Daily Grain / Hogs Marketing Outlook Written by: Jim Gerlach 10/4/2018

Transcription

1 Daily Grain / Hogs Marketing Outlook Written by: Jim Gerlach 10/4/2018 Early Call 8:45am EDT: Corn up 2, beans up 3, wheat up 5. Grain prices traded in a tight range on both sides overnight, with export sales on Thursday helping to set the tone. Weaker equity markets overnight occurred following Wednesday's surge on U.S. economic optimism. The rally drove treasuries sharply lower with the 10-year T-note hitting the lowest level since Energy prices are weaker after the rally as Saudi Arabia seems comfortable increasing oil output. Grains: Grain futures waffled between small losses and gains before ending lower Wednesday as traders weighed a rainy weather forecast and upcoming reports from the U.S. Department of Agriculture. November soybean contracts fell 0.5% to $8.61 1/2, at the Chicago Board of Trade. December corn contracts fell 0.8% and December wheat contracts fell 0.8%. Farmers and traders are anticipating that the rainfall coming to the Midwest over the next week could be significant enough to impact corn and soybean harvest, which could provide short-term support for corn and soybean prices. There's a concern of quality issues and maybe actual yield loss. Corn and soybean farmers in lowlying areas could see flooding and are trying to get as much of the crop harvested before fields become unworkable. Despite the slower pace of harvest moving forward, traders seem to be taking stock of the $.20 rally in corn off the lows and the need for new-crop 2019 futures to be above $4. The rally off the lows in November soybeans has been impressive at 7.1%, but traders are wondering how much more beans have in them given the bulk of harvest left to come in and export demand remaining sub-par. As of Sept 20 th, soybean export commitments at 690.8mb are the lowest for this week since 2015 and the second lowest since Further, export commitments as a percentage of the marketing year forecast at 33.54% are the lowest since The sales pace needed each week through next August would be a new record by 2mb per week, an incredibly tall order and one the USDA is likely to have difficulty squaring a month from now unless the export situation changes markedly. Wheat traders are continuing to monitor reports of possible restrictions on exports coming out of Russia, which could help make U.S. wheat more attractive to foreign buyers. 1

2 The heaviest rains fell in southeast KS yesterday, with scattered rain in the Midwest and light snow of 2-4 in the southeastern Canadian Prairies. Showers taper off in the ECB today before weekend rains of 1-3 focus on KS, KA, WI, MO and southeast NE and stall harvest. Rains of 1-4 early next week focus on the WCB, with localized flooding risk before expanding into the ECB late next week. Southern Plains rains of 3-6 the next 5 day fore some wheat reseeding, with Canadian Prairies snows limited to the western ¼ next week. The main Argentina rain Monday is scaled back with drier risks and yield loss rebuilds to ¼ of the belt by the day period, with occasional light frost in the far south. Rains will slow Brazil s wheat harvest at times but mostly aid corn/soybeans by the day period. Wet weather in the day period hinders wheat in Brazil, but favors corn/soybeans. Argentine dryness expands to about ½ of the corn/wheat belt. Soybean planting in Brazil's Paraná state, the country's number 2 soy producer, reached 29% of the expected area this week compared to 16% a year ago. Deral said planting of corn (first crop) was at 70% of projected area, also well ahead of last year when at this time farmers had planted only 33%. Brazil s rapid sowing progress could allow the Chinese off the hook earlier than imagined. Ukraine s corn harvest is 27% complete with 7.2mmt collected vs. last year s 22% harvest pace and 4.2mmt brought in, reflecting crop problems this summer. Australia continues to miss out on rainfall, which will impact the wheat production overall. Reports say that this past September will be the driest month that has ever been recorded for Australia. Traders don t have much interest in selling wheat with the Australian crop slipping, snow on portions of the 2

