Daily Grain / Hogs Marketing Outlook Written by: Jim Gerlach 6/27/2017

Transcription

1 Daily Grain / Hogs Marketing Outlook Written by: Jim Gerlach 6/27/2017 Early Call 8:45am EDT: Corn up $.02, soybeans up $.07, wheat up $.02. The overnight session saw soybeans bounce off recent lows, buoyed by Monday afternoon's weekly crop condition numbers from NASS. Similarly, Minneapolis spring wheat continued to move higher as well. Corn and winter wheat were more subdued, but went along for the ride anyway. Outside markets were also higher with gains seen in metals, energies and softs. Meanwhile, both the U.S. dollar index and DJIA futures were lower to start the day. Grains: Wheat prices fell Monday as wet weather returned to U.S. growing regions, alleviating fears for now about the state of U.S. crops. CBOT Wheat for July fell 1.2% to $4.50, the fourth straight session of losses. Temperatures have moderated in spring wheat areas, from the 90s two weeks ago to the mid-60s. and the rest of the Midwest is expecting timely rains. Short-covering may be in store over the July Fourth weekend, when high temperatures are expected to return. As of the week ended June 18, 49% of winter wheat was in good or excellent condition versus 61% during the same week last year, and conditions had eroded versus the week prior. For spring wheat, 41% was in good or excellent condition versus 76% at this time last year. Expectations were for an improvement for corn and soybeans and for the spring wheat crop to slide another 1% to 2%. In other markets, corn ended up 0.4% at $3.59 for July and soybeans were flat at $9.11. Other than weather concerns, it should be a relatively quiet week as speculators and commercial traders await the June 30 stocks and acreage report from the USDA. Erratic weather has been the theme of 2017 and it shows no sign of ending, with hot/drier central U.S. weather forecast from July 4 th -15 th. The heat will occur during Midwest corn pollination and traders may reduce their short bets. 1

2 Rain yesterday was centered on MO, with light amounts also falling in northern/central IL, eastern KS and northern IN/OH (see map left). Midwest and Delta rain chances look solid and heavy for the next 5-6 days (see 7-day NOAA forecast map right). The GFS model continues to be the wettest, with rainfall of from eastern NE into IN, with other areas seeing rainfall of into Saturday. A final round of rain is expected across the Great Lakes prior to the arrival of heat on July 5 th, with totals of Questions abound on the stability of the high-pressure ridge across the Plains. The models are in better agreement today, which raises confidence of hot/dry weather beyond the July 4 th holiday for the Plains and the WCB. A strong ridge of high pressure looks to form across the drier soils areas of the northern/central Plains and the WCB from July 5 th and fan a round of extreme heat, with high temps ranging from the 90 s to lower 100 s. The ridge in this location will shift the jet stream northward into Canada and reduce U.S. rainfall chances. Unfortunately, the northern Plains does not have a good chance of meaningful rain in the next 2 weeks and the drought will continue to worsen. Yesterday s weekly U.S. crop progress report saw U.S. corn crop conditions at 67% good/excellent vs. 68% expected (67-70% range of ideas), 67% last week, and 75% last 2

