Daily Grain / Hogs Marketing Outlook Written by: Jim Gerlach 9/14/2018

Transcription

1 Daily Grain / Hogs Marketing Outlook Written by: Jim Gerlach 9/14/2018 Early Call 8:45am EDT: Corn up $.01, soybeans up $.01, wheat up $.08. Grains bounced overnight into the weekend, but sentiment and money flow remain negative across the board. Mostly better international equity markets occurred overnight to close the week although the U.S. will be focused on Hurricane Florence this weekend and the aftermath it generates. Grains: Grain futures prices closed lower Thursday as traders continue digesting the surprising results from Wednesday's U.S. Department of Agriculture monthly supply and demand report. September soybean futures fell 0.8% to $8.22 3/4 a bushel at the Chicago Board of Trade. September corn futures finished down 1.5% and December wheat futures finished down 1.9%. The agency raised its estimate for domestic corn production for to 14.8 billion bushels, up 241mb from last month's estimate. The USDA also said that it expects to see a record corn yield of 181.3bpa, surprising analysts who were expecting smaller production and yields. Trade sentiment is we're moving into harvest, weather looks good, and upward revisions in yield estimates are likely. Grain traders are also watching for trade developments. The Wall Street Journal reported that the U.S. is reaching out to China, the world's largest soybean consumer, for a new round of trade negotiations. In response to the report, President Trump tweeted Thursday that the U.S. is "under no pressure to make a deal with China, they are under pressure to make a deal with us...if we meet, we meet?" Soybean prices were trading higher early Thursday but declined after the tweet. The agency's estimates of higher world supplies of wheat also put pressure on futures prices, as analysts had been expecting smaller figures, experts said. Wednesday s collapse in the wheat market brought U.S. prices closer to being competitive on the world market once again, but little significant export business is expected until Black Sea supplies run out. 1

2 With the exception of the Southeast, the major grain areas of the U.S. were dry yesterday (see left map). Heavy rains from Hurricane Florence will spread across the Carolinas through the weekend, with extensive flooding. Midwest showers early next week will be limited, with the main rains across the northwest ½ on Wed-Thu, with the heaviest totals in SD, MN, WI, northern NE and northern IA (see 7-day NOAA forecast map right). Showers spread across the rest of the Midwest next weekend and in the day period, but early harvest delays will be limited in duration. Most of the Delta stays clear of rains the next week, aiding harvest with only limited showers late next week. Plains winter wheat seeding is making good progress with a warm, dry week. Rains late next week will benefit germination. Weekend rains will stall Canadian Prairie harvest, but a drier 6-15 day trend allows for recovery and limits losses. The Rosario Grains Exchange pegged this year s Argentine soybean crop at 50mmt vs. the USDA at 57mmt and last year s drought crop of 37.8mmt. They lowered their corn crop estimate to 43mmt from 45-46mmt previously, which would still be above the USDA s 41mmt estimate and last year s drought crop of 32mmt. The exchange pegged their wheat crop at 21mmt (USDA 19.5mmt and 18.0mmt last year). The Buenos Aires grains exchange cautioned that it may downgrade its forecast for Argentina s corn sowings, underlining the setback to production prospects from the country s reintroduction of grain export taxes. While restating a forecast for corn seedings to rise by 400,000 hectares year on year to 5.80 million hectares, it cautioned that a downgrade could be in the offing after Argentina s government, in the face of a currency crisis, imposed a tax of 4 pesos per $1 on exports of crops including corn. The downgraded corn area estimate still represents growth of 2.6% year on year, although below the previous expectation of 6% expansion. The cycle started with a strong predilection for cereals, but after the new export rights that weigh on corn, late plantings are being reallocated. There was a preference for turning towards oilseed, on grounds of returns prospects, and which are seen as presenting lower financial risk. 2