3 Canadian crop (see graphic courtesy of Commodity Weather Group and the record pace of Russian wheat exports suggesting an early end to their export program. Kazakhstan s Ag Minster says wheat harvest is 90% complete, with yields tracking 3.6% below last year. The USDA has the Kazakhstan wheat crop at 15mmt vs. 14.8mmt last year. Looking ahead to next Thursday s WASDE updates, the USDA has increased U.S. soy yield from Sept to Oct in 5 of the last 6 years, while the Oct to final soy yield has advanced in 4 of the last 5 reporting years (recall cancellation of 10/13 crop report due to the government shutdown). The USDA s Sept to Oct corn yield has increased in 5 of the last 8 reporting years while their Oct to final corn yield has advanced in 4 of the last 5 reporting years. It s interesting to note that the Oct 2017 crop report, which pegged Sep 2018 U.S. soy stocks at 430 mb, triggered a mere $.50 Nov 17 autumn rally. Meanwhile, the Oct 2018 report is poised to report Sep 2019 U.S. soy stocks over double the amount reported on the Oct 2017 crop report, which suggests that Nov 18 autumn rallies will be far more limited than last year. However, one of U.S. grain traders favorite adages that big crops get bigger, is coming under scrutiny. The phrase is based on the pretty well-founded idea that crops which start receiving upgrades continue to get them. There is growing talk that thanks to heavy rains, U.S. corn and soybean crops may not after all follow the upgrade path that had been expected, or at least take a hit on quality. Major soybean quality concerns in the Delta region have become a reoccurring theme as the large inventory of poor quality soybeans has forced many warehouses to change their discount schedule to better reflect the risk of accepting these beans across the scale. After a September which was in parts of Iowa, for instance, the wettest on record (13.5 in Waterloo), October is panning out pretty damp too of rain could fall across the heart of the U.S. over the next several days, according to the European model. This should support cash and also bring big crops get bigger into doubt. Spot basis bids rose $.04 for corn and $.10 for soybeans at terminals on the Mississippi River. The Illinois River terminal saw bids rise $.03 for corn and $.08 for soybeans. On the demand front, Malaysian palm oil futures ended 1.4% higher, supported by strength in U.S. soyoil prices. But some analysts expect further price declines in the next few months as production picks up. While Brazilian soybean supplies may be getting nearer, they are not getting cheaper thanks to the recovery of the real against the dollar, boosting the value in dollar terms of the South American country s exports. Prices in the Brazilian port of Paranagua were up 2.9% in dollar terms in the first two days of this month, and in inland Parana by 3.3%, according to research institute Cepea. The Brazilian real has strengthened lately causing origination of bushels to export terminals much harder. The wheat market rallied late on Tuesday on reports that Russia s ag 3

4 watchdog agency threatened to suspend operations at 30 inland grain loading locations in two of Russia s largest exporting regions due to quality issues with grain being sent to export. Major importers have expressed concerns about declining quality of Russian grain exports, leading the watchdog group to issue a warning to clean things up or be shut down. Some view this as an indication that Russia may use quality concerns to limit exports at some point. The group said there are no immediate plans to suspend loading operations. Egypt is looking to secure wheat for deliveries between Dec 1-10, with results expected today. While prices of Russian origin are still expected to be highly competitive, just how competitive will be viewed with interest by investors seeking clues as to just how long the country s dominance in such tenders will last. Russian wheat export prices have risen by $4/mt in each of past two weeks, gains reported as supported in part by tightening inspections of grain, which remains a market focus, but also by a strengthening ruble. The dynamics appear to have undermined Russia s competitiveness, with spot offers out of Russia at $235/mt versus U.S. hard red winter wheat at $238/mt, excluding freight. This is as tight of a spread as we ve seen all season. January forward has Russian at a premium to the Gulf. Morocco will cancel their 135% customs duty on soft wheat beginning November 1 to ensure a regular supply. The duties were imposed to protect the local harvest, which has been exceptional this year. 10.3mmt have been harvested including 4.91mmt of soft wheat, 2.42mmt of hard wheat and 2.92mmt of durum. India s cabinet is reportedly set to raise the government-mandated prices for wheat by 6 % or $25.17 per 100 kg. The USDA attache in Algeria is estimating wheat imports for that country for the 18/19 marketing year will be 8.2mmt. Interestingly enough, Russia is making a big push to become eligible to export wheat to Algeria, if granted Russian supplies could take over a good portion of that country s wheat imports that have traditionally been from France. The great hope for the soybean trade is that China will have to come back to the U.S. for beans this fall when Brazil's stocks are lower and the bumper U.S. crop is coming out of the field. Instead, export terminals like those in the Pacific Northwest likely will see less rush this fall, but a slower, steadier flow of soybeans moving west as other countries turn to the U.S. for cheaper beans. The unsold portion of WASDE s 2018/19 U.S. soybean export forecast is the 2 nd largest ever while the world s largest soy buyer continues to shun U.S. beans. China has only 1.3mmt of US soybeans on the books vs. 8.0mmt last year. The general feel is no one in China will take the risk to import U.S. soybeans right now as even if they already have the export certificate, there's always the risk it could get rejected in port because of a sanitary or phytosanitary issue, 1% foreign matter, etc. U.S. soybean export sales/inspections trail last year by 16%/26% respectively, deficits that are likely to increase in coming weeks forcing WASDE to take a hard look at trimming back their billion bushel 2018/19 U.S. soy export forecast, down only 70mb (1.9mmt) vs. 2017/18. Thus, soybean bulls on the upcoming 4

