is limited this morning which is also weighing on trade. Updated crop reports will be released after the close and expectations are for a slight improvement to both corn and soybean ratings.

Highlights

* Weather turns non-threatening

* Chinese demand reports

* Ratings 1-2 points better tonight

* Risk premium being taken back out of market

* Farm borrowing on the rise

* USDA to include “much more” data in August WASDE

* Breaks have generated buying interest

Corn

* Argentina making exports

* US ethanol plants scaling back production

* Brazil raises 19/20 crop forecast by 3 mmt

* Better ratings tonight

* Favorable pollination weather

Soybeans

* Chinese interest rumors

* US new crop demand remains low

* Lower protein content in Brazil soybeans

* Brazil soybeans likely still higher protein than US

* Brazil 19/20 production forecast at 123 mmt

Wheat

* Spring wheat tour this week

* EU weather less than favorable

* Russian crop lowered 2 mmt

* Argentina to expand plantings 1 million acres

* Harvest pressure to ease this week

Livestock

* June COF as expected at 102%

* June placements also as expected at 98%

* Cattle inventory on July 1st at 103 million head

* US cattle inventory equal to last year

* Hog weights on the decline

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; Friday, July 19th, 2019

Futures were solidly higher today as technical buying surfaced. All week we have seen technical support taken out as values dropped. This removed a large amount of risk premium that was in the market at a time when this is still highly needed. This is especially the case with current weather conditions. Soybeans were the leader today, taking additional support from rumors that China may be in the market for US soybeans. Volume was thin in today’s trade which allowed values to be more easily pushed higher.

Several stories surfaced today surrounding US and China trade relations. The two sides held phone conversations yesterday and reports are they will be conducting more of these and possibly a face to face meeting as well. On top of this it was rumored today that China may have booked US soybeans. It is also thought China will need to buy US soybeans to bridge the gap between crops out of South America. Trade has heard these stories several times though and needs verification before over-extending their buying.

We are starting to see estimates released surrounding next year’s Brazilian soybean production. The firm Safras and Mercado released a projection for a record 123.8 million metric ton soybean crop in Brazil for the 2019/20 crop year. This would be a 4.7% increase from this year’s 118.2 million metric ton crop. It is believed that Brazilian farmers will seed 90.4 million acres of soybeans this coming year, a 0.8% increase from last year. This puts Brazil on track to surpass the United States as the world’s leading soybean producer and supplier.

The United States is also set to see its Russian competition in the global commodity expand. Russian officials have announced they will be investing $70 billion in that country’s grain infrastructure in the near future. This will cover storage facilities as well as transportation upgrades. By doing so, Russian officials believe their grain production will expand to 150 million metric tons compared to this year’s 118 million metric tons.

Weather outlooks gave the market mixed signals today. Extreme heat is being forecast for much of the US through the weekend, but then shifts west and unseasonable cool temperatures move into the east. This would create favorable pollination conditions as the corn crop starts that stage of growth. Trade is keeping an eye on late-month forecasts that are starting to indicate a return to higher temperatures.

Technicals played a major role in today’s trade as futures were able to climb back above technical resistance. While this instigated fresh buying interest, light volume prevented advances from being built on. Technical buying was more predominant in the soy complex as funds remain short that complex while already being long the grains.

Livestock futures were higher today as buying surfaced in each division of the complex. The strongest of the livestock was the hog contracts as slaughter numbers have slipped considerably from a week ago. For the week an estimated 94,000 fewer hogs have been processed from last week. Cattle futures were also higher but did find pressure from a lack of fresh buying interest ahead of today’s cattle on feed and bi-annual inventory reports. Livestock trade was also supported by concerns over what impact the recent heat has had on feed efficiencies.

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, July 19th, 2019

African Swine Fever Trims Demand

Export data out of China shows just how far their soybean imports have been reduced this year due to African Swine Fever and the US trade war. China’s June soybean imports were down 11.5% from May as the country’s hog herd was reduced. June 2019 soybean imports were also down 25% from June of 2018. For the calendar year China has imported 6.51 million metric ton fewer soybeans than a year ago. This brings into question the entire soybean demand figures being issued by the USDA.

The drop in Chinese hog production has been great enough that feed mils are starting to close, including ones owned by Cargill.

These losses in China hog herd is impacting the country’s financial stability. China’s Gross Domestic Product, a tool used to measure financial soundness, is only expected to show a growth of 6% for the April to June quarter. This is the least amount since 1992, and the result of both the US trade war and economic losses from African Swine Fever. The concern is what the ripple effect this may have on the global economy if China backs off on all imports and investing.

Not only are we seeing doubt on soybean demand, but on corn as well. The United States is seeing less than hoped for corn demand as buyers are opting for cheaper offerings in the global market. The main competition is coming from Argentina and the Black Sea. There is also uncertainty on domestic corn demand as more ethanol plants are reported to be slowing operations. Heavier use of wheat as a feed grain is also competing with corn in the domestic market.

Wheat harvest is progressing across the US, and as it does, more yield data is being collected. Yields are being reported as above average, but so are toxin levels. So far, the most attention is on Vomitoxin. The combination of these two factors could easily lead to more wheat being used as a feed grain this year.

We are also starting to see more accurate yield data on the global wheat crop. Russian officials have reduced their wheat crop potential due to late-season drought conditions. In turn they have reduced their export forecast by 4.6 million metric tons. At the same time, Ukraine officials have upped their wheat production estimate, putting the total crop 17% greater than a year ago. While these factors do open the door for more US export potential, the fact the US is the highest priced source for wheat in the world market is a hindrance to sales.

Farmer movement across the Corn Belt remains mixed. Heavier movement is taking place in the Western Belt, which is not surprising as that is where the crops look the best. Farmers are more comfortable in makes sales when crops look good. Movement in the Eastern Belt is lower as that is where most production issues are taking place. This is especially the case on corn, where substantial premiums have been paid to entice deliveries.

These premiums are starting to take a toll on processors, mainly ethanol manufacturers. Reports are starting to come in that ethanol plants have been forced to pay upwards of 75 cents over Chicago futures to try and secure needs. Even with this, farmers have been hesitant to sell as they do not know how much old crop inventory they may need to cover new crop sales. Others are simply holding out for higher values. We are now hearing reports of ethanol plants halting operations until movement picks up, which may not come until the fall harvest.

Weather remains a primary topic in today’s trade. We have started to see a shift in attitude though, with regions of the Corn Belt that were previously flooded now claiming they could use precipitation. This is especially the case in the east where unseasonably warm temperature have sped up soil moisture losses. There are also some concerns over the impact heat may have on corn pollination as that stage of development gets underway.