3 year, as ECB conditions improved and the WCB declined. U.S. soybean crop conditions were 66% good/excellent vs. 68% expected (67-69% range of ideas), 67% last week, and 72% last year. Sharp cuts were seen in the Dakotas, where 14% of the US soybean crop is produced in U.S. spring wheat crop conditions were 40% good/excellent vs. 41% expected (38-44% range of ideas), 41% last week, and 72% last year. U.S. winter wheat crop conditions were 49% good/excellent vs. 50% expected (49-51% range of ideas), 49% last week, and 62% last year. U.S. winter wheat harvest was 41% complete vs. 44% expected (41-48% range of ideas), 28% last week, 42% last year, and 39% average. Cotton planting was reported 98% complete compared to 98% last year and the five-year average of 99%. Sorghum planting was 95% complete compared to 94% last year and the five-year average of 93%. Rice headed was 9% completed compared to 15% last year and the five-year average of 11%. Rice condition was 73% good/excellent. The RJO weekly crop roundup highlights included a likely gain in the national U.S. corn/soybean ratings, southcentral NE HRW yields and protein exceeding expectations, while Midwest SRW yields and quality are good. Scattered weekend frost damage was reported across portions of the Dakotas (35F low in northeastern SD Monday AM). Dakota commentators want warm temps to accelerate growing degree days. HRS ratings likely erode and USDA HRS area may be lower than the trade expects. Farm marketing has ground to a halt following the recent break in prices. Accelerating growth is masking below average planting pops and the top end is off yield IL eastward. Crop development is tracking late and corn will pollinate 7-10 days later than normal. Delta crops are looking good except for river bottoms, which may go to prevent plant. Delta SRW yields are variable. NE crops need soaker and row crop ratings are likely to slip. The central third of IL is in need of a soaker, with June rains so far only 50-75% of normal. There is more replant of IN beans this week and row crop yield potential there is well below average. The Stats Can acreage report due later this week is looking for a 500,000 acre cut in wheat area vs. initial intentions of 22.2 million acres and a 800,000 acres cut in canola area vs. intentions. The Ukraine State Weather unit pegs the 2017 grain crop at 59mmt vs. 66mmt last year, including 25.6mmt of corn vs. 28mmt last year. Corn yields may be further threatened by poor weather over the next two weeks (see graphic courtesy of Commodity Weather Group The European Union trimmed forecasts for its soft wheat yield, but thanks largely to downgrades for Italy and Spain rather than the much-watched French crop, in a report which downgraded hopes for Ukraine too. The European Commission's Mars agricultural meteorology division lowered by 0.05mt/hectare to 5.86mt/hectare, its forecast for this year's soft wheat yield in the EU, the top grower of the grain. The downgrade, which lowered to 0.30mt/hectare 3

4 the recovery in the figure from last year's rain-depressed result, comes amid mounting worries over the impact on the French crop, the EU's biggest, of recent hot and dry weather. However, the estimate for the French soft wheat yield was kept at 6.77mt/hectare, and the country's winter barley result upgraded by 0.41mt/hectare to 6.17mt/hectare, with Mars instead focusing on damage from "exceptionally warm and/or dry conditions" in some other countries. Mars also downgraded by 0.37mt/hectare to 3.91mt/hectare its forecast for the Ukraine wheat yield, taking the figure comfortably below last year's 4.21mt/hectare result. From the U.S. to Europe, analysts are taking a knife to their wheat estimates after weeks of intense heat and drought. In Russia, it s the opposite. Wheat researchers, such as SovEcon and the Institute of Agriculture Market Studies, raised production forecasts this month after rains nourished the growing crop. That s a big difference compared with the rest of the world. In France, the European Union s biggest grower, analysts are preparing to take down production estimates after temperatures exceeded 30 degrees Celsius (86 Fahrenheit). A prolonged dry spell in the U.S. left the spring wheat crop in its worst shape in almost three decades. In Australia, where planting recently finished, the start of the winter wheat crop has been mixed. Russia is expected to collect the second-biggest wheat crop after last year s record harvest. In western Russia, rain during the growing season has been plentiful, even excessive in some areas, according to IKAR. Some parts of the south, the main area for growing wheat, received triple the normal amount of rain for the middle of June, government data showed. The good growing conditions led IKAR to increase Russian estimates last week, predicting output as high as 70mmt for the season, which begins next month. SovEcon, another Moscow-based consultant, raised its forecast to 70.8mmt earlier this month, saying the crop looked great. In Ukraine, conditions have been unusually dry in some parts. The main wheat and corn areas haven t received enough rain and higher temperatures later this week will add stress to plants, Commodity Weather Group said. The Hydro Meteorological Center cut its forecast for the winter wheat crop by about 5% on Monday to 23.2mmt, according to the head of the government department. UkrAgroConsult, however, has held its outlook for all wheat steady at 24.5mmt because most fields avoided the recent dry spell, according to an analyst at the Kiev-based 4