5 Oct and Nov crop reports must consider the dual risk of a higher 2018 U.S. soy yield and lower 2018/19 U.S. soy exports, which could balloon Sep 2019 U.S. soy stocks over 1.0 billion bushels vs. the USDA s Sept forecast of 845mb. Nonetheless, if the soybean market is unable to post new lows after the potentially bearish blast from the upcoming Oct crop report, traders will in the coming weeks will be prone to buy breaks on hopes that China will be forced to source U.S. soybeans even with the tariff penalty. This morning s weekly U.S. grain export sales saw wheat, corn, soybeans, meal and oil all within expectations. Wheat sales of 435,300mt for 2018/2019 were down 34% from the previous week and 8% from the prior 4-week average. Corn sales of 1,431,000mt for 2018/2019 were reported. Soybean sales of 1,521,200mt for 2018/2019 were reported. For 2019/2020, net sales of 4,000mt were reported. Soybean meal sales of 58,900mt for 2017/2018 were down 60% from the previous week and 24% from the prior 4-week average. For 2018/2019, net sales of 411,700mt were reported. Soybean oil sales of 7,600mt for 2017/2018 were up noticeably from the previous week and from the prior 4- week average. For 2018/2019, net sales of 9,700mt were reported. U.S. ethanol production for the week ended 9/28/18 fell to million barrels/day (298 million gallons/week) from mbpd (305 million gallons/week) the week prior and was the lowest in 23 weeks going back to mid-april. While production was still above last year's same-week rate of mbpd, it was up only 0.5%, below the roughly 1.3% average year-over-year increase we estimate will be needed if the USDA's 2018/ billion bushel corn for ethanol usage estimate is to be met. Through the first four weeks of the marketing year, ethanol production has averaged a 0.9% increase from last year. Ethanol production has declined in September in recent years, continuing into the first week of October, before turning back higher for a period of several months. With U.S. ethanol stocks at record levels (same week basis), production margins remaining under significant pressure and ethanol exports struggling, it will be very interesting to see if production levels move higher over the coming weeks/months as they typically have during October-December. U.S. ethanol stocks surged to 985 million gallons ( million barrels) from 950 million gallons ( million barrels) the week prior, with the 34 million gallons stocks rise being the largest in 8 weeks and the 2 nd largest of the last 29 weeks despite the production decline. Stocks easily remains record high on a same-week basis, are currently 80 million gallons (8.8%) above last year's stocks at this time and are the 6 th highest weekly stocks on record. Hogs: Cash hogs are called generally stable with bids likely to develop from $1 lower to $.50 higher through the morning. The national bid Wednesday lost $.19 to close at $63.32, while the IA/MN bid lost $.29 to close at $ The CME Lean Hog Index was up $.67 on October 1 st to $ October is converging nicely with the cash ahead 5

