News Source: SETZ

Closing Comments; Friday, July 20th, 2018

Trade was on both sides of unchanged today as fund positioning dominated the day’s session. Conflicting weather outlooks and export news were also contributors to the two-sided trade. Corn took additional support from technical indicators and a strong wheat market. Soybeans were slow to rally all day, but did take support from a late round of fund activity.

Global soybean values are being heavily distorted by recent tariffs being placed on trade. This immediately increased the cost of U.S. soybeans to a Chinese buyer by 25%. Brazil was quick to elevate soybean values by 15% to take advantage of the higher cost associated with U.S. imports. While this is allowing Brazil to sell more soybeans to China at an elevated value, it pushed many non-traditional soybean buyers to the United States, and has had little impact on our overall sales.

We are seeing mixed numbers when it comes to global grain production. Brazil has lowered its corn production in recent weeks, and the Black Sea countries have done the same with wheat production. At the same time analysts have raised their expectations on the U.S. crops. This is making it very difficult for analysts to accurately predict total production.

There are several analysts and farmers alike who believe an end to the soybean trade dispute with China would be good for the U.S. market, but this is not necessarily the case. The end of the dispute is likely going to bring an immediate rally in U.S. soybeans, and an equal collapse in Brazilian soybeans. As a result, we could easily see demand shift back to Brazil from buyers that just started taking U.S. soybeans. It is not out of the question that this could actually pressure U.S. exports rather than benefit them.

September corn futures finished today’s session 4 cents higher at $3.55 , August soybeans were 3 cents higher at $8.49 , and September wheat in Chicago rallied 11 cents to close at $5.16.

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at ksetzer@maxyieldgrain.com. The opinions and views expressed in this commentary are solely those of Karl Setzer. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Weekly Market Review; Friday, July 20th, 2018

Global Corn Supply Tightens

The global corn supply is becoming more of a focal point for the market. According to the latest balance sheets, the world will have a 50 day corn supply at the end of the marketing year. If we remove the highly questioned Chinese corn reserves, this drops to a minimal 31 day supply. Given this outlook, the global market cannot afford any corn loss this production season.

We are also seeing comparisons made between this year and last year in the market, primarily on corn. What trade is focusing on is that U.S. corn stocks are currently 270 million bu tighter than a year ago, and the world corn supply is 40 million metric tons tighter than a year ago. At the same time, spot corn futures are trading at a 40 cent lower level. This is one of the main reasons analyst feel corn should rally from its current value.

When it comes to demand the most attention in the global market right now is on China and their soybean purchases. China is currently buying and importing record volumes of soybeans, with imports at the highest levels of the year. Unfortunately, almost none of these are coming from the United States. This avoidance has more to do with political opinions than commodity values though, which makes it hard to determine when demand will increase.

There are several analysts and farmers alike who believe an end to the soybean trade dispute with China would be good for the U.S. market, but this is not necessarily the case. The end of the dispute is likely going to bring an immediate rally in U.S. soybeans, and an equal collapse in Brazilian soybeans. As a result, we could easily see demand shift back to Brazil from importers that just started buying U.S. soybeans. It is not out of the question that this could actually pressure U.S. exports rather than benefit them.

Soybean futures are currently in a tough spot. Given current economics it appears as though U.S. soybeans are under-valued. At the same time, Brazil is offering soybeans into the global market at a 20 to 30 cent per bushel discount to U.S. offerings. This is a main reason soybeans are not able to appreciate at this time.

Country movement of corn and soybeans remains depressed, which is becoming concerning to buyers and end users. We have seen several attempts to encourage movement, including basis incentives and free storage programs. While these have secured some bushels, deliveries are still not as much as hoped for. Many farmers now want to wait until they can better determine crop size to see just how much inventory they need to move, if any at all.

Trade is trying to determine what the long-term effects of this year’s slow planting pace will be. Most concern is what it will mean for crop development. While crops should have plenty of time to fully develop, they will be very uneven. This will make the window for which weather can be a factor in final yield much larger than usual.

Harvest will also be affected by the unevenness of this year’s crops. The main issue will be different maturity rates and how not all of the crops may be ready for harvest at once. This could actually end up being positive for the market as terminals will not be flooded with new crop deliveries, possibly when old crop bushels are also moving. Interior basis values could easily find support from this situation.

While it seems hard to believe, trade is already starting to prepare itself for the upcoming harvest. This brings about a seasonal change in the market, both on futures and basis. It is not uncommon to see volatility build in the cash market at this time, with buyers only wanting to secure enough old crop bushels to make it to the harvest season. We also start to see less market interest on production and more on demand as this takes place.

