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

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

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

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

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