3 The spread between early corn yield results on a widely-followed yield reporting network and the USDA s surprisingly high national U.S. corn yield is reportedly wider than at any time. Of course, it is VERY early in harvest and traders will continue to play close attention to corn yields after the USDA set the bar high with record populations and ear weights. Some traders have problems with record ear weights due to the extremely fast development of this year s U.S. corn crop, so yields vs. expectations will we watched carefully. For soybeans, the fifth big U.S. crop in a row means we have too many beans left over, with or without China. Stocks-to-use is expected to climb to nearly 20%, a level not seen since 2006, or back when China decided to start eating meat. South America will have to have the wheels come off the bus to see a chance for price recovery in the soybean market. Even with China taking 300mb from the U.S., if a trade resolution happens shortly we still have 545mb and that assumes the crop doesn t get any bigger, which looks like a big if at this point. We either plant less bean acres or need someone to have a major crop loss, or a combination of both. Of course, less bean acres means more wheat/corn acreage, implying extra supplies of those and pressure on prices. Technically, Nov soybeans need to close above $8.44 for a weekly reversal off a fresh contract low, known as a key reversal. The report news is certainly bearish, but one has to wonder if that is already priced in? As noted yesterday, the July/August reports saw fresh lows, but bottomed within 24 hours of report release. Reports that higher level invitation to talks with the Chinese have been accepted rallied prices as the last talks in August were mainly between low level diplomats. Also supportive is the fact that basis is near record poor levels, futures are near full carry and farmers will be getting $1.65 from the USDA (50% after harvest, 50% at a later date), all of which should keep farm selling to a minimum. The USDA Secretary of Agriculture said a second round of tariff-related aid to U.S. farmers could be announced in December. On the demand front, Malaysian palm oil futures ended 1.0% lower, tracking weakness in soybean oil prices. Further, higher production and lower export demand for the tropical oil has cast a gloom over the market sentiment. Malaysian markets will be closed on Monday for a national holiday and will resume trading on Sept 18. The USDA yesterday reported sales of 108,000mt of 2018/19 soybeans to Mexico, 120,000mt of soybeans to unknown (40,000mt 2018/19, 80,000mt of 2019/20) and 143,000mt of 2018/19 corn to Costa Rica. The extent of the decline in U.S. soybean prices means that U.S. soybeans are competitive enough in comparison to Brazil to attract Chinese business. There was a cargo of U.S. soybean shipments to China shown in weekly U.S. export data on Thursday. Asian grain traders said wheat importers in the region are expected to look to Argentina for wheat imports later this year due to Australia s drought. Asian markets rarely venture outside of Australia and Black Sea origin. Saudi Arabia is tendering for 595,000mt of hard red wheat for Nov-Dec delivery, 3

4 with offers due today. France, the European Union's biggest grain producer, could boost exports of wheat and barley this season after its harvest was less affected by severe weather than other EU states, the country's farm office said on Wednesday. In its first supply-and-demand outlook for the 2018/19 July-June season, FranceAgriMer projected French soft wheat exports outside the EU at 8.5mmt, up from 8.1mmt in 2017/18, while barley exports to non-eu destinations were forecast to rise to 3mmt from 2.5mmt. Jordan cancelled its most recent tender for 120,000mt of hard wheat Thursday. Jordan on Thursday reportedly bought 60,000mt of barley for shipment in the second half of October. Algeria purchased around 630,000mt of wheat Thursday. An auction of Chinese state corn reserves on Thursday saw 2.902mmt sold, totaling 73.28% of the amount offered. Iraq is seeking 50,000mt of wheat from the U.S., Canada, and Australia with the tender to close on Sep 23 rd. Rosselkhoznadzor, Russia s state agriculture watchdog, has asked grain exporters sending wheat to a number of countries, including top importer Egypt, as well as the likes of Ecuador and Israel, to undergo additional checks lasting between 5 and 10 days. Given the ongoing speculation that Russia may impose export curbs, and the country s imaginative approach to achieving its aims, often taking a roundabout route, the move has raised ideas of shipments being curtailed by proxy. Analytical firm SovEcon in a recent briefing, talking of Russia s potential options for export restrictions, reminded of the scenario of , when the government suddenly imposed informal restrictions by limiting the issuance of phytosanitary certificates and supply of grain wagons. This was then followed by the formal restrictions a floating tax on exports. Still, according to Interfax, Rosselkhoznadzor has said that the extra checks are aimed at minimizing the risk of a complaint from an importing country, and increasing Russia s export potential. Hogs: Cash hogs are called $1 higher as packers continue to compensate for hogs not being processed in NC. The national bid rose $1.22 yesterday to close at $48.92, while the IA/MN bid gained $1.09 to close at $ The CME Lean Hog Index was up $.94 on September 11 th to $ The USDA pork carcass cutout value was $.19 higher at $71.05 on average movement of 280 loads. Estimated packer margins were $37.95/head for non-integrators and $18.00/head for integrators vs. $40.12 and $17.42 the previous day. Weekly kill is down 4.37% due to plant closures for the Hurricane. Strong buyer support in cash hog values continues to drive underlying buyer support through the complex. The most impacted is December and February futures, which gained additional support Thursday. Lean hog futures trade is expected to remain sluggish through most of the session Friday. News stories and developments on the impact of Hurricane Florence continues 4