Officials are starting to make predictions for Brazilian soybean plantings this year. Current data indicates Brazilian farmers will expand their planting by 2 to 3% this year. This would give Brazil a total of 88.9 million acres, and a crop size of 120 million metric tons. While similar to this year, this size of a crop would open the door for more competition for the United States, especially for sales to China.

The official weather forecast for August has been released, and indicates the possibility of less than perfect conditions. N.O.A.A. predicts we will have above normal temperatures and normal precipitation across much of the Corn Belt in August. The concern with this is that we are already seeing a decline in soil moisture levels and these maps do not indicate they will be recharged any time soon. August weather has been a great benefit for yields in recent years, and this outlook does not indicate it will be repeated this year.

Karl Setzer is a Commodity Trading Advisor/Market Analyst at MaxYield Cooperative. His syndicated commentary and market analysis is available daily on radio, in newsprint and on the Internet at www.MaxYieldCooperative.com. The opinions and views in this commentary are solely those of Karl Setzer. Data used for this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Early Market Update; Friday, July 20th, 2018

After trading firmer all night, trade was mixed as we moved into the day session. Light short covering gave us our overnight strength, as did some concern over weather outlooks. Long range weather models are pointing towards above normal temps with normal to below normal precipitation. Thoughts are this will not give us the favorable end to the growing season that we have seen in recent years. This would actually be more of a case for soybeans than corn given current maturity levels. Normally this would give the soy complex support. News this morning that additional tariffs are being considered against China is negating this potential support though. This negates all thoughts that a resolution was being worked on between the US and China on trade. Losses in soybeans are being limited by other buyers who have stepped into the US market and kept our cumulative sales pace the same as it was with China. The question with this is how long these buyers will remain in the market, as their needs do not equal those of China. Corn is on the positive side this morning after trading weaker at the start of the day session. Of all of the commodities corn is the most undervalued at this time. This is from both a technical and a fundamental side. Corn could also be impacted by August weather this year, but given the maturity level we are at, any influence may be limited. Corn futures really do not have a lot of fresh news to drive them in either direction at this time. It is not out of the question that corn could simply trade sideways for the next several weeks, possibly right up to the start of harvest when yields can be better determined. The cash market is pretty much unchanged today. Local pushes are being paid for immediate ship deliveries, mainly on soybeans. This is to capture the record crush margins on that commodity. We are starting to see some plants shut down for maintenance though, which will ease up on basis incentives.

Headlines

  • Ukraine corn being stressed during pollination
  • Texas is now the world’s 3rd largest oil producer
  • US corn cheapest in global mkt
  • Argentina lowers corn production estimate
  • 90 day outlook; warm but dry for US
  • Financial mkts under pressure
  • Corn/Soy ratio favors corn production
  • Barely stocks lowest in 35 years
  • Funds short 125,000 corn, 71,000 soy, and 5,000 wheat contracts

Bull Side

  • Brazil soy rally favors US sales
  • Rapid corn maturity
  • Technicals

Bear Side

  • Favorable weather for soy production
  • Sales starting to decline
  • No end seen to tariffs

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at ksetzer@maxyieldgrain.com. The opinions and views expressed in this commentary are solely those of Karl Setzer. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Morning Comments; Friday, July 20th, 2018

We are seeing comparisons made between this year and last year in the market, primarily on corn. What trade is focusing on is that U.S. corn stocks are currently 270 million bu tighter than a year ago, and the world corn supply is 40 million metric tons tighter than a year ago. At the same time, spot corn futures are trading at a 40 cent lower level. This is one of the main reasons analysts feel corn should rally from its current value.

China continues to sell corn out of its government reserves. Trade is now questioning how long this will take place. Given projected stocks and China’s demand base, it is thought this will continue for the next two years. The real question is what will happen then, and if China will return to the corn import market. While this is possible, China may opt to import finished product instead if they are a better value.

It appears as though the futures market is becoming immune to weather conditions this year. This is mainly from the fact that ratings were poor last year and we still ended up with record sized yields. Given this year’s even better ratings, buyers are showing even less interest in speculative buying at this time. This could make the addition of risk premium in commodity futures a thing of the past.

Market Movers: Fund Activity, Outside Markets

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at ksetzer@maxyieldgrain.com. The opinions and views expressed in this commentary are solely those of Karl Setzer. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Closing Comments; Thursday, July 19th, 2018

Grains led the market early in today’s session as short covering developed in those contracts. Updated weather maps that show the possibility of less than perfect weather in August gave the grains even more support. Soybeans held to the negative side until late in the session when light buying surfaced in the complex. All contracts were supported by technical indicators, but pressured by a lack of fresh news.