We are starting to hear some concerns over the possible impact of recent heat on the standability of the US corn crop. The corn crop had ample soil moisture all spring and did not set the root system it normally does. This can cause two issues later in the growing season. For one, the roots may not be able to pick up moisture if soils turn dry. Another concern is how stable the crop may be with insufficient roots to hold plants in place. These could easily become more of a topic as the growing season progresses.

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, July 19th, 2019

Trade is on the positive side ass the night session ends as light short covering ahead of the weekend takes place. A significant amount of risk premium has been taken out of the market this week and now some of this is being replaced. Much of the fundamental focus of today’s session will be on weekend weather outlooks. The extreme heat that is affecting much of the US is expected to break down by early next week and be replaced with much cooler temperatures. In fact, some regions will fall to below normal temperatures. This will create favorable conditions as the US corn crop starts to pollinate. Technicals will also play a role in today’s trade as futures are trying to climb back above recently broken support levels. The market will also keep an eye on trade developments with China as both sides try to reach some sort of resolution to the ongoing conflict.

Highlights

* Weather turns non-threatening

* Trade starting to look forward to Aug 12th WASDE

* Technical support broken this week

* Risk premium taken out of market

* US/China trade talks stalled

* More uncertainty on US acres

* We may see MFP details next week

Corn

* Heat damage minimal

* RSI falls to 49%

* Weather favorable for pollination

* Firms have raised corn yield estimate

* Weak SAM basis takes buyers away from US

Soybeans

* Lack of Chinese demand impacts global balance sheets

* US new crop demand remains low

* RSI at just 46%

* Short fund position limits fresh selling

* Buyers favoring SAM soybeans over US

Wheat

* US overpriced in global market

* Global harvest pressure

* Spring wheat tour next week

* Heavier sales of winter wheat

* RSI at 45%

Livestock

* Position squaring ahead of COF report

* Bi-annual cattle inventory this afternoon

* Smaller dairy herd expected

* Cash pork supports futures

* Hog slaughter numbers dropping

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, July 18th, 2019

Fund selling resumed in the overnight session, giving us lower values. The removal of weather-related risk premium was the primary cause of this action. While much of the US is currently experiencing excessive heat, this is expected to break down by the end of the weekend. Precipitation chances are increasing as well. The combination of these weather events is considered favorable for crop development by trade. Trade is also becoming increasingly concerned with import buyers passing on our offerings in the global market due to elevated prices compared to other sources. Even if crops are not as large as earlier predicted we are not at a point where rationing is needed. Trade will closely monitor this morning’s export sales report to see if China has purchased any products from us in the past week. What may be more of a factor is if cancellations take place. Fresh news is on the light side today which is also limiting early trade.

Highlights

* Weather models turn neutral

* $325 billion tariffs possible on China

* Brazil/India meet on possible ethanol partnership

* Russia to invest $70 billion in infrastructure

* Rail movements -3.9% last week, -3.3% for the year

* US/Japan working on small trade deal

* US export forecast too high

Corn

* Argentina predicts larger crops than USDA

* Prevent plant acres may be 7-8 million

* Ethanol production remains high

* Heat units seen as beneficial

* Weak SAM basis takes buyers away from US

Soybeans

* Russia sells soybeans to China

* Prevent plant acres may total 2-3 million

* Brazil investments support expansion

* Weather market for soybeans just starting

* Buyers favoring SAM soybeans over US

Wheat

* US overpriced in global market

* So Korea finds no GMO content in US imports

* Russia predicts 40 mmt of exports; USDA using 34.5 mmt

* Harvest pressure building

* Feed usage rising

Livestock

* Higher cattle on feed numbers Friday

* Global pork supply shrinking

* Seasonal demand for bacon rising

* Beef demand stagnant

* Lower feed costs beneficial

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, July 17th, 2019

Trade was mixed to today as consolidation took place following our early week break in futures. A tempering of weather forecasts calling for extreme heat across the Corn Belt limited futures potential today, as cooler and wetter temperatures are expected to settle in across the Corn Belt next week. Any remaining heat is expected to be pushed into the Plains. Trade was also impacted today by ongoing trade issues between the US and China and reports of import buyers passing on US offerings due to price. Soybeans were the weak commodity as late-session selling developed in that complex. A report that indicated prevent plant acres may be higher than what the USDA indicated in the July balance sheets helped put a floor under today’s trade.

A story floated through the market today that received mixed interest. According to sources associated with the USDA’s Risk Management Agency, prevent plant acres through early July are higher than what has been indicated. It is reported that prevent plant acres by July had totaled between 7 and 8 million for corn and from 2 to 3 million on soybeans. Total prevent plant acres are estimated at 12.5 million. The question now is if these numbers are accurate, and if they will show up in the August WASDE report.

We are starting to hear some concerns over the impact of recent heat on the US crops, primarily corn. The corn crop had ample soil moisture all spring and did not set the root system it normally does. This can cause two issues later in the growing season. For one, the roots may not be able to pick up moisture if soils turn dry. Another concern is how stable the crop may be with insufficient roots to hold plants in place. These could easily become more of a topic as the growing season progresses.

Markets are becoming increasingly concerned with the lack of trade issue resolution between the US and China. President Trump has voiced his displeasure with China and their failure to purchase US products. China has opted to buy products from all other courses in recent weeks, including soybeans from Russia. The concern now is that the US will place another round of tariffs on China, further delaying any resolution.

Ethanol manufacturing data for the week ending July 12th was released this morning, showing us production for the week was up 19,000 barrels per day from the week before. This put the week’s average ethanol manufacturing at 1.066 million barrels per day. Ethanol stocks increased for the 3rd straight week though, rising by 365,000 barrels to a 23.365-million-barrel total. The United States now has 1.6 million more barrels of ethanol in reserve than a year ago.

Technical action in the market was less influential today that in recent sessions. Corn, soybeans, and wheat all appear to be forming head and shoulder patterns, but we need more confirmation from each commodity for verification. The greatest concern when it comes to technicals at this time is all of the chart gaps that were made when the May rally started and the possibility of filling these before we can move higher.

Livestock trade was mixed today with cattle contracts under pressure and hogs on the plus side. Cattle futures were pressured today by a simple lack of trade in both futures and the cash side. Low consumer demand is also weighing on cattle values. Hogs were supported today by simple short covering and a slowing in slaughter numbers. Packing plants are taking down-time, and this could start to impact wholesale pork supplies as well.

