October 14, 2019

October 14, 2019

Good Morning

The United States and China announced Friday afternoon that they have reached agreement on the framework from which their staff can draft Phase 1 of a trade deal. Drafting that agreement will take the next three to five weeks, but President Trump and President Xi may be able to sign the agreement when they meet at the APEC meeting next month. Some reports indicate that the agreement includes quotas scaling up to $40 to $50 billion per year of agricultural commodities, while other reports indicate that we will see China purchase a combined total of $40 to $50 billion of ag commodities over the next two years.

The United States will suspend implementation of an additional 5% tariff on $250 billion in Chinese good scheduled for Tuesday of this week, but there has been no agreement to suspend the tariffs we have scheduled to go into effect in December. Phase 1 also includes some agreement on currency and on intellectual property right, although much of the IP will be covered in phase 2.
Very few details are available and the markets have grown skeptical of Chinese promises in the past and will want to see proof of purchases and shipments.

Keep in mind that these details have yet to be confirmed by the Chinese media. Our own media is reporting this morning that Beijing is seeking the removal of Dec 15th tariff increase and asking for another round of meetings in late October to further discuss the details Phase 1. This has the banks taking a cautious approach to the all the news as there seems to be some confusion over whether or not this is a new demand that will prevent it signing the “Phase 1 Deal” unless it is removed!

In addition to trade talk cooling, the weather has taken a decidedly cooler tone as well. Saturday was colder than forecast with freezing temperatures proving more widespread across the Plains and western Midwest. The system brought a blizzard with over 2 feet of snow to parts of North Dakota (above). The 2-week outlook looks much more seasonal, allowing the snows to melt and soils eventually firm enough to get the harvest back rolling. Unfortunately we will have to wait until the November WASDE report before we get an idea on just how much damage the USDA feels was done by the storm.

Have a Safe Day!

Garry Gard
920-348-6844
ggard@didionmilling.com

October 11, 2019

Good Morning,

At some point we as traders and marketers of grain will learn from the past mistakes and realize that when the strong majority is thinking the markets are going to move higher or lower following a report it will actually head the opposite direction. That was the case yesterday as most were expecting the markets to trade higher following the Crop Production and S&D.

Corn production figures came in above the average pre-report estimate and above the high-end of the range of expectations. NASS estimates the average national yield at 168.4 bushels per acre, up 0.2 bushels from last month’s report. Harvested area was lowered by 200,000 acres, but came in 300,000 acres above analysts’ expectations. Production is estimated at 13.779 billion bushels, down 20 million bushels from last month. Beginning stocks were also adjusted lower (-331 million bushels) reflecting the information from the Quarterly Stocks Report released on September 30. What made the report negative was a continued reduction in the overall demand expectations. Food & seed demand was lowered 15 million bushels, demand to produce ethanol lowered 50 million bushels and demand for exports lowered 150 million bushels. Offsetting to a degree was a bump to feed and residual usage of 125 million bushels. Ending stocks are now forecast to be 261 million bushels smaller than last month’s estimate at 1.929 billion bushels but 245 million bushels larger than pre-report expectations.
Soybean ending stocks were lowered again this month due to both decreased production forecasts and slightly higher demand expectations. NASS estimates the national average yield at 46.9 bushels per acre, down 1.0 bushels from last month’s report and lowered harvested area 300,000 acres. Production is now estimated at 3.550 billion bushels, down 83 million bushels from last month. Beginning stocks were also adjusted lower (-92 million bushels) reflecting the information from the Quarterly Stocks Report released on September 30. On the demand side, crush was raised 5 million bushels. Ending stocks are now forecast to be 180 million bushels lower than last month’s estimate at 460 million bushels.

Definitely not the weather we would like to see for harvest progress this morning with rains and cooler temps today. Rains should subside this afternoon but the cooler temps look to be in play for the next week with highs in the mid 50’s.

All markets are higher this morning with corn and soybeans both trading 9 higher as the focus shifts to US weather and the Chinese/US talks.

Have a Safe Day!

Garry Gard
920-348-6844
ggard@didionmilling.com

October 10, 2019

Good Morning,

Markets are quiet ahead of the potential storm that comes today. USDA report out at 11am (numbers below) and Chinese and US trade talks begin in Washington today. Both could send the markets in a bullish or bearish direction. Any drop in yield or harvested acres could add more anxiety to the markets while an increase in either would most definitely ease concerns and send the markets south. As you can see by the estimates below, the market is looking for a drop in yield and acres which sets the stage for a big shock if yield is actually reported higher. (we have seen this before!) With very little harvest actually completed nationally the majority of the yield report will come from satellite data and weather models from September.
The Chinese and US high level trade talks kick off today and we should expect to see a lot of headlines from these meetings over the next couple days.

My advice to producers is to take some risk off at current levels (set a floor) and add firm offers for additional sales above the market if we get any spike on the report’s release. These firm offers will have to be in by 10:45 in order for us to get them entered.