5 to gain more attention at this point than any other market factor. This will likely keep most traders focused on other issues, which could keep overall trade direction stable. The uncertainty as to how this will impact the hog industry in and around North Carolina as well as pork processors will have a big impact on the overall movement of hog trade through the next few days. But for most of the Friday trading session, it is likely to be too early to tell just what impact this will have short and long term. Even though the hurricane has been downgraded to a Category 1 storm, it still is expected to cause major disruptions through the areas. Limited direction developed in lean hog futures Thursday following morning price pressure. Futures closed mixed, $0.15 lower to $0.65 higher. The wide-ranging market swings over the last couple of days have caused some additional adjustments in all contracts. Early price pressure moved frontmonth futures nearly $1 lower. But a lack of selling activity left markets generally supported, with most contracts holding gains of $.20 to $.40 by the close. The underlying firm support of cash hog prices and increasing pork values is helping to limit futures losses through the week. Pork values inched higher with pork primals mixed in a wide price range, as triple-digit price swings developed in several markets. Livestock futures finished lower Thursday as the Southeast coast prepares for Hurricane Florence. Florence has caused some hog processors near the Carolinas to enact hurricane preparedness plans that could stall slaughter for days until the storm is over, analysts say. The weather could also impact meat demand this weekend, according to some experts. The USDA announced in Wednesday s S&D update that pork production will increase 745 million pounds from the 3rd to 4th quarter, the second highest increase for that period ever. Last year s increase was just 556 million pounds. Sluggish trade activity left cattle markets mixed Thursday in a moderate trading range, with futures closing $0.67 lower to $0.47 higher. Early price pressure in nearby contracts seemed to limit the ability of buyers to move back into October or December contracts Thursday. Given that cash cattle markets remain undeveloped and wholesale beef values have struggled to find support, buyer interest in nearby futures has been lagging. Front-month October live cattle futures posted a $0.67 loss, backing away from short-term highs set Thursday. This move reinforced the long-lasting sideways trend in the live cattle complex. With prices unable to push above $112 in the front-month October contract, this wide gap may continue, giving traders reason to wander in this wide price range. Beef cutouts were lower, down $0.03 (select, $197.24) to down $0.75 (choice, $204.04) with moderate demand and offerings. Cash cattle trade is undeveloped at this point Thursday afternoon with packers showing more interest as the week has continued but doing very little to improve bids so that feedlot managers may become more interested. Bids through the day remain at $168 to $170 dressed basis and $106 live basis. Asking prices have held at $175 and higher dressed basis and $111 to $112 live. At this point, it is likely that trade will be pushed off until midday Friday or later as 5