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, July 17th, 2019

Trade was quieter in the overnight session compared to what we have seen so far this week. Fund selling has subsided for now which is allowing the market to catch its breath. This week’s losses are being credited to a breaking of technical support and mixed opinions on weather forecasts. Much of the US is experiencing elevated temperatures this week, but models show this breaking down by the start of next week. For crops that have been needing heat units this has been nearly perfect. The market has also struggled from ongoing trade issues between the US and China. It was reported these issues were being resolved, but updated reports indicate otherwise. Soybeans took additional pressure in yesterday’s session from rumors that China may be rolling sales forward due to poor crush margins. There is a lack of fresh news in the market this morning which is preventing a rebound from taking place. Today’s trade will again be driven by weather, technicals, and any new developments on the trade front.

Highlights

* President claims “long way to go” with Chinese trade

* Concerns over possibly seeing more Chinese tariffs

* Heat to last through weekend

* Basis values starting to soften

* US crop maturity slow

* Buyers passing on US offerings

* Fund traders showing more interest in outside markets

Corn

* Technicals turn negative

* Ethanol plants slowing operations

* US crop conditions improving

* Brazil Safrinha harvest at 60%

* Crop receiving heat units, need rain

Soybeans

* China still taking US soybean bookings

* China may roll some purchases forward

* US crush pace questioned

* Doubt cast over US acres; thought to be too high

* Buyers favoring SAM soybeans over US

Wheat

* Winter wheat yields high

* Russia lowers crop estimate

* Russia still projects a crop 3.3 mmt larger than USDA

* Germany to produce large crop despite heat

* Feed usage rising

Livestock

* Chinese hog herd continues to shrink

* Global beef importers favor Australia over US

* Friday COF estimated at 101.8%

* June placements estimated at 97.7%

* US consumer demand low

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, July 16th, 2019

Trade was on the defensive to start today’s session as technical selling continued. Additional pressure came from the improved crop ratings in the weekly conditions report which indicated the size of the crops may stabilize. There are some who believe this improvement was just a one-week happening though, and condition will slip next week. Improved weather forecasts added to the day’s negative tone, as did worries over commodity demand. Fund traders showed more interest in the outside markets than the ag products today which also pressured futures. A statement from President Trump that there is “a long way to go” in Chinese trade negotiations added further pressure to the market.

While the condition of the US corn and soybean crops improved last week, there remains concern over the maturity pace. Field scouts claim both crops are currently behind their normal maturity levels by two to four weeks. This is not a major lag, but it is enough to cause some concern for how the crops finish. One is the possibility that crops will be finishing out under late-summer heat. Another is that crops could be impacted by an early frost or freeze. Even if neither of these would impact yield they could definitely affect quality. These possibilities are keeping a certain amount of risk premium in the market even if current conditions are not as threatening.

Basis values across the United States have started to stabilize. Basis has been on a steady improvement for the past several weeks as country movement has been non-existent. Country movement remains light, but we are starting to see demand back off instead. One of these is ethanol where plants have started to go off-line for annual maintenance. Others are claiming they will remain idle until processing margins improve. We are also seeing buyers pass on US offerings in the export market in favor of cheaper supplies from other sources. The combination of these has lessened the desire to own inventory at today’s basis values.

Winter wheat harvest is progressing across the US at a quick pace due to the hot, dry weather conditions. The most activity has been in the west, but we are now seeing the east get started as well. Yield reports are variable, but so far appear to be average and in line with expectations. Quality is also variable but reportedly higher in the west as well. The wet spring and growing season in the east are the primary cause of the variance.

Trade was still debating the NOPA crush data that was released yesterday during today’s session. The crush total for the month of June was 148.8 million bu, the lowest total in 21 months. Market bulls quickly credited this to the flooding in the Midwest that slowed processing. While this may have been a factor in the low usage, it does not reverse the trend of four consecutive lower crush totals than a year ago. This is stemming from the lack of export business the US is seeing and increased competition from South America, mainly into China.

For the second day in a row we had a breaking of technical support in the market. December corn has taken out support for two days straight and now appears to have its sights on long-term support at $4.20. September wheat in Chicago found support at the $5.01 level today but did not uncover much buying interest when it dropped to that mark. The greatest technical losses cam in soybeans where the contract took out support at $9.09. Given recent chart patterns this could set the contract up to test support at $8.94.

Livestock futures were mixed today with cattle lower and hogs posting advances. Cattle were pressured by sluggish demand and building packer inventories. Cattle losses were held in check by the heat in the Midwest that tends to limit gains. Lean hog futures were also pressured by lackluster demand, but a slowing slaughter pace was supportive. News that the US and China would resume trade talks later this week also supported hog futures.

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, July 16th, 2019

Yesterday’s weak close carried over into the overnight session. These losses were instigated by technical selling yesterday, but improved weather outlooks added to the negativity. Improved crop ratings added to the negative tone in overnight trade, as did added chances of rain for parts of the Corn Belt. Radar shows rains moving through the western regions of the Corn Belt today and these are expected to build as the day progresses. News that import buyers are passing on US offerings due to price is also pressuring early trade today. The lack of progress on US and Chinese trade talks is also a negative factor. Losses are being limited so far by ongoing tightness in the cash market and thoughts we will see further decreases to US acreage in the August supply and demand report. It would not be surprising to see sideways but choppy trade until that data is released.

Highlights

* Hurricane Barry falling apart fast

* US crop rating improves

* Crop progress 4 to 6 weeks behind

* Chinese economy a concern following Trade Tariffs, ASF

* NOPA crush lowest in past 21 months

* US losing export business

* Long range weather cooler, wetter

Corn

* Condition +1% at 58% G/E

* 17% of crop is silking, normal is 42%

* Ukraine raises crop estimates

* Export loadings 81% of expectations

* Crop receiving heat units

Soybeans

* Crop up 1% at 54% G/E

* Crop is 22% bloomed, 49% is average

* Chinese imports -25% in June

* Funds holding short position

* Export inspections 84% of estimates

Wheat

* Winter wheat 57% harvested

* Spring wheat 76% G/E

* US harvest pressure

* Quality reports becoming mixed

* Russian yields lower than year ago

Livestock

* Chinese pork production -5.5% in 2019 so far

* Chinese hog herd -26%

* Cattle trade untested

* High slaughter numbers

* Consumer demand not up to expectations

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, July 15th, 2019

The strength we had in the overnight session did not carry over into today’s session on the Chicago Board of Trade. Last night’s gains came on the heels of weather forecasts and conditions that are hot and dry for much of the Corn Belt. Light follow through technical buying also supported overnight trade. This same interest was not shared by day traders though, and futures set-back as a result. Concerns over the global economy after China posted the lowest GDP growth since 1992 this morning was also negative. Losses were held in check by a hesitation to liquidate long positions and thoughts US acres are currently over-estimated by trade.

The big story in today’s trade was weather. Heat is impacting much of the US again this week with temperatures into the 90’s for many areas. Precipitation with this heat is scattered and mostly outside the Corn Belt. The question is if this is harmful for the crops or possibly beneficial. Crops have not received the heat units they need this year but are now quickly catching up. This is especially the case with corn where shallow root systems are being reported. Updated weather models show the system moving west by the end of next week, which will limit crop impact. The fact the US has ample soil moisture is also limiting the current impact of high temperature.