Export sales for the week ending July 12th were mostly positive. Corn sales were split with 25.2 million bu old crop and 30.5 million bu new crop. Soybean bookings came in with 9.3 million bu old crop and 22.5 million bu new crop. Wheat sales totaled 11 million bu. After these were released the U.S.D.A. reported that corn and wheat sales were misstated though, and would be corrected next week.

The official weather forecast for August was released today, and indicated the possibility of less than perfect conditions. N.O.A.A. predicts we will have above normal temperatures and normal precipitation across much of the Corn Belt in August. The concern with this is that we are already seeing a decline in soil moisture levels and these maps do not indicate they will be recharged any time soon. August weather has been a great benefit for yields in recent years, and this outlook does not indicate it will be repeated this year.

We are seeing mixed demand numbers on soybeans at the present time. U.S. soybean exports are struggling as we continue to see China back away from our offerings. At the same time we are seeing record crush margins as demand for our products remains high. We could easily see crush counter any loss in exports as a result, and possibly reduce carryout from current estimates.

September corn futures finished today’s session 4 cents higher at $3.51 , August soybeans were 3 cents higher at $8.46, and September wheat in Chicago gained 9 cents at $5.04 .

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at ksetzer@maxyieldgrain.com. The opinions and views expressed in this commentary are solely those of Karl Setzer. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Early Market Update; Thursday, July 19th, 2018

Trade is mixed as we move into the day session with grains higher and soybeans under pressure. Much of what we are seeing is simple fund positioning and balancing. There really is not enough fresh news to push the market in one direction or another today. We did have solid export numbers in this morning’s release, but nothing that really jumped out. Expanding dry soils in the weekly drought monitor are giving the grains support today, as are simple oversold indicators. Trade starting to reconsider its earlier yield estimates that are on the top side of 180 bpa. This is a little misleading though, as even though corn yield estimates have declined, nearly all still remain above the 174 bpa USDA projection. That said, world corn supplies continue to dwindle and that is giving the market a strong footing. At the same time, soybeans are under pressure this morning from a lack of buying interest. Funds have covered some of their short positions this week, and are now unwilling to cover anymore. We are not seeing any fresh buying which is what really needs to take place to sustain a rally. The ongoing trade dispute between the US and China is also a lingering issue on soybeans. We are also seeing a difference in opinion on what would happen if tariffs were lifted. This may not give the soy complex the support that is expected, as soybean values in Brazil would likely drop once the tax is suspended. This would make Brazilian soybeans more affordable for buyers in other countries, likely costing us the business we just gained. Thoughts that weather will turn near perfect for the start of pod setting and filling in the Corn Belt also weighing on the soy complex. All in all, a general lack of fresh news is keeping a lid on the soy complex as much as anything. The cash market is unchanged today with localized incentives still being paid on immediate ship bushels. These are quick ship offers though, and very narrow for a seller to take advantage of. Buyers and processors are keeping bids firm though, especially soy crushers, where margins remain above $2.00 a bushel in most regions.

Headlines

  • WCB soil moisture starting to decline
  • COF tomorrow expected to be up 4% from year ago
  • DDG production rising, demand slipping
  • Chinese soy auctions preventing imports
  • Non-traditional buyers keep taking US soybeans
  • Ethanol production +2.7% year ago; stocks -2%
  • Trade issues may start to impact land values
  • Funds short 134,000 corn and 74,000 soybeans, even on wheat

Bull Side

  • Record soy crush values
  • Technicals
  • Dry soils

Bear Side

  • Favorable weather forecasts
  • Ongoing trade disputes
  • No fresh buying

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at ksetzer@maxyieldgrain.com. The opinions and views expressed in this commentary are solely those of Karl Setzer. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Morning Comments; Thursday, July 19th, 2018

Forecasters have revised their El Nino predictions and upped the chances of the event building. The odds of having an El Nino event by this winter are now at 70%. If accurate this will bring a favorable end to the U.S. growing season. It is also likely that this will favor production in South America this coming year.

Analysts continue to take the U.S. corn crop rating and determine a final yield. Most now feel corn yield will top trend by 2%, which would be right at 180 bushels per acre. Predicting yield based on ratings has proven to be very difficult though, with no real correlation being made between the two. Still, the possibility of a larger corn crop is negating the strength we would normally be receiving from the elevated demand we are seeing.

China has started offering soybeans out of reserve for auction, same as they have with corn. So far, it is believed that demand for these soybeans has been limited. This is mainly from price, as the soybeans are being offered at an 80 cent per bushel premium to what imports can take place at. The simple fact that these soybeans are available has prevented buyers from coming to the United Sates for needs.