5 company. For corn, dry weather is causing some damage. The Kiev-based researcher cut its estimate 0.8% to 26mmt earlier this month, but said outlook may improve if rains return. After mulling over the contrast of last week's bearish corn price response and obvious problems in the field, it seems fair to say that traders are being more swayed by forecasts that look better than actual conditions. Technically, Friday's new low was obviously bearish, but fundamentally, this does not look like a corn crop headed to a record national yield. Have traders, after a series of years of benign weather and bumper harvests, become a bit too optimistic over U.S. crops' ability to withstand less than ideal conditions? Expectations for the weekly USDA weekly crop progress data have been a little too upbeat so far this season. The extent of the deterioration in spring wheat, stressed by drought in the northern Plains, has in particular caught them off-guard. USDA data late yesterday again showed that traders were again optimistic in their expectations. For corn, the crop did not experience the small improvement that investors had expected, with the rating instead staying at 67% good or excellent, a marginally sub-par reading for the time of year, with 70% about normal for this time of year. Although parts of the eastern Corn Belt did see the improvement that investors had talked of, with ratings up for IL, IN and OH, ratings declined in Plains states such as the drought-hit Dakotas, but also NE and TX. For soybeans, in which traders had also forecast a 1-point improvement in the rating to 68%, the figure actually declined by 1 point to 66%, which is pretty much in line with the five-year average. Again, there was some improvement in IL and OH, offset by deterioration in the northern Plains, but also in LA, with the figure tumbled by 7 points week on week, seen as potentially a reflection of damage from rains caused by Tropical Storm Cindy. I ve been walking corn fields for 25 years and unlike soybeans, which can have great yields even after early stress and lower than normal stands, corn that is stressed early on rarely recovers. Oh sure, corn eventually grows tall and can hide the problems, but they don t go away. I expect we ll see low plant/ear counts, a greater abundance of sucker plants/ears, lower than normal row counts, minor pollination issues and nitrogen deficiencies, all of which make trend yields likely impossible. The question in my mind is just how far under trend U.S. corn yields fall, which won t be known until later in the growing season. Assuming a yield 2.5% lower than trend and a U.S. carryout near 1.5 billion bushels, a fall low in Dec corn of $3.50-$3.70 would be likely. With last week s low at $3.74, one could argue that very little if any weather premium is currently in the corn market. On the demand front, South Korea tendered and purchased 418,000mt of corn over the weekend in a testament to reduced world feed wheat supplies and its higher price relative to corn. A year ago, it was feed wheat that captured at least 11-13mmt of additional world feed demand. This year, world corn trade will benefit from its cheaper 5

6 price levels and the higher price of wheat. China is expected to sell 1.18mmt of corn from state reserves on Thursday, with an additional 2.43mmt on Friday. Iraq is seeking 50,000mt of U.S., Canadian, or Australian wheat, with the tender closing on July 3 rd. U.S. corn exports for the week ended 6/22/ mb were down solidly from the previous week's 48.0mbre well below last year's same-week exports of 57.1mb and were the lowest in 7 weeks. Nonetheless, corn exports continue to easily keep pace with the USDA's billion bushel export estimate as weekly shipments will need to average roughly 25.5mb/week over the final 10 weeks of 2016/17. Based on this, we still feel the bias for 2016/17 final exports is a bit above the USDA's current estimate. U.S. soybean exports of 11.6mb were generally in line with last week's 10.7mb and last year's same-week exports of 10.9mb. More importantly, not a single week's soybean exports have fallen below the average weekly needed pace of 8.0mb so far in 2016/17, and still averaged 12.7mb over the last 8 weeks even as exports slow seasonally to end the marketing year. As long as Argentine soybean exports remain on the slow side, as they have in recent months, the USDA's export projection appears likely to be achieved, if not still potentially slightly exceeded, when all is said and done. Hogs: Cash hogs are called steady. This week's slaughter should be close to last week's level as supplies continue to tighten on a relative basis and should be tighter throughout June and the tightest in July, year over year. The national bid gained $.02 to $85.82, while the IA/MN bid gained $.16 to close at $ The CME Lean Hog Index for 6/22 was up another $.87 to $ The USDA pork carcass cutout value was up $.20 at $ on slow movement of 222 loads. The picnic and rib were the only cuts lower. Bellies had another round of aggressive price movements upward last week, with risk that more price hikes could occur. Currently, at price points rivaling last February's highs, the seasonal risk to price is higher right now than during a typical February timeframe. Monday s kill was up 2.11% from a year ago. Estimated packer margins were $23.91/head for non-integrators and $85.41/head for integrators vs. $25.00 and $86.08 the previous day. With the cash hog index digging in above $90, the discounts of spot July and August will keep would-be bears nervous, warning them of the danger of getting too bearish and/or overstaying their negative welcome. Lean hogs traded higher Monday, with July futures up 2% at cents a pound. Lean futures seem staged to open some higher with nearby once again advancing at a faster pace than deferreds. The cash market has been nonstop hot in hogs. The rally is a demand-driven, not a supply driven rally, with steady demand from Mexico for pork and bacon from the U.S. The market is closely watching to see if cash prices, which are higher than futures prices, will begin to take a turn lower as the livestock market closes in on a season in which cheaper cuts dominate summer barbecues. Cash hogs were steady to lower Monday and cutouts were steady to higher with a kill pegged at 430,000 6

