Heartland Daily Newsletter

Commentary

It is a repeat of last week Monday where Sunday night opened firm but then selling emerged immediately and the market was lower into Mondays close. Todays losses came on the backs of cooler temperatures breaking a short hot streak with better-than-expected rainfall being targeted for Southern Illinois and Indiana. The midday forecast maintains scattered showers through this week with up to 2 inches of rain over the next 12 days. Silking has started and will be happening for the next two weeks with cooler temperatures now welcomed and timely.

Lack of any confirmed Chinese buying also is absent, as Chinese crushers are still inquiring about US imports and looking to obtain tariff waivers. However, private companies in China indicate that future purchases will still largely hinge upon US & South American price relationships. Without tariff waivers, South American origin soybeans make economic sense. The question longer term is just how much will China buy without the elimination of some US tariffs? New face-to-face meetings are desired to boost market confidence in US-China trade progress.

Exports continue to be a drag and simply put; exports are terrible. Weekly US export inspections through July 18th were neutral soy & wheat but bearish corn. Weekly corn inspections totaled just 17 Mil Bu, vs. 27 Mil the prior week. A pace of just over 36 Mil Bu/week is needed to meet the USDAs old crop corn export forecast. USDA is expected to lower its 2018/19 US corn export forecast another 50-75 Mil Bu in its August WASDE. Weekly wheat export inspections totaled 16 Mil Bu, vs. 13 Mil the prior week. Bean inspections totaled 21 Mil Bu, vs. 31 Mil the prior week. China loaded 12 Mil Bu of beans last week, mostly from the PNW. For their respective crop years to date, the US has shipped 1,717 Mil Bu of corn, down 13% from last year, 1,443 Mil Bu of soybeans, down 24%, and 125 Mil Bu of wheat, up 28% on this week in 2018.

U.S. ethanol plants are expected to sharply curtail production in the weeks ahead as steep Midwest corn prices and the U.S.-China trade war have led to weak margins and oversupply. Ethanol production margins are at a 4 year low while inventories at a 9 year high.

Today marks the deadline for farmers to certify 2019 planted area to FSA which NASS will incorporate into Aug 12 crop report acreage revisions. Note that in addition to NASSs re-survey of seedings, NASS in August will use satellite-based data as well as some FSA acreage certification data when updating acreage. Bloomberg survey of 6 analysts pegs unplanted corn acres at 6.6 ma and soy at 2.3 ma with corn surpassing 2013 record unplanted corn area of 3.6 ma while unplanted 2019 soy would match the record set in 2015. NASS head spokesman justifying dropping objective yield data collection for Aug crop report, says they get better data from farmers for Aug survey than from field counts. FSAs certified acres data, in addition to satellite data and farm survey results, will be used in forecasting USDAs August planted and harvested area forecasts.

GFS Central US Weather Pattern: The midday GFS is broadly wetter across the Plains and Midwest in the next 12 days. Cooler, dry weather lies ahead into the coming weekend. After that the GFS projects a more zonally flowing jet stream, with more regular rain chances due July 29-Aug 3. Neither the EU nor the GFS has been overly precise with long term details, but the GFS features widespread rainfall of .50-2.00 across a bulk of the Corn Belt next Tuesday to the following Saturday. Temps warm slightly next week but excessive heat is absent.

So far, what is happening is a classic supply concern bull market that peaks around the July 4 window, and the end of July, slides on price. The market fears the worst early, and slowly loses confidence on extreme production losses. This is the July 15-August 5 seasonal downturn for grain prices. This could set us up for an end of the month low that bases and braces for the August 12 acreage data. We must see something in the 10 million range for preventive plant corn acreage to excite that market to new highs. The USDA will be lowering exports again for corn in the next report by 50-75 million Bu. Current long-term weather models from NOAA suggest a normal to later than normal frost with normal to above normal temps in September.

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Corn

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Bean

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Wheat

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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%.

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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