Market Movers: Weather Outlooks, Export Sales

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at ksetzer@maxyieldgrain.com. The opinions and views expressed in this commentary are solely those of Karl Setzer. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Closing Comments; Wednesday, July 18th, 2018

Moderate advances were made in corn and soybeans today as short covering took place in the market. This was mostly technical as we have started to see a shift in indicators. More concerns over crop conditions in parts of the Corn Belt also gave the market support. Advances were limited by a failure to end trade disputes and the overall impact it could have on commodity reserves.

Ethanol manufacturing for the week ending July 13th was positive for the industry. An average of 1.06 million barrels of ethanol were manufactured each day of the week, a 31,000 barrel increase from the previous week. Even with this increase in production, ethanol stocks dropped a large 625,000 barrels from the week before. Reserves now stand at 21.77 million barrels, which is an adequate amount.

Trade continues to keep a close eye on the Brazilian export market. Truckers in Brazil are not satisfied with the provisions that brought an end to their strike, and are still delaying shipments and deliveries in many cases. The question is at what point do buyers start to cancel their bookings with Brazil and switch them to other sources, possibly the United States. At the same time some buyers, including China, have enough soybeans in reserve they can wait for deliveries to take place.

So far, the commodity market has failed to react to flooding that has taken place in some regions of the Corn Belt. This is aggravating to farmers who are seeing fields underwater and know they are losing production. The reason for the lack of reaction is that flooding is more of a regional factor, not widespread like a drought tends to be. In many wet years we have seen total crop loss and record yields in fields right next to each other, which makes losses impossible to predict.

September corn futures finished today’s session 1 cent higher at $3.47 , August soybeans were 2 cents higher at $8.42 , and September wheat in Chicago was 3 cents lower at $4.94 .

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at ksetzer@maxyieldgrain.com. The opinions and views expressed in this commentary are solely those of Karl Setzer. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Morning Comments; Wednesday, July 18th, 2018

Officials are starting to make predictions for Brazilian soybean plantings this year. Current data indicates Brazilian farmers will expand their planting by 2 to 3% this year. This would give Brazil a total of 88.9 million acres, and a crop size of 120 million metric tons. While similar to this year, this size of a crop would open the door for more competition for the United States, especially for sales to China.

Soybean futures are currently in a tough spot. Given current economics it appears as though U.S. soybeans are under-valued. At the same time, Brazil is offering soybeans into the global market at a 10 to 20 cent per bushel discount to U.S. offerings. This is a main reason soybeans are not able to appreciate at this time.

Country movement of corn and soybeans remains depressed, which is becoming concerning to buyers and end users. We have seen several attempts to encourage movement, including basis incentives and free storage programs. While these have secured some bushels, deliveries are still not as much as hoped for. Many farmers now want to wait until they can better determine crop size to see just how much inventory they need to move, if any at all.

Market Movers: Fund Activity, Weather Outlooks

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at ksetzer@maxyieldgrain.com. The opinions and views expressed in this commentary are solely those of Karl Setzer. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Closing Comments; Tuesday, July 17th, 2018

Trade is receiving mixed signals on the Chinese soybean tariffs and how they might impact Brazilian soybean demand. It was thought that Brazil might import U.S. soybeans and then re-sell them to China. While this would work economically, Brazilian importers do not have the necessary licenses to make sizable soybean imports from the United States. Right now the most soybeans Brazil could import from the U.S. is 37 million bu.

There is an old saying in the market that low prices cure low prices. This is mainly from the fact that low values of a commodities tend to bring about added demand. While this is true, the question is how low values need to get to spark added usage. One thing that sets the current drop in futures to those in history is that this time losses are being credited to political and trade worries, not from an over-supply.

We continue to hear doubt cast over the rating of this year’s crops, mainly corn. The high rating we have had all season has generated ideas of above trend yields, with some above 180 bushels per acre. Some field scouts claim this size of a yield is impossible, and we will be lucky to harvest 174 bushels per acre for a national average. That is the size of a yield the U.S.D.A. is using in balance sheets though, so to see that for production may have little impact on futures values.

September corn closed today’s session 4 cents higher at $3.46 , August soybeans closed 10 cents higher at $8.39 , and September Chicago wheat closed 9 cents higher $4.97 .

Morning Comments; Tuesday, July 17th, 2018

As expected, the condition of the U.S> corn and soybean crops declined last week. The U.S. corn crop is now rated 72% Good/Excellent, down 3% on the week. The corn crop is 63% in the silk stage, well ahead of the 37% average amount. The soybean crop is now rated 69% Good/Excellent, a 2 point decline on the week. Pods have set on 26% of the soybean crop with the normal amount being 11%.