7 compared to 435,000 last week and 426,000 last year. Cheap pork should be featured for the 4 th of July holiday. The overall cost to feed 10 people an assortment of burgers, ribs, hot dogs and potato salad with various fixings is set to decline 1% from last year's total, the Farm Bureau's annual survey shows, driven lower by cheaper pork, beef and cheese- -though ketchup and corn chips went up in price versus last year. The total cost to throw a BBQ under the parameters laid forth by the Farm Bureau comes to $55.70 this year, versus $56.06 last year. Live cattle futures reversed course to end higher Monday, with traders pointing to higher-than-expected demand from packers trying to take advantage of strong margins. CME live cattle for June was up 1.9% to end at $ a pound and August futures were up 2.6% to end at $ a pound. As of June 1, cattle on feed in feedlots is above 11 million for first time since January 2013, leading expectations that cattle supply will increase in August. But Monday, boxed beef prices were higher following last week's slump, with select boxed beef up $2.08 and choice 3 cents higher. Packer margins are huge, so while there are big numbers on the horizon, packers want to secure beef now to take advantage of those margins. Packer margins have been strong, with the latest HedgersEdge packer margin index per cattle at plus $ Today's slaughter was pegged at 117,000 head versus 110,863 a year ago. The futures market for August is trading at a discount to the cash market, with speculators betting on higher prices at a near record net long position with news that China has opened its market to U.S. beef and Brazil has had issues with tainted beef. On June 23 rd, the pork cutout value soared to a new high for the year, which is impressive for several reasons. First, we re dealing with record large pork production as year-to-date hog slaughter is up 2.7%. Second, the cutout is higher than this time last year, higher than this time two years ago and stands at the highest level since October Recall that 2014 was the porcine epidemic diarrhea year in which hog prices and cutout values rallied sharply. The obvious conclusion reached from higher hog prices and cutout values in the face of record large production is improving or strong to very strong demand for U.S. pork. When producers decided to expand the herd a year ago, they were counting on strong demand and sure enough here it is. Speaking of expansion, the USDA will shed light on the pace of hog herd expansion in the quarterly Hogs and Pigs Report slated for release on June 29 th. The question begs, what should traders and hedgers be doing in the market? First, if you re a producer and you don t have hedges in place before the Hogs and Pigs Report, you re making a marketing mistake. Any time you can establish a price floor above your cost of production during a year of record large production, you d be wise to do so. With seasonals usually peaking just before the July 4 th holiday and U.S. pork production gains from the 2 nd to 3 rd quarter much larger than normal, downside risk appears to be growing. 7