Economic data out of China was negative for trade today, as progress has slowed considerably. China’s GDP is only expected to show a growth of 6% for the April to June quarter. This is the least amount since 1992, and the result of both the US trade war and economic losses from African Swine Fever. The concern is what the ripple effect this may have on the global economy if China backs off on all imports and investing.

Export inspections for the week ending July 11th were on the light side. For the week the US inspected 26.6 million bu of corn, 31.4 million bu of soybeans and 11.6 million bu of wheat for export. These were all under the amount needed to meet yearly projected totals. With just seven weeks left in the old crop marketing year, corn inspections are 81% of the projected total and soybeans are sitting at 84% of expectations.

The National Oilseed Processor Association report was released today for the month of June. According to NOPA data, 148.8 million bu of soybeans were crushed in the month, the lowest monthly total in 21 months. This total compares to 154.8 million bu being crushed on May and 159.2 million bu in June of 2018. The wet spring and plants delaying shut down from flooding are the reasons being given for the poor monthly crush total.

After five consecutive higher closes, profit taking developed in the soy complex today. This was partially technical as recently established support was taken out. November soybeans also dipped below the 20-day moving average at $9.24 which intensified selling. December corn futures also suffered from a technical set-back today, although the contract did see resistance turned support at $4.48 ½ hold.

Livestock futures were mostly lower today as demand concerns again took ahold of the market. The most interest in the livestock market is on China where pork production in the first six months of the year were down 5.5% from a year ago due to African Swine Fever. China also imported 25% fewer soybeans in June as the country’s hog reduction continues. China has not upped its pork imports from the US though, which is disappointing to the hog complex. Cattle futures were mostly lower today as buying simply did not develop.

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, July 15th, 2019

Trade is mixed overnight as we see new week positioning take place. Much of what we are seeing is simple fund positioning as several traders exited the market ahead of the July WASDE report and are now just starting to return to trade. There is little fresh news this morning to entice new positioning either. Weather is a prime topic in trade this morning as high temperatures are still being forecast for the US, although we are seeing several chances of precipitation. These events are scattered though, without general coverage. Trade is mixed in their opinion of condition tonight, with some expecting higher ratings while others are expecting to see a decrease. Tropical Storm Barry did less damage in the Delta than expected with flooding not as bad as forecast. Expect weather updates and fund activity to drive today’s trade.

Highlights

* Lack of rain in Corn Belt becoming a concern

* Flooding causes production loss in China

* Chinese soy imports -6.61 mmt this year

* Country movement very thin

* NOPA crush today est 154.4 million bu

* Delta flooding not as bad as expected

* Trade showing more concern on demand

Corn

* Acreage predictions doubted

* Processors halting purchases, weaken basis

* Condition improvement expected

* Large acreage decline not common from July forward

* Export demand slow

Soybeans

* Loadings not keeping up with sales

* Chinese demand slow

* No trade-talk progress with China

* Weather stressing crop

Wheat

* Favorable weather in Argentina promotes plantings

* Argentina to expand plantings 1 million acres

* EU/Black Sea weather a concern

* US yields/quality average as harvest progresses

* US harvest pressure

* Spring wheat looks very good

Livestock

* LTD July contracts

* US beef production to hold steady through 2020

* US pork production to increase 185 million pounds in 2020

* High slaughter numbers

* Higher feed grain values weigh on feeders

Closing Comments; Thursday, July 11th, 2019

The early portion of today’s trade was spent getting final positions in place ahead of the monthly balance sheets being released. Export data weighed on early trade, as did the anticipation of a negative report from the USDA. Weather had mixed reactions by trade, as even though there are concerns over the heat in the Corn Belt, the crops still have adequate soil moisture, and there are chances of rains with the heat. More concern is what impact the tropical storm may have when it lands in the gulf this weekend.

The long-awaited July supply and demand report was released today and did contain a few surprises. Corn yield was left unchanged from June at 166 bushels per acre, and acres were upped to 91.7 million from last month’s 89.8 million. This will give the US a crop of 13.875 billion bu, 195 million bu more than projected last month. Very few changes were made to corn demand, giving us a new crop carryout estimate of 2.01 billion bu. This was 335 million bu more than the June prediction, and above the range of trade expectations.

Updated soybean data gave us a 4.6-million-acre reduction to plantings and a 1 bushel per acre yield cut. This puts the national average soybean yield estimate at 48.5 bushels per acre and a crop of 3.845 billion bu. We did see a slight reduction to demand, but a tightening of new crop reserves is still expected. New crop soybean ending stocks are now projected at 795 million bu compared to the 1.045 billion bu in June.

Few changes were made to the wheat balance sheets, but that grain received the most bullish reaction. Wheat ending stocks are now estimated at an even 1 billion bu, down 72 million bu from last month. Wheat futures were more focused on global weather today, mainly the forecast for Australia to remain hot and dry for the next 90 days.

The global numbers were mixed in today’s release. World corn ending stocks for the 2019/20 marketing year are pegged at 198.9 million metric tons, up 8.4 million tons from June. The world soybean carryout number is 104.5 million metric tons, 8.2 million fewer than last month’s projection. Global wheat carryout is now estimated at 286.5 million metric tons, down 7.8 million from June.

Export sales for the week ending July 4th were termed disappointing by trade. Corn sales for the week were split with 19.9 million bu on old crop but a negative 4.3 million bu on new crop as cancellations took place. Soybean sales totaled 4.86 million bu for old crop and 4.76 million bu on new crop. While China was listed as a buyer of soybeans, the cancellation of a large unknown booking was more negative. Wheat bookings came in at a light 10.45 million bu. In a related note, President Trump tweeted today that “China is letting us down” when it comes to agriculture trade.

Meat exports were mixed on the week and weighed on the livestock complex today. Pork exports for the week totaled 11,300 metric tons, a 52% reduction from the week before. China was not listed as a buyer of pork, which disappointed many traders. Beef sales were better for the week at 21,500 metric tons, up 15% from the prior week. Given the slaughter numbers we have seen in recent weeks we need to see demand pick up, which is expected to happen once the US and China resolve their trade issues.

Several points of technical resistance were tested today, including the 200-day moving average on December corn. While this point held, the fact corn rallied to it was positive. We also saw technical buying in the wheat complex during the session. The question now is if we can break through these to continue our rally, or we see a set-back.