6 of expiration next week. The USDA pork carcass cutout value was $.11 lower on Wednesday at $80.37 on good movement of 283 loads. Estimated packer margins were $29.62/head for non-integrators and $35.91/head for integrators vs. $29.61 and $38.43 the previous day. Weekly kill is up 3.01% vs. a year ago, right on H&P expectations. Weekly USDA Iowa/Southern Minnesota hog weights showed an increase in live weights from to 280 lbs. (last year at lbs., 0.7% over this year). December pulled back hard on Wednesday, trading past support at $58.25 and the 21-day moving average at $56.65 to the session low at $56.47, settling at $ It back in the middle of the $58.65-$54.52 trading range. The break down in price to the 21-day moving average is important because if price fails from here, a test of the $54.52 low is possible. If it holds, hogs may retest the $59.95 highs. The strong pullback in lean hog futures on Wednesday seems to be the main focus, and even though technically it brought no surprises, it seemed to erode much of the emotional support that has built through the complex over the last week. Prices are far from a strong market pullback and the move is considered a mere correction at this point, but general uncertainty through the complex could keep some market-watchers nervous as they try to determine where prices will go the rest of the week. The end of the week closing prices will be a much more significant guide, as it takes out the overall day-to-day volatility. Hog futures extend losses Wednesday, with contracts for December delivery falling 3.4% to $ The U.S. has record supplies of hogs as of Sept. 1, though strong domestic demand and exports have helped support prices. Traders are watching the African swine fever outbreak abroad that started in China, which is the world's largest hog producer. The euphoria over the U.S.-Mexico-Canada trade deal has waned and fears the trade war with China will continue into next year put pressure on Hogs. The African swine fever is still around however and with 21 cases reported in China, the potential for disease spread is high. Wide-ranging losses developed in most hog contracts Wednesday. The overall lack of support quickly eroded previous market gains ($2.00 lower to $1.05 higher). October futures pushed higher Wednesday, while all other contracts posted triple-digit losses. The Oct-Dec spread continues to widen and stands at a mind-blowing $10.32! This general weakness across the complex was most evident by $2 losses seen in December contracts. This pulled prices back to $ Although markets continue to hold well above support levels, the shift lower could quickly limit additional support late in the week. Moderate pressure moved through live cattle futures Wednesday as traders seemed less intent on aggressively pushing prices lower as was seen in other livestock markets ($0.65 to $1.07 lower). Firm losses were in all live cattle contracts. December contracts led the market lower with a $1.07 loss, although there continues to be some additional uncertainty about follow-through buying in the coming days, prices remain in the top 6

7 end of the trading range, and still hang onto a firm market trend. It is going to take more than one down day to change this trend, leaving traders closely watching for additional direction indicators through the rest of the week. Beef cutouts were $1.68 lower (select, $192.30) and down $0.47 (choice, $204.42). Cash cattle bids remain undeveloped at midweek following the general pressure in futures trade. This is causing both sides to reassess overall market direction, and likely will limit active packer interest until late week. Bids may become more evident late Wednesday evening or sometime during the day Thursday, but it is unlikely feeders will give them much attention unless a major shift lower develops in futures. Asking prices are starting around $114 to $115 live and $180 and higher dressed. Firm pressure developed in feeder cattle futures with traders focusing on general pressure in all livestock markets ($0.80 to $1.20 lower). October futures led the complex lower with a $1.20 loss, moving back to $ as traders tried to back away from early month support. The potential that September highs of $ in October futures may hold given the recent market pressure could allow markets to establish a sideways market trend through the month of October. Reports have emerged that sow death rates in the U.S. are rising at an alarming rate, causing concern for intensive farming methods. Researchers believe the rise in mortality could be linked to a rise in sow prolapse. According to statistics provided by National Hog Farmer, sow mortality increased from 5.8% to 10.2% on sow farms over 125 heads between 2013 and 2016, and mortalities are continuing to rise. This rise in sow deaths has been significantly linked to an increase in prolapse, a phenomenon caused by the collapse of the animal s rectum, vagina, or uterus. A report by Successful Farming indicated that, on some farms, between 25-50% of deaths were caused by prolapse. Research is underway to determine the reasons for the sudden increase in sow prolapse and subsequent deaths but, to date, this has been inconclusive. Due to the prevalence of the condition in predominantly intensive farming, it has been speculated that intensive breeding methods and sow confinement could be the causative factors. According to USDA statistics, a commercial sow will now mother an average of 23.5 piglets per year, a number that far exceeds their natural reproductive capacity and certainly exceeds that of smaller-scale units. A number of other potential causes have also been discussed which include, vitamin deficiency; mycotoxins in feed; high density diets; and abdominal abnormalities. Vets and industry members are said to be tackling the issue head-on but, with a number of potential causes for the mortalities being observed, determining a universal solution, and quickly, is proving difficult. Weather: The U.S. and European models are in fair to good agreement in a general sense but there are a couple of significant differences as it concerns the details. Today's European model is favored as it concerns the main jet stream forecast. However, this model picks up on a low coming out of the Caribbean and tracking north and then 7