8 Weather: Today's U.S. and European models are in fair to good agreement during the outlook period today. A weak to moderate shortwave trough will drift over the Midwest region early in the outlook period. This likely means widespread shower and thunderstorm activity and mostly below normal temperatures for the first 1-3 days of the period. The rainfall may also occur in eastern areas of the central Plains region and northern areas of the Delta region during this time. Later in the period, the subtropical ridge builds northward over the southern and central Plains area and noses into the southwestern Midwest region. This likely will mean hot and dry weather for the central and south Plains region. It should also mean a turn to above normal temperatures over the Midwest, especially the western Midwest, and a drop off, somewhat, in the chances for scattered thundershowers. Today's extended range outlook covering the 11 to 16 day period, July 7-12, shows significant upper level ridging ranging between the central Plains area through the Midwest to the east-central U.S. This is a new development from yesterday and is therefore considered highly uncertain. The strong jet stream this season is likely to limit the amount of time that any U.S. ridging can remain far enough north to impact the Midwest or the northern Plains regions, but we have already seen this season where brief periods of hot weather are possible in these locations. Rains of generally less than.50 fell across most of MO and the southern ½ of IA, with things mainly dry in the rest of the Midwest. Temps were below average, with highs in the 70 s in most cases and even a few 60 s in the far north. Overall, it s a fairly favorable forecast, with an absence of heat stress and average to above average precip to occur. Changes have even added precip to areas generally south of I-80 for the first half of next week. Temps will run below average, with 70 s and a few 80 s through most of this week and weekend, with upper 80 s to mid 90 s as we head through the middle of next week. Things remained mainly dry across the northern Plains yesterday, with temps in the 70 s and a few 80 s for highs. Below average precip will continue to occur across the western ½ of the region for the next week to ten days, with moderate rains to fall in the east. Temps will run average to below for most of this week and then look to warm to above average for the early part of next week. Other than a few showers bringing generally less than.50 to the eastern 1/3rd of KS, things were mainly dry in the central/southern Plains. Temps were in the 80 s and 90 s for highs. Hit and miss showers will cause some issues with remaining harvest in these areas for the week ahead, but things do not look to be overly wet, with totals for the week of.40-1 and coverage of around 70%, favoring the east. Things then look to quiet down for the weekend and early next week. Things were mainly dry across the Delta yesterday. Temps were in the 80 s for highs. Things look to be fairly quiet for the week ahead and then close to average precip looks to fall in most areas in the 6-10 day period. Temps will run below average for the week ahead and then warm to above average by the 8

9 weekend and into early next week. The day forecast for this time frame is unchanged and still indicates some weak ridging to produce below average precip in most of the Midwest, Delta and northern Plains, with average to above average temps. Temps could be warm enough to cause a bit of stress for crops in the Midwest, but nothing too out of hand. North American Weather Highlights: The Delta saw rain late last week due to post tropical depression Cindy. This will maintain adequate to surplus moisture for crops and is favorable, except for areas of local flooding. Rain and scattered thunderstorms in the Midwest this week will maintain mostly favorable conditions for developing corn and soybeans, especially as temperatures return to more normal levels. More rain in the northern Plains would benefit developing corn, soybeans and spring wheat. However, the lack of any hot weather limits stress and some beneficial shower activity is possible during the next few days. The central/southern Plains will see no significant concerns for mature wheat and the wheat harvest at this time, although showers may at times cause slowdowns to harvest. A cooler period will favor developing corn and sorghum in the region this week, but hot weather is expected next week. Showers during the week and more seasonal temperatures will favor crops in the Canadian Prairie, except in the northwest where fieldwork delays are still of some concern. Global Weather Highlights: More rain is needed in northeast China for favorable development of corn and soybeans, especially in the western crop areas. Drier and hotter weather occurs early this week, while late in the week we may see some increase in scattered shower activity and less hot weather. Rainfall looks to average below normal during the next ten days. The Indian monsoon has moved north of Gujarat and all but the extreme north portion of Madhya Pradesh, but is still just east and south of Uttar Pradesh. This is at least 10 days behind normal development, but it appears to be improving. Improvement is expected during this week and there is a good chance for needed rains to occur in soybean, groundnut and cotton areas of west-central India. We should also see increasing shower activity reach into Uttar Pradesh during the week. Macros: The macro markets were mixed as of 8:45am EDT, with Dow futures down 0.1%, the U.S. dollar index is down 0.6%, crude oil is up 1.3% and gold is up 0.3%. The S&P 500 on Monday closed 0.3% higher, the DJIA gained 0.07%, and the Nasdaq lost 0.44%. Bullish factors included carry-over support from a rally in European stocks on reduced banking risks after the Italian government committed $19 billion to rescue two failed Italian banks, and strength in energy stocks as crude oil prices rallied. Gains were limited after U.S. May capital goods orders non-defense ex aircraft, a proxy for capital spending, unexpectedly fell 0.2%, weaker than expectations of +0.4% and the biggest decline in 5 months. Fed Chair Yellen speaks today at 1pm EDT in London on the topic 9

