Heartland Daily Newsletter - Grains

Commentary

Grain futures got underway with a very weak tone for corn and wheat on the heels of terrible exports and yield guesses for this Fridays crop production, while soybeans enjoyed minor strength from explosive palm oil market, which lifted bean oil to the best prices since the spring of 2018. In spite of its terrible board action, the basis continues firming on heels of slow harvest, ample farm storage & scant farm selling. Wet corn slowing harvest, especially in IA/MN, where elevators struggling with LP gas shortages.

The Trump Administration Friday says the US aims to sign an initial deal this month (possibly in IA). Chinas Xinhua News Agency says the US/PRC had reached a "consensus on principles" during Friday's phone call. Both Kudlow and Ross expressed optimism regarding "enormous progress" being made. "Discussions will continue at the deputy level."

Two heavyweight crop guessers put out their data last weekend. Informa Friday upped US corn yield vs. prior forecast 1.1 BPA to 167.5 BPA for a crop of 13.792 bil bu (13 mb over USDA). Soy yield up 0.5 BPA to 47 BPA for crop of 3.553 bil bu (3 mb over USDA).

FC Stone Friday showed a corn yield up 0.7 BPA vs. prior forecast to 170.0 (USDA 168.4 BPA) while soy yield trimmed 0.6 BPA to 47.5 BPA (USDA at 46.9 BPA). Their 13.911 corn production forecast is 132 mb over USDA; soy crop of 3.593 bil bu is 43 mb over USDA. Fridays NASS November Crop Report will be the last of 2019, and if the US corn and soybean yield is not downgraded, the supply bulls will have abandoned their lower crop ideas for at least the next two months.

Crop exports year to date, the US has shipped just 148 Mil Bu of corn, down 62% from last year; 402 Mil Bu of wheat, up 21%; and 351 Mil Bu of soybeans, up 11% from this week a year ago. With corn shipments to date accounting for just 8% of the USDAs current forecast, the lowest on record, a 100-150 Mil Bu reduction in 19/20 corn exports is probable. The corn market is hedging its bets on the bearish side that even if yields were lowered, corn exports could be slashed enough to keep carry out close to the 2 billion bushel mark.

Weather leans price negative with dry areas in Brazil/Argentina shrinking to 15% or less of crop areas while majority of US Midwest enjoys 10 days of open (although cold) weather. The Brazilian weather forecast offers better rain chances for all crop areas next week. The rains look to improve the conditions for recently seeded crops while Southern Brazil gets a chance to dry out. The Brazilian weather forecast is much improved with drought concerns fading amid a normal soy seeding pace.

The US dollar recovered today from one of the worst Friday closes in three months and on a technical bounce and was able to recover mildly. Resistance will keep the US dollar negative if it continues to stay under the 9740-9750 value. The downtrend should stay in force into the coming weeks with an eventual breakdown imminent.

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Corn

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Beans

Only beans were able to close higher today for the third day in a row, leaving corn and wheat in the dust, yet the rally is still labored. It was the explosive bean oil that held the bean complex firm throughout the session.

USDA crop report on Friday is unpredictable whether the USDA will acknowledge snow production damage in the Northern Plains from several weeks ago, and the fact the 2 million acres of beans did not have pods set on them in mid-September. It seems like the USDA is hell-bent on always showing the best potential for yields, and ignoring obvious losses until they are forced to accept them at the end of the crop year.

It's possible China's waiting for a bearish USDA crop report to start making purchases into US grain supplies, it's just a thought, but they also can acknowledge the observation of how the USDA is usually a negative price contributor to prices.

Look for beans to trade choppy the rest of this week with last week's low a targeted area to be re-challenged. The potential rally of beans in November is seasonal, especially with strength very strong during Thanksgiving week.

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Wheat

Today was the 60-day wheat cycle which you could look at the chart and think it made a low. It's possible, but I think that is just a minor the first of the month low. The overall cycle high probably scored the top side two weeks ago with that cycle likely having come in early.

Price seasonality is for wheat to soften after the opening of November into the year-end. Look for any challenges of the resistant highs made two weeks ago as just another opportunity to sell.

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Cattle

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2019 Hedge Recommendations

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Corn

Sold 25% of 2018 corn stocks at 429.2, with 50% having been sold at a 409 average. Total sales are now 75%.

Sold 25% new crop 2019 on December corn at 4.47. Total sales are at 40%.

Sold 15% of 2019 corn crop at 3.96 Dec corn.

New crop 2019 corn sales to 65% by purchasing the September 460 short-dated corn put on 25% production for 30 cents.

Wheat

New crop sales on Minneapolis wheat were started at 571 September or 581 December for 20%.

Hedge update: Made a 25% Spring wheat sale at 557 for Dec Minn wheat per weekend and Tuesday recommendations. Sale was made on the board if basis is weak or you have exceptional wheat that could receive price improvement into the fall.

Beans

Sold 25% of 2019 production at 910 on the November contract. Total sales at 25%

New crop 2019 bean sales to 50% with the purchase of the 940 September short-dated bean puts on 25% production for $0.45.

Old crop 2018 bean sales were completed at 920 average this spring, and we added 1.14 gains from our put options in the summer of 2018 along with the 2018 market facilitation payment of $0.83 a bushel. That put our total sales value at above 11.00 on 2018production.


NOTE: All trades will be entered in the electronic markets unless otherwise noted. Hedge recommendations and Trade recommendations are totally separate, and may sometimes conflict with one another. It is strongly suggested that Spec trades and Hedge trades be done in separate accounts.

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