8 northeast over the Gulf of Mexico during the 6-10 day period. If verified, this would imply a tropical storm or hurricane moving into the north-central or northeast Gulf of Mexico and into the southeast U.S. during the period. This is new from yesterday and is therefore uncertain at this time. The mean maps at 8-10 days continue to show a weakening of the high latitude blocking pattern over western North America. The mean ridge that has recently been featured on the maps over the Gulf of Alaska, Alaska and northwest Canada is much less evident on today's maps. It appears to have split with the north part moving west to Siberia and the south part hanging back west of British Columbia, Canada. This suggests a less cold weather pattern for the Canadian Prairies and the north-central U.S. in the longer range. Over the U.S. we see the mean trough shifting eastward over the Rockies and into the northern Plains at 8-10 days. The U.S. model is somewhat further east with this trough. The mean ridge remains over the eastern U,S, and the western Atlantic. This is also a little east of where it has been. The further east position of the ridge leads to southerly flow over the Gulf of Mexico and is likely the reason for the low that the European model has moving north during the period. The further east position of the trough likely means a turn to cooler or somewhat colder conditions through the Plains, maybe even the western Midwest, towards the end of the period. The precipitation chances remain highest over the Plains and western Midwest during the 5 day period and early in the 6-10 day period. The activity may shift a little further to the east and weaken later in the period. Today's U.S. model shows a storm intensifying as it moves from the northwest Midwest into Ontario, Canada at days 9 and 10. This storm is not supported by the European model and is being ignored for now. North American Weather Highlights: Improving conditions in the Delta for fieldwork occurs during the next 5-7 days as drier, warmer weather dominates the region. Increasing coverage of moderate and heavy rain in the Midwest at the end of this week through the early and into the middle part of next week will delay and disrupt the harvest and will be highly unfavorable for maturing crops in the western and northcentral Midwest region. A more favorable weather pattern occurs for harvesting in east and south areas of the Midwest during this period. Cold, unsettled weather is unfavorable maturing crops and harvesting in the northern Plains. This unsettled weather pattern is expected to continue during the next 5-7 days. This might mean snow in some cases. The central/southern Plains sees favorable conditions for planting and developing winter wheat at this time. Rain at the end of this week through early next week will provide for adequate to surplus soil moisture for prewinter development but it may also lead to delays in planting. The European model is predicting a storm in the Gulf of Mexico heading into southwest Georgia at the end of next week. This is new from yesterday and is therefore highly uncertain. It will be watched but is not yet included in the forecast. Moderate to locally heavy precipitation in Canada over 8

9 southern Alberta and southwest Saskatchewan early this week included an unusual early season snow storm. This is likely to halt harvesting of wheat and canola in the area for a while. Areas further north in the Prairies have been and will continue to be drier and also cold, which is a more favorable pattern for harvests in these locations. Global Weather Highlights: Episodes of scattered thundershowers and warm temperatures in Brazil will favor planting and early development of soybeans in Mato Grosso, MGDS and Parana. Planting of full season corn may have slowed due to recent rains in southern Brazil, but a drier period has begun which should improve conditions for planting. Episodes of showers has recently improved conditions for reproductive to filling wheat in West Australia. Rain has moved into New South Wales this week. This favors reproductive to filling wheat in the south part of the state, but it is likely too late to help the drought reduced crop in the north or wheat in south Queensland. Rainfall in northern NSW and south Queensland may help improve conditions for planting sorghum and cotton but more will still be needed. An unusually strong Mediterranean sea storm spread heavy rain and strong winds through Greece and western Turkey during the weekend period. Severe flooding is likely to have occurred, impacting to cotton and citrus is expected. Typhoon Kong-Rey is expected to bring heavy rain and wind to South Korea and then to northern Japan during the weekend period. It will become extratropical as it tracks across. Rain will cause delays to the harvest of rice. Flooding may lead to some losses. Macros: The macro markets are modestly weak as of 8:30am EDT, with Dow futures down 0.4%, the U.S. dollar index is up 0.1%, crude oil is down 0.6% and gold is up 0.4%. The S&P 500 on Wednesday climbed to a 1-1/2 week high and closed 0.07% higher, the DJIA gained 0.20% and the Nasdaq 100 gained 0.12%. Bullish factors included the 230,00 increase in the U.S. Sep ADP employment report, stronger than expectations of 184,000 and the largest increase in 7 months, and the unexpected 3.1 point increase in the U.S. Sep ISM non-manufacturing index to 61.6, stronger than expectations of -0.5 to 58.0 and the fastest pace of expansion in 21 years. Stocks fell back from their best levels on interest rate concerns after the 10-year T-note yield rose to a 7-1/4 year high. The 10-year T-note yield on Wednesday moved sharply higher by 12 basis points to a new 7-1/4 year high of 3.18%, easily taking out May's previous high of 3.13%. Factors behind the sharp rise in the 10-year yield included Wednesday's strong ADP report of 230,000 versus expectations of 184,000, Wednesday's 3.1 point rise in the ISM non-manufacturing index to a new 21-year high of 61.6, stronger expectations for Fed rate hikes after Fed Chair Powell again expressed optimism about the economy, the new 4-1/2 month high in inflation expectations, and reduced safehaven demand for T-notes after Italy agreed to slightly reduce its 2020/21 budget deficits and after this past weekend's NAFTA 2.0 agreement. The market's expectation 9