10 of global economic issues at an event at the British Academy. The markets will be watching for any fresh hints on the timing of the Fed's next rate hike or the beginning of the Fed's balance sheet reduction program. The markets will also be watching to see if Ms. Yellen makes any comments about the recent soft U.S. economic and inflation data, which she has largely written off thus far as transitory. There has been little change over the past month in market expectations for future Fed rate hikes. The market is currently discounting the chances for the Fed's next rate hike at 30% by September and 62% by December, according to the federal funds futures market. The Atlanta Fed's GDPNow on Monday cut its forecast for Q2 GDP to +2.9% from +3.0% due to Monday's weak May durable goods orders report of -1.1% and +0.1% extransportation. That Q2 GDP forecast of +2.9% is sharply lower than the +4.9% forecast that GDPNow started out with on May 1. The Bloomberg survey consensus for Q2 GDP is currently at +3.0%, close to the GDPNow forecast. The market consensus for today's June Conference Board U.S. consumer confidence index is for a 1.9 point decline to 116.0, adding to May's 1.5 point decline to The University of Michigan's U.S. consumer sentiment index for early June has already been reported at -2.6 points to 94.5, which is partially behind expectations for a decline in today's Conference Board index. The market consensus is for today's Apr S&P CoreLogic Composite-20 home price index to show another solid gain of 0.5% on month and 5.9% on year. The index showed a lull in the middle of last year but has risen sharply with an average monthly gain of 0.8% since Sep The index has now soared by 44.8% from the housingbust low and needs to move higher by only another 4.1% to match the record high posted in April Overnight, Bloomberg News reported that a mood of caution was evident in equity markets Tuesday, with European stocks falling in a broad-based retreat. The euro jumped and the dollar fell as Mario Draghi said headwinds to inflation in the region are temporary. The Stoxx Europe 600 Index dropped, led by automakers, though basic resources shares were among those bucking the trend as commodities advanced. Gold rebounded after an apparently erroneous order triggered a plunge in the price on Monday. The Chinese yuan surged both onshore and overseas amid speculation of central bank intervention. Treasuries slipped before an appearance by Federal Reserve Chair Janet Yellen. Traders will be looking to Yellen for clues on the outlook for interest rates and the American economy, especially after weakness in data yesterday added to concerns about the strength of growth. Some investors worry the Fed is taking too rosy a view as it sets the path for increasing borrowing costs. European Central Bank President Draghi struck a cautiously optimistic tone for the euro area, noting a strengthening and broadening recovery but stressing the need for prudence in adjusting policy. Meanwhile, Brazilian President Michel Temer was charged with 10

11 corruption in a highly anticipated development that may put the embattled leader of Latin America s largest economy on trial. Temer, who has denied the charges, could lose his job if indicted and found guilty. India and Singapore reopened after holidays but many markets, including in Malaysia, Indonesia and most of the Middle East remain closed. The Federal Reserve is set to announce the results of the second part of its annual U.S. bank stress test on Wednesday. China s PMI might have declined in June after unexpectedly remaining unchanged in May, reflecting government offers to cut overcapacity and leverage. That reading is due Friday. The Stoxx Europe 600 Index slipped 0.4 percent as of 11:10 a.m. in London, as declines in automakers overshadowed the rally in basic resources shares. Futures on the S&P 500 Index fell 0.1 percent. The underlying gauge rose less than one point on Monday. The Nasdaq 100 fell 0.4 percent. The euro surged 0.6 percent to $ The Bloomberg Dollar Spot Index fell 0.3 percent after gaining 0.1 percent in the previous session. The British pound added 0.1 percent to $ West Texas Intermediate crude rose 0.8 percent to $43.73 a barrel, adding to a three-day rally following oil s drop into a bear market. Gold increased 0.5 percent to $1, an ounce. The precious metal sank almost 1 percent on Monday. The yield on 10-year Treasuries rose two basis points to 2.16 percent, after dropping less than one basis point on Monday. European government bonds dropped across the board, with the yield on benchmark French bonds climbing six basis points and that of Germany four basis points. China s offshore yuan jumped as much as 0.4 percent in the afternoon spike, with the onshore market following with a similar move. Hong Kong s Hang Seng index fell 0.1 percent and the Shanghai Composite Index advanced 0.2 percent. Japan s Topix climbed 0.4 percent to the highest closing level since August Summary: December corn is in position to establish a minor, short-term uptrend on its daily chart Tuesday, if it can hold or add to overnight gains during Tuesday's session. Support could come from spillover buying tied to new-crop soybeans, as well as a morning weather radar map devoid of rain. Monday afternoon saw NASS' latest crop condition numbers remain unchanged, with this year's ratings continuing to track those seen in 2013 when final national average yield came in reportedly at 158.1bpa vs. the current USDA estimate of 170.7bpa. Soybeans posted a solid rally overnight into Tuesday morning, sparked by lower weekly crop condition numbers from NASS. For now, 2017's index ratings continue to run near what was seen in 2015, when the U.S. crop reportedly saw a national average yield of 48bpa, which matches the USDA s latest June Crop Production report. Technically the market could see a minor, short-term bounce, though its major, long-term trend on its monthly chart remains down. The wheat complex was higher to start the day, once again led by Minneapolis spring wheat. 11