Trade is trying to determine what the long-term effects of this year’s slow planting pace will be. Most concern is what it will mean for crop development. While crops should have plenty of time to fully develop, they will be very uneven. This will make the window for which weather can be a factor in final yield much larger than usual.

Harvest will also be affected by the unevenness of this year’s crops. The main issue will be different maturity rates and how not all of the crops may be ready for harvest at once. This could actually end up being positive for the market as terminals will not be flooded with new crop deliveries, possibly when old crop bushels are also moving. Interior basis values could easily find support from this situation.

Market Movers: Fund Activity, Crop Reports

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at ksetzer@maxyieldgrain.com. The opinions and views expressed in this commentary are solely those of Karl Setzer. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Closing Comments; Monday, July 16th, 2018

After trading on the negative side all night, corn and soybeans managed to start the day session on the positive side. Short covering was the primary reason for this strength, especially in the soy complex. Rumors that the U.S. and China may be working on a resolution to their trade dispute added to the market’s strength. Concerns over recent heat across the Corn Belt and the stress it put on crops was also beneficial to futures trade. A lack of active buying limited the day’s advances, as did the fact U.S. crop ratings remain historically high.

Export loadings for the week ending July 12th were at the top end of expectations across the board. Corn loadings totaled 47.9 million bu, soybeans came in at 23.3 million bu, and wheat reached 17.3 million bu. The wheat total was actually larger than expected for the week. While this was positive news, all contracts fell short of what is needed to reach yearly U.S.D.A. expectations.

The NOPA crush report for June was released today, and showed record monthly soybean usage for June. For the month NOPA members crushed 159.2 million bu of soybeans, 4.4 million bu less than May, but 21 million bu more than in June of 2017. This puts yearly cumulative crush 7% ahead of a year ago, and just over the increase expected by the U.S.D.A.

The tariffs China has placed on U.S. pork may have more to do with China’s domestic pork industry than actual trade. Hog margins in China are currently the lowest in the past five years, and pork values are the lowest in four years. China currently has a total tariff on pork imports of 88%. It is quite possible these are in place to support China’s pork producers rather than by paying a subsidy.

September corn futures finished today’s session cent higher at $3.41 , August soybeans gained 10 cents at $8.29 , and September wheat in Chicago was 8 cents lower at $4.88 .

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at ksetzer@maxyieldgrain.com. The opinions and views expressed in this commentary are solely those of Karl Setzer. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Early Market Update; Monday, July 16th, 2018

Trade has already been on both sides of unchanged to start out the week. Futures were pressured early on, but have now climbed into positive territory. Early losses were from a lack of fresh news and thoughts we will see another round of high crop ratings this afternoon. Soybeans managed to shrug off this news though and are the leader early in the day session. This strength is being credited to rumors that China wants to start talks to resolve the current trade dispute with the United States. Trade is quick to believe this will bring the US more export business than what we are expecting at the present time and negate the drop in demand that was predicted last week. While this would be friendly news, the market is going to want verification of both dispute resolution AND demand before extending futures too far at this time. More than anything soybean futures are taking support from over-sold technical indicators. Soybeans lost nearly 60 cents last week so to see a recovery is not unexpected. Volume is quite thin in the trade so far, which questions how long we will see our advances hold. Corn is trying to follow soybeans but is struggling so far. We simply are not seeing the buying in the corn market that we are in soybeans. This is a direct conflict with what we are seeing from a fundamental point of view. World corn reserves are shrinking and are now at a point where we could actually start to see rationing before too long. Corn futures being held in check by the Brazilian harvest and impending exports. The vessel line up in Brazil is growing and soon this is where many buyers will cover their needs from. That said, Brazil corn is currently priced above all other sources, including the US and Argentina, which will limit demand for their offerings. No change to the cash market at this time. Buyers are not showing as much concern over coverage even though very little fresh selling has developed in recent weeks. Deliveries are just enough to keep reserves adequate, and the thought we could have an early harvest this year is further limiting any interest in pushing bids.

