Daily Grain / Hogs Marketing Outlook Written by: Jim Gerlach 11/2/2018

Transcription

1 Daily Grain / Hogs Marketing Outlook Written by: Jim Gerlach 11/2/2018 Early Call 8:45am EDT: Corn up 1, beans up 4, wheat down 1. Grains are slightly higher overnight but well off of their highs on ideas the President wants a trade deal with China by the G20 Summit at the end of the month. China s nearby soymeal futures traded limit down last night after President Trump s tweet yesterday about a positive talk with President Xi. Sharply better equities occurred around the globe overnight as trade-talk fever is ramping up. The market will want confirmation soon there are concrete steps being made as opposed to just late-night tweets from the President. Energy markets continue to trade weakly with fresh 7-month lows Thursday. Grains: Soybean futures rallied on optimism that a trade deal between the U.S. and China could be reached sooner than expected. January soybean contracts rose 3.6% at the Chicago Board of Trade, with traders covering short positions after President Donald Trump signaled progressing trade talks with China Thursday. "Just had a long and very good conversation with President Xi Jinping of China," Mr. Trump said on Twitter. "We talked about many subjects, with a heavy emphasis on Trade." China has been filling its needs for the oilseed elsewhere since the countries enacted tariffs on each other's goods earlier this year. The two presidents are slated to meet during the G- 20 summit in late November. The announcement sent off all kinds of speculation in the market that they are close to reaching an agreement. While making a deal with China could support soybean prices and bring back some foreign demand, the ongoing dispute itself has likely changed the trade relationship between the U.S. and China permanently. This whole tariff situation has sent a signal to China that maybe we're not a reliable supplier as we were before, and it could have long-term implications. Soybean and corn prices, which rose 1%, were also supported harvest nearing its close and a possible reduction in yield estimates in next week's supply and demand report. Meanwhile, wheat prices rose 1.5% after this week's export sales data showed higher figures than anticipated. The USDA reported net sales of 582,500mt for wheat, up 32% from the previous week. Corn and soybean sales fell below expectations, as the trade tariffs on U.S. soybeans continues to hamper demand from China. November beans settled above the 50 and 100-day moving averages of $8.49¾ and $8.67½, respectively. November 1

2 beans haven t traded over the 100-day moving average since October 17 th, but are well above that this morning. The fall insurance price for corn came in a $3.68 vs. $3.96 in the spring, while the soybean price was $8.60 vs in the spring. Higher yields may make it difficult to draw a corn insurance check, but the big difference in soybean prices could lead to some claims. Rainfall yesterday fell mostly in the ECB and MO, with significant rain also noted in the Delta (see map left). Light, weekend rains cross the Midwest and Delta, with heavier activity early next week keeping harvest progress limited (see 7-day NOAA forecast map right). A drier 6-10 day period aids harvest, but showers return again in the day period and slow ECB/Delta progress. Western Canada weekend snow will stall canola harvest (20% left), while Plains wheat seeding improves with limited rainfall. In Argentina, rain chances today and Monday favor southern and far northern areas, further reducing dry wheat areas in the south on Monday. Current dry spots account for just 15% of corn/wheat areas and a widespread rain even next weekend is still favored for nearly the entire belt. The EU operational model still poses a drier risk for Argentina in the 6-10 day period and much of the guidance is still split for the day event. In Brazil, widespread showers in central/northwest areas occurred the past day, providing a beneficial early growing season the next two weeks. Rains tomorrow and in the day period slow late southern Brazil wheat harvest, but damage risks are quite low. Longer term, the growing El Nino typically provides for average to better than average yields in South 2

3 America, as noted in the graphic courtesy of Commodity Weather Group A private analyst estimates Brazil 2018/19 corn production to remain unchanged at 27.08mmt. The same analyst estimates the Brazil 2018/19 soybean crop at mmt, up 850,000mt from the last projection. President Trump on Thursday said trade discussions with China were moving along nicely and that he planned to meet with Chinese President Xi Jinping at the upcoming G-20 summit, after the two had a very good talk. Earlier on Thursday, Chinese Premier Li Keqiang told a group of visiting U.S. politicians that China and the U.S. could overcome their differences and get relations back on track if they worked together in a spirit of mutual respect. The fact that BOTH leaders were signaling some optimism was likely the key to yesterday s rally as traders have become accustomed to the President s tweets, that often times reverse course within a few days. Trump has long threatened to impose tariffs on all $500 billion-plus goods that the U.S. imports from China if Beijing fails to meet his demands for sweeping changes to its policies on intellectual property, technology transfers, industrial subsidies and local market access. He and Xi are due to attend the G20 summit in Argentina, which starts at the end of this month. Just had a long and very good conversation with President Xi Jinping of China. We talked about many subjects, with a heavy emphasis on Trade, Trump wrote in a post on Twitter. Those discussions are moving along nicely with meetings being scheduled at the G-20 in Argentina. Also had good discussion on North Korea! The obvious question is will strength hold? It is a very good question as something new could come out tomorrow and crush this new-found optimism and soybean prices right along with it. But, if there isn't new news between now and the meeting I think the market could carry some of this optimism through the end of the month. The market makeup could be conducive to some strength and seasonality is usually higher between now and the end of the year. If it makes U.S. farmers feel any better, Economically there is no doubt the Chinese will suffer more from the tariff wars, says Wendong Zhang, an Iowa State ag economist. Iowa State analysis reveals that this latest round of $200 billion in tariffs on China will cause the Chinese economy to decline close to or exceeding 1.5%. By comparison, analysts say the Chinese tariffs will only cause a drop of about half percent in the U.S. economy. A sharply weaker dollar also supported grain gains yesterday on reports that U.K. banks have reached a tentative deal for continued access to EU markets post-brexit has strengthened both of their currencies this morning and subsequently weakened the dollar index. Daylight Savings time ends Sunday, November 4 th, so don t forget to fall back an hour. 3