12 NASS' latest weekly crop condition numbers decreased for spring wheat, again, sparking continued buying interest overnight. As for winter wheat, harvest progress was estimated at 41% completed, slightly ahead of the 39% 5-year average. Look for today s session to see light buying interest continue in winter wheat as markets recover from Monday's sell-off, with support also coming from the lower U.S. dollar index. September corn edged higher Monday in a corrective recovery rally. The near and intermediate-term trends are negative for corn, but last week's strong selling tugged the market below its lower daily Bollinger Band line, which is a sign of an overextended market. September corn is testing a key chart point at $3.68 1/4, the April 21 low. The market slid through that level on Friday, but recovered to test that zone on Monday. That level could act as a short-term toggle point for corn. Sustained declines below $3.68 1/4 would confirm a new intermediate-term down leg in corn and leave the market vulnerable to continued deterioration. The next bearish daily chart objective lies at $3.56 1/4, the Sept. 30, 2016 low. Conversely, if September corn can post sustained strength above $3.68 1/4, it would mark out short-term support at $3.64 1/2 and open the door to a sideways consolidation or upside correction phase. Resistance lies at $3.68 1/4 and then $3.71 1/2 and then $3.77 1/4. November soybeans edged slightly higher on Monday. The market stabilized above new support at last week's low at $9.07. The near and intermediate-term trends are negative for beans, but the market sold off swiftly from the June 19 high at $9.58 1/4 and is vulnerable to a digestion or backing and filling phase. On the upside, initial resistance lies at $9.15 1/2-$9.18 1/2, the May 31 swing low and Monday's high. It would take sustained strength above that zone to suggest bean bulls are gaining traction with a countertrend correction. Beyond that, the $9.30 1/4 level is next resistance. On the downside, last week's low at $9.07 remains initial support. Below that, a significant daily chart objective is seen at $9.03 1/2, the Aug. 2, 2016 low. A/C Trading Co. does not accept orders to buy or sell by , text or any other form of social media. This material has been prepared by a sales or trading employee or agent of A/C Trading Co. and is, or is in the nature of, a solicitation. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions. DISTRIBUTION IN SOME JURISDICTIONS MAY BE PROHIBITED OR RESTRICTED BY LAW. PERSONS IN POSSESSION OF THIS COMMUNICATION INDIRECTLY SHOULD INFORM THEMSELVES ABOUT AND OBSERVE ANY SUCH PROHIBITION OR RESTRICTIONS. TO THE EXTENT THAT YOU HAVE RECEIVED THIS COMMUNICATION INDIRECTLY AND SOLICITATIONS ARE PROHIBITED IN YOUR JURISDICTION WITHOUT REGISTRATION, THE MARKET COMMENTARY IN THIS COMMUNICATION SHOULD NOT BE CONSIDERED A SOLICITATION. The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that A/C Trading Co. believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. 12