Headlines

  • Global corn production to decrease 5 mmt this year
  • World corn stocks only 50 day supply
  • China swapping out of US soybean purchases
  • 70% chance of El Nino by winter
  • High water levels hindering US transit
  • Brazil to expand acreage 2% this year
  • Brazil soy values at $15.00/bu
  • Last week; corn -19 cents, soybeans -58 cents, wheat -18 cents
  • Funds short 153,000 corn, 89,000 soy, and long 3,000 wheat contracts

Bull Side

  • More of US in drought
  • Country movement shut off
  • Crops showing heat stress

Bear Side

  • Global trade
  • Rains forecast for Corn Belt
  • Limited buying interest

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at ksetzer@maxyieldgrain.com. The opinions and views expressed in this commentary are solely those of Karl Setzer. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Morning Comments; Monday, July 16th, 2018

The global corn supply is becoming more of a focal point for the market. According to last week’s balance sheets, the world will have a 50 day corn supply at the end of the marketing year. If we remove the highly questioned Chinese corn reserves, this drops to a minimal 31 day supply. Given this outlook, the global market cannot afford any corn loss this production season.

When it comes to demand the most attention in the global market right now is on China and their soybean purchases. China is currently buying and importing record volumes of soybeans, with imports at the highest levels of the year. Unfortunately, almost none of these are coming from the United States. This avoidance has more to do with political opinions than commodity values though, which makes it hard to determine when demand will increase.

Another factor that could be preventing China, and others, from buying U.S. soybeans is the expected expansion to the Brazilian crop. Brazilian officials believe the country will expand soybean production by 2.5 million acres this year. This means importers will be able to pass over on U.S. offerings more easily if they wish. As a result, the United States will need to be more price competitive than ever.

Market Movers: Fund Activity, Crop Reports

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at ksetzer@maxyieldgrain.com. The opinions and views expressed in this commentary are solely those of Karl Setzer. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Early Market Update; Wednesday, July 11th, 2018

Trade has started out the day session weaker, with losses similar to what we had in the overnight session. The big talk in the market today is the announcement of another $200 billion in tariffs that are going to be placed on China by the US. There is no doubt China will retaliate. Not only will this impact agriculture, but all US industries. Basically anything the US trades with China will now have a tariff on it. This has caused as much weakness in the financial market as in the commodities. Markets do not like uncertainty, and these tariffs are generating as much uncertainty as anything we can name at this time. As a result, traders are pulling their positions out of the market and simply moving to the sidelines for now. Improved weather outlooks for the Corn Belt are also weighing on today’s session. The heat that is currently sitting over the WCB is expected to beak-down and generate rainfall as it moves out. Bottom line when it comes to weather is that conditions for pollination are near perfect at this time. I am not saying ALL parts of the Corn Belt are in prefect shape, but the majority is at this time. We need to remember that there is a lot of growing season ahead of us though, and plenty of time for issues to develop. The problem is that the longer it takes for issues to arise, the less their impact on production. Trade showing more interest in tomorrow’s supply and demand data. The general feel is that we will see higher yields on corn and soybeans. While possible, we have not seen yields increase from June to July in the past 15 years. We could still see higher production numbers though as elevated acreage will be used. We will also see higher stocks numbers given the data that was released at the end of June. With all of this negativity in the market, even a neutral report could receive a friendly reaction though. The cash market is unchanged today with regional pushes being paid for quick ship deliveries. Processor margins have improved with the recent commodity market weakness, which has allowed more buyers to push their bids. Buyers remain hesitant to over-extend bids though given the fact country stocks remain high.

Headlines

  • More US tariffs on China
  • Processor margins improve
  • Insect pressure high this year
  • Brazil ethanol exports 10% greater than a year ago
  • Yield changes unlikely tomorrow
  • CONAB raises Brazil soy crop, lowers corn
  • Black Sea drought hurting grain yields
  • Funds short 126,000 corn, 66,000 soy and 1,000 wheat conts

Bull Side

  • China to keep buying US soy for reserves
  • Soybean demand remains high
  • Midwest turning dry

Bear Side

  • More tariffs
  • Larger stocks likely tomorrow
  • Weather non-threatening

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at ksetzer@maxyieldgrain.com. The opinions and views expressed in this commentary are solely those of Karl Setzer. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Closing Comments; Tuesday, July 3rd, 2018

Freight issues continue to impact the Brazilian export market. This industry is still recovering from the strike that took place in May and restricted the flow of soybeans to export terminals. Adding to this situation is the start of the Safrinha harvest and port space needed for corn, as well as fertilizer. This is making cheaper soybeans from the United States even more attractive to some global importers.

Now that the Safrinha harvest is getting underway in Brazil we are getting a better idea of crop potential. Analysts in the country now have the crop at 55 million metric tons, 2 million tons fewer than previous estimates. This is also a large 10 million metric tons under last year’s corn crop. At the same time Brazilian analysts are not lowering their corn export forecasts as last year’s large crop is still being used to satisfy demand.