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; Friday, June 28th, 2019

Trade started out mixed today as final positions were placed ahead of the USDA data dump. Soybeans were the early leader, taking support from a 20 million bu purchase of old crop inventory by China. Trade viewed this as a “good faith” purchase ahead of this weekend’s G20 summit, where Presidents Trump and Xi are scheduled to discuss the current trade war. No resolution is expected to come from this, but rather an understanding of where each side stands. Now much has changed from the weather front with high temperatures forecast for much of the US over the next week. With a full tank of moisture this will be a great benefit for developing crops.

The corn market was shocked today when the USDA published a revised plantings acreage number of 91.7 million, an unbelievable 1.9 million larger than what was published in the June supply and demand report. This was also 4.7 million more than the average trade guess. Corn stocks as of June 1st were reported at 5.2 billion bu, 2% less than a year ago. On farm corn inventory stands at 2.95 billion bu, a 7% increase on the year. These stocks indicate a March to May corn disappearance of 180 million bu more than a year ago.

The additional corn acres came from soybeans as planting were reduced to 80 million acres. This was 4.7 million under trade expectations. The USDA has stated it would revise its planted acres in the July balance sheets though, which casts a shadow of doubt over this figure. Soybean reserves on June 1st totaled 1.79 billion bu, a large 47% increase from a year ago. Of these, 730 million bu were held on-farm which is 94% more than last year. Last quarters soybean usage was 5% greater than last year at 937 million bu.

Wheat figures came out pretty much as expected across the board. All wheat acres are projected at 45.6 million which was equal to trade expectations. Wheat stocks were just under the average estimate at 1.07 billion bu. March to May wheat usage totaled 521 million bu which was up 32% on the year.

After these reports were released, the USDA said acreage will in fact be resurveyed and published on August 12thdue to the slow planting pace in the US this spring.

The cash market continues to provide underlying support for futures trade. This is especially the case for the Eastern Corn Belt, and specifically on corn. Reports are showing corn buyers in the east are posting immediate ship corn bids from 50 to 65 cents over futures to encourage movement. Even with this incentive very few bushels are moving, which is causing some processors, mainly ethanol, to slow operations rather than run at negative margins.

While mostly muted, an announcement has come out of Brazil that will impact world soybean balance sheets. Brazilian officials believe that country will expand soybean plantings by nearly 2 million acres this coming year. This is mostly from the elevated demand Brazil is seeing for its soybeans, mainly to China. Brazil wants to prove it can supply soybeans to the world market and develop its status as the leading world source for needs.

Trade is looking forward to next week’s crop progress report, with some field scouts claiming we will see an improvement to ratings. This is especially the case on soybeans where talk is the rating will climb by two points. A few have even stepped out to say they believe the initial crop rating at 54% Good/Excellent will be the lowest of the growing season. While it is early to make such a statement, trade is taking it as an indication the crop is better than thought.

Livestock trade was on both sides of unchanged today as month end positioning dictated market direction. Hogs continue to be pressured by large US stocks, including the hog report that showed inventory in the US stands at 75.52 million animals. This is up 3.9% from a year ago, and higher than most analysts had expected. We did see China buy just over 10,000 mt of Us pork last week though, which was positive. Cattle futures were firm today as hopes of elevated demand overshadowed high slaughter numbers.

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, June 28th

Stocks/Acreage Updated

The corn market was shocked when the USDA published a revised plantings acreage number of 91.7 million, an unbelievable 1.9 million larger than what was published in the June supply and demand report. This was also 4.7 million more than the average trade guess. Corn stocks as of June 1st were reported at 5.2 billion bu, 2% less than a year ago. On farm corn inventory stands at 2.95 billion bu, a 7% increase on the year. These stocks indicate a March to May corn disappearance of 180 million bu more than a year ago.

The additional corn acres came from soybeans as planting were reduced to 80 million acres. This was 4.7 million under trade expectations. The USDA has stated it would revise its planted acres in the July balance sheets though, which casts a shadow of doubt over this figure. Soybean reserves on June 1st totaled 1.79 billion bu, a large 47% increase from a year ago. Of these, 730 million bu were held on-farm which is 94% more than last year. Last quarters soybean usage was 5% greater than last year at 937 million bu.

Wheat figures came out pretty much as expected across the board. All wheat acres are projected at 45.6 million which was equal to trade expectations. Wheat stocks were just under the average estimate at 1.07 billion bu. March to May wheat usage totaled 521 million bu which was up 32% on the year.

Weather data shows that the month of June will go down as a record setter across the Corn Belt. June has the Corn Belt on track for eleven straight months of above normal precipitation. This will also make the last twelve months the wettest for the Corn Belt in the past 125 years. The question now is if these conditions will continue, or we see a complete reversal to drier than average conditions.

There are two well-defined opinions forming in the market surrounding recent weather in the Corn Belt. The question is if the recent lack of heat units is negative for production or beneficial as the crops have had limited stress. This also brings into the question on whether recent growing conditions are as negative as we believe given today’s plant genetics.

We are starting to see more attention placed to commodity demand, mainly for corn. In the latest supply and demand report the USDA reduced corn demand 425 million bu for this coming marketing year from a combination of lower inventory and higher values. There are thoughts we could easily see another 200 to 400 million bu reduction to corn usage by the end of the marketing year.

The debate surrounding this situation is if corn demand will be curtailed by price or by competition from other sources in the world market, mainly South America. South American corn production forecasts are rising at the same time US production is decreasing. We are also seeing larger corn crop estimates out of Ukraine. When added together, these three suppliers are expected to produce nearly 2 billion bu more corn than a year ago.

The real question surrounding this topic is if corn demand even needs to be cut. The current new crop carryout projection is for 1.675 billion bu. While this is tighter than early forecasts, it is not uncommon to see ending stocks that low. The question is if crop size continues to decrease and we get to a point where corn needs to be rationed. That will change the dynamics of the entire corn complex and make price prediction very difficult.

These issues are not a problem in the soy complex, and in fact, just the opposite is taking place. Soybean carryout is over 1 billion bu on old crop and just under it on new crop at 995 million bu. It is quite likely both figures will increase over the remainder of the marketing year especially of soybeans gain acres that were intended to be seeded to corn. Rather than rationing in corn the question is how competitive soybean values need to be to encourage demand, especially with trade issues and tariffs elevating the cost of our soybeans above the global market.

Some private analysts are not as optimistic on US ending stocks. For corn we are starting to see a range from 1 to 1.2 billion bu. For soybeans we are starting to see estimated of 500 to 700 million bu. While these are roughly 50% of what trade was initially forecasting, we are now starting to see demand slow, indicating these may be the lowest ending stocks predictions we see.

A result of this production loss is a much-improved regional basis. It is not uncommon to see corn basis values for immediate ship bushels as much as 50 cents over CME futures. Even with bids at this level farmers are hesitant to make sales as they are worried over new crop production and may need old crop bushels to fulfill these commitments.