Be sure to check back after 11am for the updated report.

2019/20 US Production (Billion Bu)
USDA Oct Ave. Est. USDA Sept.
Corn Yield 168.4 167.5 168.2
Corn Production 13.779 13.684 13.799
Corn Harvested Acres 81.8 81.649 82.017
Soy Yield 46.9 47.3 47.9
Soy Production 3.55 3.583 3.633
Soy Harvested Acres 75.6 75.705 75.866

2019/20 Ending Stocks (Billion Bu)
USDA Oct Ave. Est. USDA Sept.
Wheat 1.043 1.015 1.014
Corn 1.929 1.784 2.19
Soybeans .460 .521 .640

Have a Safe Day!

Garry Gard
920-348-6844
ggard@didionmilling.com

October 8, 2019

Good Morning,

Markets are softer again this morning with both corn and soybeans down 1. Traders are waiting on Thursdays WASDE and Production reports. Private analysts are expecting to see a 1.8 bu/acre(167.5) cut in corn yield and 400,000 acre(81.6) cut in harvested acres. The USDA has historically saved its big harvested acre cuts for October as they become more confident in the completeness of the FSA certified acreage reporting process. I don’t expect any big yield reductions on Thursday as harvest progress has not advanced enough to justify big adjustments.
Tensions between the US and China are rising just as trade talks are scheduled to begin. China is indicating this morning that they are already planning to leave the talks one day early. This could be the backlash in response to the Commerce Departments move. The Commerce Department on Monday put a number of Chinese entities, including surveillance technology company Hikvision on an export blacklist that prohibits American firms from doing business with them unless they have a US government license to do so.
If you are a producer that historically stores grain at your local elevator you should give us a call to find out how we can add $ dollars $ to your bottom line with our storage alternative.

Be sure to get your firm offers in with us before Thursday’s crop report. I look for this one to spike when the report is released and then fade into the close.

Have a Safe Day!

Garry Gard
920-348-6844
ggard@didionmilling.com

October 7, 2019

Good Morning,

Quiet markets to start the day/week off as corn is up 1 and soybeans are unchanged. There is a lot of news that could move the market this week and direction is TBD.
1. US and China trade talks resume this week as the Chinese delegates are in Washington to continue negotiations. Last week’s thoughts were that something would get done this week, but over the weekend the officials from China said they would not be bringing any full scale concessions to the table this week. This is disappointing as President Trump has maintained he wants 100% or no deal will get done. While it doesn’t look like a full scale trade deal will get done this week, I just hope things don’t go south again.
2. USDA Crop production and Supply and Demand numbers will be released on Thursday at 11am. After last month’s Stocks report traders are anxious to see what the USDA will show for yield and harvested acres estimates in this report.
3. Forecasts for freezing temps and snow in the Dakotas, Minnesota and parts of Northwest Iowa later this week and into the weekend could set harvest back for those areas. Temperatures locally will drop next weekend, but most areas don’t appear to have any killing frost in the forecast.
Producers locally are reporting that they will be heading to the fields as early as this afternoon to start bean and corn harvest. With the first half of the week looking dry it should allow most to get out and work out the bugs.

Look for some positioning ahead of Thursdays report as traders are currently short 140,000 corn contracts.

Be sure to get your firm offers in with us before Thursday’s crop report. I look for this one to spike when the report is released and then fade into the close.

Have a safe day!

Garry Gard
920-348-6844
ggard@didionmilling.com

October 4, 2019

Good Morning,

The markets got a boost this week from some active short-covering by the funds after the surprisingly bullish report from the USDA to kick off the week. While things cooled off as the week wore on, fund managers are still maintaining a good-sized net-short position and are currently short 137,000 corn contracts.
The latest weather forecasts are a little warmer, but not warm enough to keep things above freezing in the Dakota’s and portions of the western Corn Belt over the next week. Eventually the more seasonally cool temperatures will move over the rest of the Midwest, but big threats to national yield estimates from frost/freeze will be limited.
Next week could be an interesting one. The early yield reports we are hearing on corn are all over the board from last year. Beans sound as they may end up being lower than last year. Weather outlooks continue to show the mercury dropping and fields too wet to make any progress getting anything in the bin. Additionally, we will get to see the latest estimates on production from our friends over at the USDA. And if that weren’t enough the Chinese negotiating team will be sitting down in high-level meetings with their US counterparts in Washington DC. Let’s hope something can get done there because we are in need of some bullish news for traders to react to. Any bullish news should be countered with sales by producers as it won’t last long!

Have a Safe Weekend!