6 traders focus on outside market direction and the potential to spark trade activity through nearby futures. Early feeder cattle uncertainty quickly faded with additional buyer support trickling back into the market. Futures closed $0.30 to $0.75 higher. Lateday buyer support slowly moved back into the feeder cattle complex, which helped to spark some additional underlying support across the market. The continued pressure in grain trade is pointing to lower production costs, which typically remains a bullish sign for feeder cattle futures. The most aggressive support remains in deferred contracts, which continue to hold a moderate-to-firm discount to nearby trade based on expected availability of cattle through early Although it has not been officially reported to the World Organization for Animal Health, preliminary reports indicate that African swine fever has been confirmed in two wild boars near the southern Belgian village of Étalle, in the province of Luxembourg, which is located 8 miles (12 km) from the border with France and 11 miles (17 km) from Luxembourg. It appears to have jumped a considerable distance from previously affected countries, about 300 miles (500 km) from the border with the Czech Republic, 500 miles from Hungary, and 750 miles (1,200 km) from the border with Romania (approximate distances). Belgian authorities report they are working to prevent the possible spread of the disease among wild boar and onto pig farms. In 2017, Belgium exported $1.4 billion of pork, making it the eighth largest pork exporter by country, and it is unclear how trade within the European Union will be affected. Following the report, the French Minister of Agriculture called for an adequate response given the considerable economic interests at stake for the French agri-food chain and warned about the impact of the Belgian outbreak, calling on officials to stop the disease from spreading across the border. This is also the first time ASF has been diagnosed in Belgium since 1985, when 12 farms were infected and 60 farms (34,041 animals) were eliminated. A recent modeling exercise on the potential spread of ASF in Belgium suggested that, in most of the cases, the disease would be controlled before any spread. This new outbreak may represent a new change in the epidemiologic situation of ASF worldwide, suggesting that the disease may have reached pandemic proportions. Pandemic is a term that refers to an outbreak of a disease that occurs over a wide geographic area, which seems appropriate in this case, considering ASF s expansion across Europe, and over considerable distances in China over the last year, in addition to the sustained occurrence of outbreaks in Africa and Russia. Weather: The U.S. and European models are in better agreement today, although there are still some differences. Post Hurricane Florence is expected to be out of the way by the first day of the 6-10 day period, next Wednesday. As we begin the outlook period we will have a strong trough centered northwest to north of Hudson Bay in Canada, a weak to moderate trough over the western U.S. and a broad ridge from the southeast 6

7 plains through the southeast U.S. and into the southwest Atlantic. The northern trough is expected to rotate around north-central Canada during the outlook period. It may lead to colder temperatures into the northern Canadian Prairies at times. The western trough is expected to move eastward across the northern U.S. underneath the northern trough. In a break with usual biases, the European model is faster with this movement than the U.S. model. The first question would be how cold it might get behind this trough over the north-central U.S. areas. It appears to me that unless it also phases with the northern trough it would bring somewhat colder temperatures to the northern Plains, but not very cold conditions. Another question would be how active the cold front would be as it comes southward. It appears that the northwest to the north-central Midwest region would be the area of concern for heavier rain or thunderstorms. Elsewhere in the Midwest, showers may occur, but these look to be lighter in nature. Through the central and southern Plains region, there may should also be some shower and thundershower activity, likely favoring eastern areas but possibly also in the south-central areas as well, depending on how far south the cold front moves during the period. Dry weather dominated the majority of the Midwest region again yesterday and temps topped out in the 80 s, with lows in the 50 s and some 60 s. The forecast sees dry weather to continue to dominate all of the Midwest through the weekend and Monday. A front is still indicated to move into the northwest ½ of the Midwest Tuesday and create waves of rain in the northwest ½ of the region into the end of next week. Little in the way of rains are seen for areas southeast of a line from the southwest corner of IA to Milwaukee next week. Temps will run in the 80 s for highs in most areas for the rest of this week, into the weekend and early next week. Slightly cooler air then looks to build in for the middle of next week, but no cold air threats are seen through Sept 23 rd at least. Dry weather dominated the region yesterday and temps were in the 80 s for highs, with lows in the 50 s. The forecast sees mainly dry weather to dominate the region for much of the next 7 days. This will help to facilitate any fieldwork associated with the upcoming winter wheat crops. By the very end of next week and weekend, a front is indicated to bring some rains to the eastern ½ of KS, OK and TX. Temps will be running near average across the southern Plains through much of the next week to ten days, with highs in the 80 s. Some 90 s will be possible in the west and south this weekend and the first half of next week. The day forecast continues to see a fairly west to east flow aloft to result in close to average temps in most of the Plains and Midwest. The Midwest and southern Plains would also both see average to below average rainfall. No cold air threats are seen. North American Weather Highlights: Hurricane Florence will be making landfall shortly as a category one system near Wilmington, NC. Winds will slowly diminish as the system encounters land but heavy to torrential rains will continue and spread inland 7