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, June 28th, 2019

The primary interest in today’s session will be the release of the long-awaited quarterly stocks and revised plantings reports. Estimates have been released for these that vary considerably. The most interest may be on stocks today, as those numbers will be defined. A tremendous amount of doubt will be cast on acreage figures since planting has yet to conclude. Aside from these reports, today is also month and quarter end. It is also first notice day on the July contracts. It would not be surprising to see traders look at today’s numbers but remain absent from the market until next week and establish a position then.

Highlights

  • USDA Reports at 12:00 ET today
  • Month/Quarter end
  • Markets are consolidating
  • Corn/soy ratio at 2:1
  • World corn supply to shrink 41 mmt this year
  • G20 summit this weekend

Corn

  • Average stocks estimate at 5.33 bbu on June 1st
  • Would be largest June 1st corn stocks since 1988
  • Planted acres estimated at 86.66 million
  • Acres would be down 6.2 million from March
  • US corn $15-$20/mt above global market

Soybeans

  • June 1st stocks estimated at 1.861 billion bu
  • Would be record June 1st stocks
  • Planted acreage estimated at 84.35 million
  • Acres would be 250,000 under March estimates

Wheat

  • June 1st stocks estimated at 1.1 billion bu
  • Stocks nearly unchanged from year ago
  • Plantings estimated at 45.65 million acres for all wheat
  • Record heat stressing EU crop; rain is forecast
  • Analysts reduce Canadian crop 2.5 million metric tons

Livestock

  • Chinese pork production -30% in 2019
  • Demand prospects supporting feeder cattle
  • Wholesale beef/pork under pressure
  • US hog herd at 103.9% of year ago, estimates were for 103%

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, June 27th, 2019

Today’s session was spent getting final positions in place ahead of tomorrow’s report, as well as month and quarter end. Contract rolling ahead of first notice day on the July contracts also took place today. For the most part the market was void of fresh news which limited fresh buying interest. President Trump arrived in Japan today for the G20 summit. The US and China have reportedly reached at least a tentative agreement that will prevent additional tariffs from being implemented. Weather models continue to show heat building across the US this week into next but breaking down after that.

Export sales for last week rebounded from the previous three weeks on corn. The US sold a reported 11.6 million bu of old crop and 4.3 million bu of new crop corn for the week. This old crop total was 3.7 million bu more than the last three weeks combined. Still, sales remain below the volume needed to reach yearly projections. Soybean bookings were split with 6.18 million bu old crop and 11.74 million bu new crop. Old crop sales were above needs, but the concern with soybeans is the record low new crop bookings. Wheat sales came in at 22.5 million bu for the week, well above both estimates and weekly needs.

The new crop corn/soybean price ratio is again being noticed by trade. This ratio is holding close to 2:1 which is an indication of elevated corn plantings. This is in response to the poor corn crop that is expected this year and the need for more corn production next year. There is a different way of looking at this though, and it could be the soy complex is trying to deter plantings with lower values. If this thought is correct, it could favor corn plantings without a rally in futures.

US ethanol margins are starting to impact the industry’s manufacturing process. More plants have announced that they would be taking longer periods for maintenance this year due to the negative returns. Many ethanol plants report losing 10 to 15 cents for each gallon of ethanol that is manufactured. This is mainly from the elevated price for corn, especially in eastern regions. This has led to the draw-down we have seen to ethanol stocks declining in recent weeks.

The International Grains Council updated their world production estimates today. The IGC lowered world corn production a large 23 million metric tons, mainly from losses in the United States. The world corn crop is now estimated at 1.095 billion metric tons. A portion of the US losses were off-set by an increase in other regions of the globe. World corn ending stocks are now pegged at 271 million metric tons by the group, a 48 million metric ton decrease from a year ago.

The IGC raised the world wheat crop 3 million metric tons for a 769 mmt total.

Technicals broke in the soy complex on the July contract yesterday and this limited buying in the complex today. Much of this is simply the market correcting from its recent run up that did not generate fresh buying interest. The same correction is taking place in the grains as well, although the wheat complex appears to have less selling interest than corn. The RSI on corn is softer, which is curbing buying interest.

Livestock trade was on the positive side much of today’s session as fund buying did surface in those contracts. News that China’s hog herd will shrink by 30% this year was supportive, as the previous estimate was for a 16% decrease in production from African Swine Fever. Trade is becoming increasingly optimistic that China will eventually import US pork, even with tariffs in place. Cattle futures were mixed today as the market is still uncertain over future consumer 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, June 27th, 2019

The majority of today’s session will be spent getting final positioning done ahead of tomorrow’s USDA reports, as well as month and quarter end. Much of this has already been accomplished, which has caused trade to thin. This could easily make for a choppy session today. Trade will be interested in the weekly export numbers today to see if we can finally see demand for our corn. Combined sales for the past three weeks have only totaled 7.9 million bu so it will not be hard to see an increase. Trade will also be watching new crop soybeans as bookings for those months are record low for this time. Unless this changes soon, we will start to see demand alterations in balance sheets, and possibly an easing of concern over shorter crops. Combine these slow sales with the fact the US is already one of the highest priced sources in the global market and we may not need to see rationing beyond current levels.

Highlights

  • US/China trade talks progressing, have “a way to go”
  • US set to impose another $325 in tariffs, but may go with smaller amount
  • China wants all tariffs dropped
  • FND on July contracts is tomorrow, along with month/quarter end
  • Final positioning ahead of stocks/acreage reports
  • Demand becoming a concern

Corn

  • Buyers going to south America rather than US
  • Safrinha harvest advancing, adding to global corn availability
  • Basis continues to strengthen
  • May see corn planted on Prevent Plant acres for feed, open the way for more cash grain

Soybeans

  • Funds will not give up on short position
  • Global oilseed market under pressure
  • China cutting back on all soybean imports
  • Record low new crop sales becoming a concern

Wheat

  • Harvest pressure increasing
  • Weather remains an issue for EU/black Sea
  • US uncompetitive in global market
  • Buyers surface on technical breaks

Livestock

  • Canada looks for buyers after China backs away
  • China will need meat imports eventually
  • Weather favorable for consumer demand
  • Hog report expected to show June 1st inventory at 103% of 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; Wednesday, June 26th, 2019

Consolidation increased today as we approach the long-awaited USDA report on Friday. Trade was also shoring up positions ahead of month and quarter end today, as well as First Notice Day on the July contracts. Weather is more favorable for the Midwest which applied additional pressure to today’s trade. Not only will this benefit developing crops, but it may entice additional soybean plantings. News the USDA will allow corn silage to be seeded on prevent plant acres weighed on that complex as it may lead to more corn for grain next fall. An overnight sale of 145,000 metric tons of US soybeans was positive for trade, as was news the US may delay additional tariffs on Chinese products, even if talks do not move forward as planned.