With tassels and silks emerging quickly across the US, trade is keeping an eye on short to medium term weather as we start to head into pollination. Heat will be expected as we move deeper into this holiday week and could be proved beneficial to areas that were later planted.

July Corn finished the day up 5 cents at $3.43 . July Soybeans closed the day down 5 cents at $8.43 . July Chicago Wheat finished the day up 10 cents at $4.91.

Morning Comments; Tuesday, July 3rd, 2018

The condition rating of the U.S corn crop slipped 1 point last week to 76% Good/Excellent. The corn crop is now 17% in the silk stage with 8% being normal for this time. The soybean crop is rated 71% Good/Excellent, down 2% on the week. The soybean crop is 27% in the bloom stage with the average amount being 13%.

Country movement of farm stored corn and soybeans remains light. The only deliveries taking place right now are ones that were forward contracted, or buyers paid a sizable incentive for. Producers want to see how crops develop this year before extending their sales coverage. What is more concerning for buyers is that commercials claim to be out of shippable bushels, which is limiting sources for purchases.

The Chicago Board of Trade will close at 12:00 PM CT today and be closed tomorrow. Historically, many traders opt to take an entire week off when a holiday falls in the middle. This thins volume and makes it easier to manipulate futures. We are also at a stage in the year where any change in weather conditions can cause a rapid reversal in market direction.

Market Movers: Crop Reports, Pre-Holiday Positioning

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at ksetzer@maxyieldgrain.com.The opinions and views expressed in this commentary are solely those of Karl Setzer. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Closing Comments; Monday, July 2nd, 2018

Trade disputes are firmly applying pressure to the grain markets. The United States will impose 25% tariffs on Chinese goods starting this Friday. This alone has caused the ag sector to remain nervous and uncertain of market direction. Trade bias is leaning bearish short term, while long term remains to be seen.

Questions are starting to arise about the current condition of crop along the Iowa-Minnesota corridor. Rainfall levels have far outpaced what is considered normal amounts. In the past 60 days, some areas have received 200-300% of normal rainfall. Substantial flooding has occurred as rivers have been at capacity for a majority of this growing season. Parts of Iowa have received emergency flooding status from Governor Reynolds.

With the Quarterly stocks and acreage data out of the way, the market must argue yield with the amount of acres given. Some analyst argue we are on track to raise a 182 yield. This can be attainable and could potentially be the most problematic factor for the US farmer going forward. On the flip side, we still have a large chunk of the growing season in front of us to finish this crop out.

July Corn finished the day down 12 cents at $3.37 . July Soybeans closed down 10 cents at $8.48 . July Chicago Wheat closed down 17 cents at $4.79 .

Morning Comments; Monday, July 2nd, 2018

Trade is looking forward to next year’s South American production, with most interest on Argentina. Officials in Argentina believe soybean production will rebound considerably next year to a large 57.5 million metric tons compared to this year’s 39 million metric ton crop. A return to more normal weather and improved economics are the main reasons for this projection.

These changes are possible, but are not a given. The Argentine government has opted to place a hold on tax reform for now, which is reducing revenue outlooks for Argentine farmers. The government has had to halt tax reductions as it was costing the government too much income. Until these tax reductions are re-enacted, farmers may put any plans of expansion on hold.

This week tends to be one of the most interesting of the marketing year. Historically many farmers and some analysts have termed crops as being made if no weather loss had taken place up to this point. While this is true in some years, there are others where it is not. In recent years weather in August has been more important on crop development, as favorable conditions at that time have led to record sized yields.

Market Movers: Fund Activity, Crop Reports

For more information, you may contact Karl Setzer at 1-800-383-0003, or e-mail at ksetzer@maxyieldgrain.com.The opinions and views expressed in this commentary are solely those of Karl Setzer. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.

Closing Comments; Friday, June 29th, 2018

The early portion of today’s session was spent getting positioned ahead of the long-awaited quarterly stocks and updated acreage reports. Futures also bounced off yearly lows that were established during yesterday’s trade. Building concerns over long-range weather outlooks that are calling for a possible ridge in the Western Corn Belt instigated some buying as well. Early gains were capped by ongoing trade concerns as Canada will reportedly impose tariffs on the United States this weekend.

Acreage changes from the March intentions were close to expectations on soybeans and slightly larger on the grains. Soybean plantings this year are now forecast at 89.6 million acres, a 575,000 increase from March. Corn plantings are now forecast at 89.1 million, a 1.1 million increase from March. Wheat acres are now projected at 47.8 million, a 482,000 increase.