8 slowly during the next 2-3 days. Slow movement likely means excessive rainfall, inches and locally heavier. The hardest hit areas, in terms of torrential rains and severe flooding, appears to be for southeast and south-central North Carolina and northeast to north-central South Carolina. However, potential heavy to very heavy rains will also cover the balance of the Carolinas region before heading north into Virginia and then the middle Atlantic and northeast areas of the U.S. The Delta sees drier weather this week, especially central areas hit by locally heavy rains last week. This should help improve conditions for mature crops and crop harvests as well as any early winter wheat planting. Warm, dry weather in the Midwest will favor mature crops and harvesting for at least another 4 days. Showers and thunderstorms return to the northwest and northcentral areas after that leading to likely harvests delays. Rain associated with post hurricane Florence will move into southeast Ohio Monday. There is a slight chance that this rain would occur far enough to the west to impact key growing areas for soybeans and corn in Ohio. The northern Plains sees mostly favorable weather for maturing crops and harvesting of corn and soybeans through the weekend, although showers may occur at times. There is a slight risk for somewhat colder, wetter weather for a time next week. Wet weather last week in the central/southern Plains improved soil moisture for winter wheat planting. Above to much above normal temperatures and below normal rainfall during the next 5 to 6 days will deplete soil moisture. This situation bears watching. After that, some areas may see cooler temperatures and showers developing. The Canadian Prairie sees showers, rain and some snow during the weekend and early next week, with colder temperatures, especially western and northern growing areas. Precipitation may cause delays, at times, to the harvest of wheat and canola while improving soil moisture for planting winter grains. Colder temperatures likely means an end to the growing season for some west and north areas and a chance for frost in southcentral and southeast areas. Global Weather Highlights: Frost and a light freeze in China was reported early this week in the area of Heilongjiang northwest of Harbin. Late maturing soybeans in the area may be somewhat at risk due to this cold weather. Conditions remain more favorable elsewhere in the northeast China soybean belt at this time. However, a wet and sometimes cool weather pattern in the area going forward is also somewhat concerning for maturing soybeans in the area. Recent rainfall in eastern Australia has helped ease drought conditions in the area. This is likely too late to significantly improve prospects for winter wheat. Rainfall improves soil moisture and builds irrigation for planting cotton and sorghum, however much more rain is needed. The region continues mainly dry during the next 7 days. The monsoon activity in India is now mostly confined to the northeast. While the monsoon begins to withdraw from Pakistan and northwest India around this time, it is much too early for rains to quit elsewhere in the region. This needs to be watched, especially as it concerns west-central 8