Stats Canada released their acreage projections today with numbers that were mostly as expected. Canadian farmers are forecast to plant 24.6 million acres of wheat this year, 700,000 more than a year ago. These acres are anticipated to come from canola, where a 700,000 acre decrease to plantings is expected. This will leave Canada with 20.95 million acres of canola production.

Ethanol manufacturing dipped a slight 9,000 barrels in the United States last week for a daily average of 1.1 million barrels. Ethanol stocks also decreased 46,000 barrels, leaving inventory at 21.6 million barrels. This is 110,000 fewer barrels in reserve than a year ago.

The US is starting to see elevated export competition in the global market. Brazil’s Safrinha harvest is at a point where more exports will start to take place, especially with this corn is being offered at a discount to the US. This may not pressure the US market though, rather it may simply mean futures do not need to rally to ration demand. US corn sales are already sparse, so any additional loss of business is unlikely.

There are also building concerns over future US soybean exports. This is mostly from the trade issues with China, and how that buyer is passing the US as much as possible for needs. Chinese soybean demand on a whole is being questioned though as the ongoing spread of ASF has reduced feed demand. One bright spot for soybean exports is news the US may not impose additional tariffs on China, although China wants all current tariffs dropped before resuming their buying.

December corn broke through its long-standing trendline support today, although it was quick to find support just above the $4.50 level. December corn has been in a consolidative mode for the past several sessions so to see a break-out was not a surprise. Overhead resistance for the contract remains at the June 17th high of $4.73. Technical profit taking developed in the soy complex today. But no significant chart changes took place. The contract continues to have support at $9.11 and resistance near $9.48. September wheat in Chicago traded right to support at $5.36 today where fresh buying was uncovered. The contract has upside resistance at $9.48.

Lean hogs were again under pressure today as the lack of demand continues to weigh on that complex. The initial reaction to news of China banning all meat imports from Canada was also bearish, although long tern this could lead to elevated demand for US pork as China continues to run out of alternative sources in the global market. Cattle futures took support from technical buying today along with prospects for elevated consumer demand due to improved grilling weather.

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, June 26th, 2019

Futures were pressured overnight as profit taking developed ahead of month and quarter end. More positioning is expected today ahead of the USDA reports at the end of the week. This generated the two-sided trade we had yesterday and easily could for the next two sessions as well. Trade will also monitor weather as even though moderating conditions are still expected for the Midwest, it appears much of the heat being forecast will be further west. We are starting to see a shift in interest from old crop to new crop which will start to affect the market as well. Fresh news is on the sparse side this morning, putting more emphasis on the technicals.

Highlights

  • US/China trade negotiations not going as hoped
  • Low crop ratings reduce some crop estimates
  • ECB basis continues to firm; still no movement
  • Favorable US weather outlooks
  • Instability in financials creates volatility in commodities

Corn

  • Analysts predict 160 bpa yield, crop at 12 bbu
  • Feed demand curtailed with higher wheat usage
  • Record Brazil exports in May
  • ECB buyers paying up to +50 for immediate ship bushels

Soybeans

  • Funds holding to short position
  • Estimate released for 45 bpa yield, crop of 3.6 bbu
  • Fewer Canadian canola acres, more demand for Us soy
  • China May imports -31% from year ago

Wheat

  • Elevated feeding usage
  • Rains move through Canada
  • Canadian planting up 1-2 million acres
  • Black Sea remains hot, limited yield loss however

Livestock

  • Hope builds for Us exports
  • Slaughter number remains high
  • Consumer demand steady at best
  • Logistics impact meat exports as much as grains/soybeans

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, June 25th, 2019

Trade was on both sides today as funds started to position themselves ahead of the upcoming USDA reports. Early support came from the lower corn crop rating and the initial soybean crop rating of just 54% G/E. The likelihood of additional prevent plant acres was also beneficial, especially for corn. Global weather concerns supported the wheat complex, although these fears were tempered by field reports indicating very little damage has taken place to the Black Sea crop. Elevated positioning ahead of Friday’s reports created choppy trade as today’s session progressed, as did month and quarter end squaring. Trade is still waiting for some sign of trade development between the US and China, but all that was received today was that “talks are ongoing.”

While acres are still a market topic, we are starting to see more interest on crop condition. Crop ratings this year are well below where they were a year ago which immediately generates ideas of smaller crops. History shows that the correlation between ratings and yields is not very accurate, but they can give us an idea of overall crop health. The lowest ratings this year are also in the regions where the most unplanted acres are, specifically the Eastern Corn Belt. Some models have this region losing 700 million bu of corn output this year.

A result of this production loss is a much-improved regional basis. It is not uncommon to see Eastern Corn Belt corn basis values for immediate ship bushels as much as 50 cents over CME futures. Even with bids at this level farmers are hesitant to make sales as they are worried over new crop production and may need old crop bushels to fulfill these commitments.

China’s import data for the calendar year was released this morning, showing some significant changes from a year ago. From January through May China has imported 12.2% fewer soybeans and 12.4% less wheat. Corn imports grew by 41.4% over this period though, and soy oil imports rose by 92.6%. The most attention was on pork though, as May imports were 63% greater than the same month a year ago. Even if this pork is not coming from the US, hopes are it will create a void that the US will be able to fill.

Technicals played a larger role in today’s trade, primarily on soybeans. The spot soybean contract traded right to major support at $9.00 and bounced higher. If this level breaks it sets us up for a test of $8.95, and then down to the $8.50 level. New crop soybean also dipped below major support before rebounding. Technicals were less of a factor on the grains as both corn and wheat continue to trade in their respective sideways patterns.

Lean hogs were finally able to catch a break today and post a recovery from recent losses. Hogs have become heavily over-sold which was a primary reason for the higher trade. Thoughts that Chinese imports will eventually lead to higher demand for US pork were also supportive, even if the business is not done directly with China itself. Cattle futures were also on the plus side today as light buying and a firm cash market provided support.

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, June 25th, 2019

Even with scattered rains we did see planting take place across the US last week. As of Sunday, 96% of the US corn and 85% of soybeans were planted. This leaves 12.7 million soybean and roughly 4 million corn acres unplanted. The condition rating slipped slightly on corn which was not a big surprise given the lack of heat units. Crop conditions will now become more of a topic ion the market and if this coming week’s rise in temperatures will be a benefit. There is some question as to how long this heat will last though, as some models indicate a return to cool, wet conditions by mid-July. Aside from crop ratings, trade is monitoring trade developments as the G20 summit in Japan approaches. While unlikely, there are hopes we will see at least some trade announced at this meeting.