10 for further rate hikes through the end of 2019 rose to a new peak of 73.5 basis points on Wednesday, which indicates that the market is expecting another 2.9 rate hikes through Dec 2019, according to the federal funds futures market. Expectations for a tighter Fed policy were driven by Wednesday's strong U.S. economic data, increased inflation expectations, and mildly hawkish comments by Fed Chair Powell. Fed Chair. Powell on Wednesday again referred to the U.S. economy as "extraordinary" and said that the Fed may need to lift rates to levels that restrain growth. That would be a higher funds rate than market expectations since the market at present is expecting the Fed to stop tightening before the funds rate reaches the neutral rate of 3.0%. The unemployment claims data remains in very favorable shape with layoffs near the lowest levels in nearly five decades. Initial unemployment claims are only 12,000 above the mid-sep 49-year low of 202,000 and continuing claims are only 16,000 above the early-sep 45-year low of million. The consensus is for today's initial claims report to show a 1,000 increase to 215,000 (following last week's 12,000 to 214,000). Continuing claims are expected to show an increase of 4,000 (following last week's 16,000 to million). Today's report will show some continued distortions from Hurricane Florence, which hit North Carolina starting Sep 14. On the labor front, the market is mainly looking ahead to Friday's Sep unemployment report. Sep payrolls are expected to show a solid increase of 184,000, which would be just mildly below the 12- month trend average of 194,000. The market consensus is for today's Aug factory orders report to show an increase of 2.1% following July's report of -0.8% and +0.2% extransportation. On a year-on-year basis, factory orders remain very strong at 9.0% and 8.4% ex-transportation. Factory orders are seeing support from the generally strong global economy and from strong investment by U.S. businesses that are flush with taxcut cash. European shares followed Asian markets lower Thursday after yields on U.S. Treasury bonds surged to multi-year highs as U.S. central bank officials expressed confidence in the staying power of the current expansion. The DAX in Germany lost 0.3 percent to 12, while in France the CAC 40 sank 0.8 percent to 5, Britain's FTSE 100 also tumbled 0.8 percent, to 7, The S&P future contact dropped 0.6 percent to 2, and the contract for the Dow lost 0.5 percent to 26,732.00, auguring a dismal start for Wall Street. India's Sensex tumbled 2.2 percent to 35, and Hong Kong's Hang Seng index sank 1.7 percent to 26, Japan's Nikkei 225 index lost 0.6 percent to 23,975.32, while the Kospi in South Korea sank 1.5 percent to 2, Australia alone posted gains, as the S&P ASX 200 jumped 0.5 percent to 6, India's Sensex lost 1.8 percent to 35, Shares also fell in Taiwan, Singapore and Thailand. Markets in mainland China are closed for a weeklong holiday. The yield on the benchmark 10-year Treasury note spiked to its highest level in more than seven 10