The quarterly stocks data contained even fewer surprises for trade. As of June 1st the United States was holding 5.3 billion bu of corn, 1.22 billion bu of soybeans, and 1.1 billion bu of wheat. Compared to last year these were minimal changes on the grains, with corn gaining 7 million bu and wheat reserves down 8 million bu. Soybean stocks were the big changer, with 256 million bu more in reserve than a year ago.

Trade is starting to pay more attention to temperatures across the Corn Belt. This is not just on daytime highs, but on overnight temperatures as well. History has shown us that even if daytime temperatures are high, if they cool off at night yield loss is minimal. If temperature do not drop at night we tend to see higher yield loss, such as what happened in 2012.

July corn futures closed today’s session 5 cents higher finishing at $3.50 , July soybeans were down 2 cents closing at $8.58 , and July Chicago wheat closed 18 cents higher at $4.97 .

Weekly MArket Review; Friday, June 29th, 2018

Stocks/Acreage Updated

Acreage changes from the March intentions were close to expectations on soybeans and slightly larger on the grains. Soybean plantings this year are now forecast at 89.6 million acres, a 575,000 increase from March. Corn plantings are now forecast at 89.1 million, a 1.1 million increase from March. Wheat acres are now projected at 47.8 million, a 482,000 increase.

These acres will give the United States crop sizes of 14.23 billion bu on corn, 4.3 billion bu on soybeans and 1.85 billion bu of wheat using current yield estimates.

The quarterly stocks data contained even fewer surprises for trade. As of June 1st the United States was holding 5.3 billion bu of corn, 1.22 billion bu of soybeans, and 1.1 billion bu of wheat. Compared to last year these were minimal changes on the grains, with corn gaining 7 million bu and wheat reserves down 8 million bu. Soybean stocks were the big changer, with 256 million bu more in reserve than a year ago.

We are seeing more yield estimates released, which is not uncommon at this point of the year. As always these are being based on crop conditions, which tends to be highly inaccurate at this stage of the year. The most talked about right now are on corn, where some analysts have yield at 182 bushels per acre, which is also what futures are reflecting. While this is possible, there is plenty of growing season ahead of us, and expectations will change several times.

The real question when it comes to corn yield is what is needed to satisfy demand. At the present time a U.S. corn yield of 178 bushels per acre would satisfy demand without drawing on reserves. Even if yield is slightly below this the United States has enough corn in reserve to maintain an adequate carryover. When comparing this year to similar ones in history, at this time a corn yield of 178 bushels per acre for the U.S. is not out of the question.

We are also at a stage of the year where more interest is placed on country movement of farm stored bushels. Typically we see farm movement once planting wraps up and crops are developing. The better the crops look, the more movement that takes place. This is a barometer than many analyst use to try and predict crop potential. While not scientific by any means, historically it can be an accurate indicator.

Weather conditions across the United States remain mostly favorable, but trade is aware that conditions can change quickly. The year that is most remembered for this is 2012. That year the crops started out with high ratings and then eroded as the growing season progressed. This was more of a case for corn, where late June and July weather devastated yield potential.

The United States is starting to gain some non-traditional corn demand in the global market. This is the result of reduced production in other corn producing countries, with Brazil being the one most talked about. Another is Ukraine though, where grain exports are going to be down 4 million metric tons from a year ago. While some of this demand will be satisfied with alternative grains, mainly for feed, corn usage is still expected to grow.

A result of this elevated corn demand is more interest on new crop stocks to use in the United States. At the present time this is projected at 10.8%. If demand grows as much as some analysts believe, this could easily drop to 10% and possibly below. If correct, this would put stocks to use at levels not seen since the 2013/14 marketing year.

The recent trade disruptions with China continue to impact commodity values. Much of this was the result of tariffs being proposed, but history shows us China has set up several hurdles for U.S. imports in recent years. For soybeans this started with a reduction in allowed foreign material from 2% to just 1%, yet China was only willing to pay the value of higher FM soybeans. This same issue has taken place with Chinese meat imports and how much stricter testing has been taking place.

It is believed that both of these are being done to negotiate price rather than worries over a quality issue.

Trade continues to focus on one simple factor at this time of year; that being if crops are getting larger or smaller. Right now it appears as though trade believes yield potential is increasing. This is why we have not seen much buying interest in futures, even though indications show we should be trading at higher values. Until this mindset changes it will be hard to have a sustained market rally.

Karl Setzer is a Commodity Trading Advisor/Market Analyst at MaxYield Cooperative. His syndicated commentary and market analysis is available daily on radio, in newsprint and on the Internet at www.MaxYieldCooperative.com. The opinions and views in this commentary are solely those of Karl Setzer. Data used for this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.