9 India cotton, groundnuts, sugarcane and sorghum areas. Maharashtra and Gujarat could still use more rain. It appears that the rains will be increasing over east-central and southeast India later this weekend and early next week. Moderate to heavy showers and thunderstorms occurred during this past weekend in South Ukraine, the southern portion of east Ukraine, the southern portion of Central Ukraine and the western portion of South Russia. Rain in these areas will help recharge soil moisture for planting winter grains while causing some delay to the planting effort and the harvest effort for corn and sunflowers. Macros: The macro markets were mixed as of 8:30am EDT, with Dow futures up 0.1%, the U.S. dollar index is up 0.2%, crude oil is up 0.5% and gold is up 0.2%. The S&P 500 on Thursday rose to a 2-week high and closed 0.53% higher. The DJIA gained 0.57% and the Nasdaq 100 gained 0.98%. Bullish factors included reduced trade angst as U.S. and Chinese governments are working on the logistics for a new round of trade talks and the U.S. initial unemployment claims report of -1,000 to a 48-3/4 year low of 204,000, better than expectations of +7,000 to 210,000.The odds have fallen farther for a U.S. government shutdown at the beginning of the new fiscal year in two weeks on Oct 1. There is now a bipartisan agreement for Congress in the next two weeks to pass regular spending bills for 90% of the government and to roll the rest of the spending over until December 7 with a continuing resolution (CR). The parts of the government covered by the CR will be for the departments of Homeland Security, State, Commerce, and Justice, and the science agencies. President Trump seems to be on board with that plan but could nevertheless decide at the last minute to veto the spending bills and CR and in fact cause a broad government shutdown on Oct 1. While the odds are low for an Oct 1 government shutdown, the odds are perhaps as high as for a government shutdown after Dec 7 when the CR expires. Since he took office, President Trump has been trying to use a "good government shutdown" to get his border wall funding. He may finally get his opportunity for a showdown on Dec 7, i.e., after the November 6 mid-term elections. However, the impact of the shutdown would be reduced by the fact that the shutdown would involve only the 10% of the government funded by the CR since the rest of the government would already be funded through Sep 30, The markets are waiting to see if there will be new high-level U.S./Chinese trade talks after Treasury Secretary Mnuchin's recent invitation to Chinese officials. There is no indication that China would bring any more concessions to the table than they did in the failed mid-level talks in late August. Nevertheless, the mere scheduling of talks could at least delay the Trump administration's announcement of tariffs on another $200 billion of Chinese goods, which could occur at any time since the procedural prerequisites have been met. President Trump in tweets on Thursday took umbrage at a WSJ story saying that the administration was offering trade talks with China to reduce the tariff-induced 9

10 political damage ahead of the Nov 6 mid-term elections. Mr. Trump tweeted in part, "We are under no pressure to make a deal with China. They are under pressure to make a deal with us. Our markets are surging, theirs are collapsing." The S&P 500 index this week in fact hit a record high while the Shanghai Composite fell to a 2-1/2 year low. The market consensus is for today's Aug retail sales report to show another strong increase of 0.4% and 0.5% ex-autos, adding to July's report of 0.5% and 0.6% ex-autos. Retail sales have been very strong since March and showed year-on-year growth of 6.4% in July, the strongest growth rate in 6-1/2 years. The consensus is for today's preliminary-sep University of Michigan U.S. consumer sentiment index to show a modest increase of 0.4 points at 96.6, recovering part of August's 1.5 decline to The index showed back-to-back declines in July-Aug and fell to a 7-month low in August where it was down by 5.2 points from March's 14-1/2 year high of However, the weakness in the University of Michigan's consumer sentiment index needs to be taken with a grain of salt because the Conference Board's U.S. consumer confidence index, by contrast, has shown surprising strength in recent months. In fact, the Conference Board's index in August rose sharply by 5.5 points to a new 17-3/4 year high of The market consensus is for today's Aug industrial production to show an increase of 0.3%, improving from July's small 0.1% increase. Today's Aug manufacturing production index is also expected to show an increase of 0.3%, matching July's 0.3% increase. Asian shares were mostly higher Friday, continuing their rally after gains on Wall Street and hopes that regional trade tensions may ease. Japan's benchmark Nikkei 225 gained 1.2 percent to finish at 23, Australia's S&P/ASX 200 was up 0.6 percent at 6, South Korea's Kospi added 1.3 percent to 2, Hong Kong's Hang Seng rose 1.2 percent to 27,330.57, while the Shanghai Composite index lost 0.3 percent to 2, The S&P 500 index gained points, or 0.5 percent, to 2, The Dow Jones Industrial Average rose points, or 0.6 percent, to 26, The Nasdaq composite jumped points, or 0.7 percent, to 8, The Russell 2000 index of smaller-company stocks dipped 1.38 points, or 0.1 percent, to 1, Investors are worried about the impact on the regional economy of trade tensions under President Donald Trump's tariff policies, amid reports of a new round of talks that would give the Chinese government another chance to address U.S. concerns before the Trump administration imposes bigger tariffs. Benchmark U.S. crude added 17 cents to $68.76 a barrel. It slid 2.5 percent to $68.59 a barrel in New York Thursday. Brent crude, used to price international oils, fell 1 cent to $78.17 a barrel in London. The dollar rose to yen from yen. The euro rose to $ from $