Highlights

  • 2019 Ag sales to China -55% from 2018
  • Another 4 million acres of Prevent plant corn acres expected
  • Market interest shifting from old crop to new crop
  • Trade more interested in crop condition than planting
  • India lowers exports due to drought

Corn

  • Corn 96% planted, 89% emerged
  • Corn rated 56% G/E, -3% last week
  • 300 to 400 million bu reduction to exports likely
  • Crop progress a concern for next fall
  • Chinee corn imports +42% from year ago
  • South Africa raises crop estimate

Soybeans

  • 85% planted, 71% emerged
  • Initial soybean rating 54% G/E
  • Much larger stocks expected Friday
  • Acreage uncertainty to last
  • Buyers opting for alternatives to US soybeans

Wheat

  • Winter Crop 61% G/E; 14% harvested
  • Spring wheat 75% G/E
  • Rains benefit Canadian crop
  • Canola acres to wheat in Canada
  • Russian crop better than expected

Livestock

  • Chinese pork imports in May 19 +63% from May 18
  • US pork supply “near burdensome”
  • Technicals breaking in hog futures
  • Cattle placed at higher weights
  • US frozen beef supply down

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, June 24th, 2019

Trade started out the week on the positive side as light buying and short covering took place. Much of this was in anticipation of the USDA reports that will be released on Friday. There is a tremendous amount of uncertainty heading into this release on acreage given this spring’s conditions across the Corn Belt. Not only are initial acres going to be nearly impossible to predict, but so are any acres that may need to be replanted. Wheat was the leader early in today’s session taking support from weather concerns in the EU. High temperatures are forecast to set in this week over that region and could impact yields. A portion of this strength was negated by better than expected yields out of Russia. Wheat traders are also concerned with the US crop and what recent weather has done to quality. Trade will thin as the week progresses and positions are set for the USDA reports.

Export inspections for the week ending June 20th were mostly as expected across the board. Soybean loadings totaled 25.06 million bu and wheat came in at 14.9 million bu. These were similar to a week ago and in the middle of trade expectations. There were 24.3 million bu of corn inspected for export, down 2.3 million bu from the week before, and near the bottom of the estimate range. All three missed the volume needed to reach yearly projected totals.

Import data from China shows their buying of US ag products this year has dropped considerably. Chinese imports of US products from January through May are down 55% from a year ago, mainly from the tariffs that have been enacted. At the same time, China has imported 21% more products from Brazil. There was a spike in Chinese purchases of US soybeans in May though as resolution talks took place.

According to a survey conducted by Creighton University, ag lenders across the US are seeing a rise in loan defaults. Lenders across ten states claim that just over a quarter of them are seeing rising defaults and one-third expect to see defaults rise this year. A large 50% of lenders are seeing farmers exit the ag industry altogether.

We are starting to see technical consolidation in the market. July corn futures have set a range between support at $4.38 and resistance at $4.64 ¼, which is the contract high. The same is taking place in July soybeans with a range established from $8.96 on the bottom to $9.21 on the top. Chicago wheat has established a narrow range from $5.15 to $5.49. The Kansas City contract has a wider range, trading between $4.39 and $4.87.

Livestock futures were again mixed as hogs had follow through selling while cattle posted light gains. Hogs are being pressured from abundant pork supplies and less than hoped for demand. The cattle market found early support from lower placements in the June cattle on feed report, although the total number of cattle in US feedlots is record high. The US frozen beef supply at the end of May was down 8.7% from a year ago which was also supportive for those contracts. Frozen pork inventory at the end of May was up 0.8% from a 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

Morning Comments; Monday, June 24th, 2019

Trade is on the positive side as we are seeing short covering and light buying ahead of Friday’s USDA reports. For the most part trade is focusing interest on stocks as those numbers will be better defined than acres. Trade is generally expecting to see higher June 1st stocks than a year ago, especially on soybeans. These high stocks may be needed though given the production issues the US is facing this year. Those issues are supporting morning trade as well. Widespread rains have all but ended the planting season for the Eastern Corn Belt for the year. There is some talk we could see soybeans used as a cover crop though, which is causing some thoughts production may be greater than believed. We are now at the stage where crop condition will start to play more of a role in price discovery than plantings. Trade will also be monitoring the trade talks between the US and China ahead of this week’s G20 summit, although no substantial progress is expected to be made.

Highlights

  • Stocks/Acreage data on Friday
  • G20 summit this week
  • Friday in month, quarter end and FND on July contracts
  • US farm loan defaults rising
  • COF report mostly as expected
  • US ag sales to China down 55% this calendar year

Corn

  • Weekly sales need to average 22 million bu
  • Record production expected outside the US
  • Better ratings tonight
  • Replants likely in ECB

Soybeans

  • First condition report of the year tonight
  • Acreage unknown until fall
  • China has 220 million bu unshipped purchases from US
  • Buyers pass on US meal due to price

Wheat

  • Stats Canada Wednesday
  • Early harvest in Russia indicates good yields
  • Black Sea turns hot, dry
  • High US ratings

Livestock

  • June 1st Cattle on Feed 101.6% from year ago
  • COF highest on date since records started in 1996
  • May placements at 97.2%
  • Cattle down 13% in past 2 months, hogs down 17%
  • Economic uncertainty weighs on consumer demand

This commentary is the sole opinion of Karl Setzer, market 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, June 21st, 2019

Trade was mixed overnight as we had pre-weekend positioning in the market. Traders have had wide price swings this week and many are now taking profits or covering their shorts ahead of the weekend. Trade also wants to see what happens with global developments before extending their current positions, mainly from the tensions building between the US and Iran. Global trade stories will also impact trade today as the US and China start to make trade negotiations ahead of the upcoming G20 summit. Weather will be a factor today as well as outlooks are still calling for heat to build across the Midwest next week, but for how long it will last is the question.

Highlights

  • USDA reports one week away
  • Poor exports on corn
  • Some concerns over shifting weather patterns
  • Concerns remain over financial markets
  • USDA to allow early working of cover crops
  • Tensions build between the US and Iran

Corn

  • Three-week sales only total 7.9 million bu
  • Ethanol margins negative but stabilize
  • Competition from Brazil increasing
  • Feed demand being displaced by wheat

Soybeans

  • Export demand remains strong
  • Technical support
  • May see planting linger
  • Crush margins remain strong
  • China asking for more bookings to be pushed back

Wheat

  • Disease reports rising
  • Harvest slow to start
  • Global production up
  • Feed use rising
  • Russia lowers export forecast

Livestock

  • China cancelled US pork purchases last week
  • Grilling demand not as strong as normal
  • On-feed estimates supportive
  • ASF continues to spread in Asia
  • Cattle weights likely to rise