Garry Gard
920-348-6844
ggard@didionmilling.com

October 3, 2019

Good Morning,

Better US weather forecasts, fund consolidation and increasing yield reports have led to softer markets the last two days. With a lack of fresh news in the market traders appear poised to wait on next which could have a lot of market movers. Next Thursday’s Crop production and S&D report will give us an updated look at planted and harvested acres, yield and demand updates. Private analyst FC Stone released their estimates yesterday and put corn yield at 169.3 bpa which is above the USDA’s September estimate of 168.2. This should be a reminder to producers that things are not bad everywhere especially in the west.
Next week will also bring the Chinese trade team to Washington DC to continue talks on trade and tariffs. This may sound like a broken record, but there has been a lot of positive news in the past month with tariff delays that has most feeling that things are finally moving in the right direction.
Export sales this morning were on the low end with 19.4 million bushel compared to trade estimates of 15.7-31.5. Soybean sales were also soft at 38.1 million bushel compared to trade estimates of 33.1-51.4.
I would encourage producers to not only be looking at your 2019/20 crop marketing plan, but start to take action on the 2020/21 crop. With the strong potential for 94-95 million acres of corn to be planted this market has a much greater downside than upside. I would recommend locking in some cash sales at $3.85-3.90 range to take some risk off the table.

Have a Safe Day!

Garry Gard
920-348-6844
ggard@didionmilling.com

October 1, 2019

Good Morning,

As expected the USDA had a issue estimating the size of last year’s corn and soybean crops! For months many have argued that they were too high…and they were proven correct in the end. NASS revised down 2018 bean production by a record 116M bu. with yield down 1.0 bpa to 50.6 bpa. Planted area dropped 300k acres as well to 89.2M acres with harvested area down 400k acres to 87.6M acres.

September 2018/19 corn stocks missed the average guess by over 320M bu. at 2,114 Mil Bu due to enlarged feed/residual use. This would mean we saw record corn feed/residual use in the 4th quarter.

The bears will struggle to sustain much downside pressure until the trade has a better idea about 2019 corn and soybean yields. Following a miss of more than 2.5% by the USDA on both corn and beans, traders will question the methodology that they used to calculate the size of the 2018 crop when it is likely being applied to the calculations for 2019 crops. One possible culprit to the miss could be the cold/wet harvest weather we saw last fall.

There is no evidence of a Midwest frost/freeze into the middle of October and this should allow crops to continue to mature, but temperatures will be becoming more seasonally cool across the northern Corn Belt which slow things down some.

While yesterday’s report put a spark in the markets, the long term issue remains demand. Until we see a shift in exports or domestic demand this market has no reason to move dramatically higher or lower. The current stocks to use ratio sits at 13% with the USDA’s latest number. We would have to drop yield to 164 bpa to get stocks below 10% which is historically the level we need for corn to trade above $4 on the CBOT.

This morning corn is up 2 and soybeans are up 5.

Have a Safe Day!

Garry Gard
920-348-6844
ggard@didionmilling.com

September 25, 2019

Good Morning,

Another day and more rumors of China eliminating tariffs on additional bean purchases from the US. Yesterday’s rumor suggested that China was going to allow an additional 5 mmt of beans to ship tariff free thru January. Illinois Governors’ office Tuesday released statement saying a letter of intent was signed by the Taiwan Feed Industry Association and the Illinois Corn Marketing Board for $2.2 billion in corn, corn product and soybean purchases over the next two years. Corn purchases are expected at 5.0 mln mt, corn product purchases at 500,000 mt and soybean purchases between 2.5 to 2.9 mln mt over 2020-2021 period. The problem with both of these “rumors” is that there has been no follow thru. A lack of confirmation of Chinas bean purchases and negative comments from President Trump on the trade war at yesterday’s UN summit have the markets stagnant to lower today.
Harvest delays in the west and northern areas due to rains could add premium to the market in the coming week. Traders are focusing on the Stocks report Monday. Next Monday the USDA will release its September 1st quarterly stocks report. Estimates are for 2.43 billion bushel in corn which compares to 2.14 in 2018.
With the funds short 162k corn contracts we could see some short covering in the next couple days ahead of month end.

Have a Safe Day!

Garry Gard
920-348-6844
ggard@didionmilling.com

September 24, 2019

Good Morning,

Corn saw support from the bean market and flooding in the northwest Corn Belt yesterday and managed to close a couple cents higher. Yesterday’s bean rally was the result of China buying PNW beans and reports that Chinese officials rumored to have temporarily lifted tariffs on up to 200 mmt of soybeans. Beans failed to hold the highs as all of these beans were not bought causing traders to question China’s demand for US beans. The market needs to see more than “good will” purchases if it is going to add fundamental risk premium. If China doesn’t buy all 200 mmt, this could be viewed as bearish the bean markets.
There is no serious threat of damaging cold weather in the Midwest growing areas for the next two weeks but there is talk of frost in North Dakota and Minnesota along the Canadian border next week.
Weekly export loadings last week were the lowest since 2013 and significantly below last year. The lack of demand has been and will continue to be the market mover regardless of crop size.

Have a great day!

Garry Gard
920-348-6844
ggard@didionmilling.com