11 Summary: Grains continued to face pressure on Thursday following bearish news from USDA on Wednesday, although investors seemed sellers of most commodities on Thursday despite the weaker dollar trade. December corn broke below its July low in late-session trade to reach a fresh contract low of $3.48 ¾, although it bounced from this low to pare losses to finish at $3.50 ½. There were signs of supportive commercial buying Thursday, with the Dec/March spread narrowing by ¼ cent to minus $.12 ¼. Despite the larger-than-expected crop, the current corn price remains well above the 2018 low of $3.38 ¾, a level reached in the month of June on the July contract. Weekly export sales for the first six days of the crop year were viewed as neutral. Daily sales included 142,876mt sold to Costa Rica for 2018/19. Favorable weather is expected over the next four days, although disruptions are expected in the Western Corn Belt in the next week. Soybeans took back a portion of Wednesday's gains, with the November ending down following Wednesday's gain. The trade continues sideways overall, with a range of $.32 ¼ traded over the past 13 sessions as traders position themselves for a record-sized crop along with trade issues with the world's biggest buyer China. Further challenges remain for world demand, with USDA lowering China's import projections for soybeans by 1mmt this month to 94mmt, while China's Ag Ministry announced the same day the goal to reduce imports by roughly 10% to 83.5mmt. This would be the first year-over-year drop in import volumes seen since 2003/04. Weekly export data in the U.S. was viewed as neutral for soybeans. Daily sales reported included 108,010mt sold to Mexico, 40,000mt sold to an unknown destination and a further 80,000mt sold for 2019/20. Wheat futures added to Wednesday's losses, with both K.C. and Chicago wheat reaching nine-week lows Thursday, with the most active Chicago contract closing below $5 on the December chart for the first time since July 11 th on signs of bearish commercial selling. Weekly export sales continued to be viewed as bearish for wheat. European milling wheat closed lower for the third straight session on Thursday, while reaching a seven-week low. November soybeans closed slightly lower and traded within a recent minor consolidation band. The bean bull's inability to follow-through to the upside after Wednesday's bullish reversal day is a warning flag. The near-term soybean trend is neutral above key support at $8.26 1/4-$8.21 1/4, the July 16 and Sept. 12 lows, respectively. On the upside, nearby November bean resistance comes in at $8.51 1/2, the Sept. 4 high and the top of the current consolidation band. The multi-month trend off the late May high at $ /2 remains bearish. But, for now, the bean bulls and bean bears are fighting for short-term trend control above a key support zone. If key November soybean support at $8.26 1/4-$8.21 1/4, gives way, it would open the door to a fresh selling wave. The weekly continuation chart shows minor support at $8.10 1/2 and the $8.00 would serve as a psychological objective for bean bears. Conversely, a rally through resistance at $8.51 1/2, and then the 20-day moving average at $8.53 1/4 would 11

12 improve the near-term soybean trend. Beyond there on the upside, soybean resistance and bullish targets lie at $8.73 3/4 and then $9.22 1/4, the July 31 high. December corn extended slightly lower Thursday. Notably, December corn breached key support from the mid-july low at $3.50 1/4 on an intraday basis, although the contract did not close below that level. The near and intermediate-term corn trends point lower. However, the corn contract etched a swift daily decline this week and is holding above lower daily Bollinger Band line support at $3.49. Light pre-weekend profit-taking could support two-way trade on Friday. Minor resistance lies at $3.55 1/2. Bigger picture, sustained declines below the $3.50 1/4 level would leave December corn vulnerable to a fresh selling wave with potential targets at $3.35 1/2 and then $3.29 3/4, weekly corn continuation chart lows from December 2017 and July 2018, respectively. 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