11 years and was hovering at 3.22 percent during the Asian trading day. The surge in bond yields to multi-year highs has been driven by U.S. interest rate hikes, buttressed by bullish commentary from Federal Reserve Chairman Jerome Powell and other U.S. central bank officials. Benchmark U.S. crude fell 13 cents to $76.28 per barrel in electronic trading on the New York Mercantile Exchange. It jumped 1.6 percent to settle at $76.41 a barrel in New York. U.S. crude has hit four-year highs this week. Brent crude, used to price international oils, lost 14 cents to $86.15 per barrel. It rose 1.8 percent to $86.29 a barrel in London. The dollar fell to from yen. The euro was flat at $ Summary: December corn ended down Wednesday, a quiet day of trading that showed little movement. Except for scattered showers from Montana to northern Minnesota, Wednesday's map was mostly dry, but the seven-day forecast is expecting broad coverage of heavy rain from Oklahoma through the central Midwest and into Ontario. Flooding around Iowa and Wisconsin looks likely, which means more problems for harvest. After a fairly consistent season of good growing weather for much of the Corn Belt, harvest is encountering challenges. On the demand side, corn exports are off to a quick start and USDA said early Wednesday 230,000mt of U.S. corn were sold to Japan for The Department of Energy said last week's ethanol production slipped from million to million barrels a day and ethanol inventory increased from 22.6 million to 23.4 million barrels. In spite of higher gasoline prices, spot ethanol prices remain below $1.30 a gallon, near their lowest prices since For now, December corn prices are trading sideways, well above their September low of $3.42 1/2. November soybeans ended down in a quiet day of trading with the market a bit puzzled as to how harvest will do with so much rain in the forecast over the next two weeks. Meanwhile, soybean planting in Brazil reportedly is going well with beneficial rains in this week's forecast. This is typically the time of year when China increases its buying of U.S. soybeans, but given this year's trade war, Chinese officials remain firm in their opposition to U.S. purchases. Strained trade relations with China remain a bearish concern for U.S. soybean prices, but aside from the political risk, the trend has turned sideways and the September low of $8.12 1/4 is holding as support. December K.C. wheat ended down Wednesday as trade volume was light and prices were mostly lower while the U.S. dollar traded higher on the day. Winter wheat planting likely made progress Wednesday and is probably close to half-complete. Eastern Kansas may get some rain the next few days, but more is expected in the southwestern Plains this weekend into early next week. Planting will likely slow, but overall, the rain should be beneficial to the new crop. Temperatures in the western Canadian Prairies remain cold, but a drier forecast should help spring-wheat harvest progress in the week ahead. For now, December contracts for all three wheats are holding in a sideways range, supported by their lows in July. 11

12 December corn erased Wednesday's intraday gains and all of Tuesday's gains to close lower. The minor bearish reversal marks out initial resistance at $3.69, the high from Tuesday and Wednesday, which also matched the Sept. 11 high. The minor December corn trend is positive, but the short-term uptrend is looking toppy. December corn climbed swiftly in recent weeks from the Sept. 8 low at $3.42 1/2 into this week's high at $3.69. The short-term moving average picture is positive for corn as the contract trades above its 10-day and 20-day moving averages. However, Wednesday's reversal to a lower close signals a lack of bullish conviction around key resistance at $3.69-$3.69 3/4, which includes this week's high along with the Sept. 11 and Sept. 5 daily highs. In order to signal a continuation of the recent minor rally phase, the burden lies on corn bulls to conquer the $3.69 3/4 ceiling on a closing basis. On the downside, initial support lies at $3.63 1/2, and a decline through that zone would be a weak signal. Below there, a stronger technical floor for corn comes in at $3.54 1/2, the Sept. 28 low. November soybeans fell to a weaker close Wednesday, as the market retreated from upper daily Bollinger Band line resistance at $8.67 1/4. The soybean contract slightly exceeded that line on Wednesday, indicating a moderately overextended uptrend. Notably, soybeans approached but could not clear Fibonacci retracement resistance on Wednesday at $8.70 3/4, which represents 61.8% of the Aug. 20-Sept. 18 sell-off. The short-term soybean trend remains positive, but the market is vulnerable to short-term backing and filling following the recent gains. Since Sept. 18, November beans climbed from $8.12 1/4 into Wednesday's high at $8.70 1/4, which now stands as new resistance, alongside the critical Fibonacci retracement level. A bearish momentum turn is seen on the intraday charts. The 14-hour relative strength index tumbled on from an overbought 71% to 44% by the final bell. Hourly support lies at $8.60 1/2, with additional support at $8.53. Shifting to the daily chart, support is seen at $8.42, the Sept. 28 low and a breakdown below that floor would suggest the bears have regained short-term trend control. 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