4 While nearly all of yesterday s strength was tied to trade hopes, Soybeans also drew support after Bunge s CEO stated they expect soybean acreage switching to corn next year at a historic magnitude. Informa is already pegging corn acreage at 93.1 million vs million this year and soybean acreage at 83.6 million vs million this year. The previous largest acreage switch occurred in , when soybean acres dropped 10.8 million and corn acres increased 15.2 million. Soybean carryout the previous year hit a record 574mb, while the booming ethanol program was able to absorb the increased corn production. Regarding the remaining corn harvest, I m not sure the market is aware of just how difficult the remainder will be, especially in the ECB. There is a tremendous amount of corn that went down in the wind storm two weeks ago. I am hearing widespread reports of corn so difficult to harvest that it takes days to harvest a single acre field and even then, 40-60bpa are being left on the ground. I have personally seen many combines sporting corn reels (used to pick corn up off the ground), with corn mixed with dirt making the grain gray instead of yellow. The longer corn ears/stalks lay on the ground in wet conditions, the harder it will be to harvest what s left. Customers are also reporting corn that is 15-16% moisture that is not flowing normally due to dirt and other contaminants, which is a big warning sign for those that put corn in grain bins as spoilage risk goes up dramatically when air cannot move freely through corn in bins. November is certainly proving a different beast to October from an investor s perspective. The tweet by U.S. President Donald Trump on Thursday raising hopes of a resolution to the U.S.-China trade dispute continued to echo around markets in the new session. January futures rebounded a further overnight on ideas of a reopening of China to U.S. trade, extending its recovery above its 100-day moving average regained in the last session. However, U.S. soybean exports to China are very unlikely to return to levels expected before the trade dispute began, with much of China s 9mmt demand destruction deemed permanent. Also, the window for U.S. to capture new China sales is very narrow at best with Brazil planting ahead of the normal pace, implying new crop beans will available for January export business. One commercial source that that if China and the U.S. were to resolve the trade conflict today, about half U.S. soybean export potential to China is already gone. However, as noted earlier this week, there is still another billion bushels of global soybean trade outside of China that the U.S. stands to capture the lion s share of due to the 25% discount vs. Brazilian soybeans. Traders are laser-focused on poor sales/shipments vs. normal, but the USDA recently noted that while export sales are good forward indicator of shipments, unlike China many markets such as the European Union, the Middle East, and North Africa do not purchase soybeans in advance. Furthermore, there are ideas of accelerated farmer selling at higher prices. Still, at least it looks like they may have less crop to sell than had been thought, with FC Stone overnight lowering its forecast for the U.S. soybean 4

5 yield this year by 0.8bpa from its October estimate to 53.2bpa, still 0.1bpa above the current USDA forecast. For corn, Stone lowered its U.S. yield forecast to 181.4bpa from 182.7bpa last month, but still above the current USDA figure of 180.7bpa. On the demand front, Malaysian palm oil futures ended 0.4% slightly higher Friday after touching a 3-year low in early trading, guided by gains in rival soy oil complex. However, concerns of lower export demand and rising production in top-growers Indonesia and Malaysia will continue to keep investors at bay. Palm oil will see some benefit from the U.S.-China trade war as China will reduce supplies of soybean for its vegetable oil processing industry, said industry analyst James Fry (you can t make that name up!). Malaysian government forecasts higher crude palm oil prices next year due to stronger demand, though production is also expected to rise. The finance ministry says crude palm oil prices are expected to average MYR2,400/ton ($574.1/ton) next year, up from this year's MYR2,300/ton. Output is expected to increase to 20.5mmt next year, from an estimated 19.8mmt this year due to an expansion in areas of mature palm trees. Weakness in corn this week is tied to a jump in corn exports out of Ukraine, which likely explains the drop off in U.S. corn sales the last several weeks. Ukraine s corn export prices are at a 4 year low after a bumper crop, with shipments since July up 63% vs. last year. The Ukrainian Grain Association raised its corn estimate last week by 16% to 35mmt vs. the USDA at 31mmt. With China cutting minimum levels of protein to reduce their reliance on soybeans, they may shift to Ukrainian corn as an alternative, according to local consultancy Agritel. Of course, if China takes Ukraine s excess corn, it should increase demand for U.S. corn from other customers. The trade ministry reports October Brazilian corn exports at 3.200mmt, down 1.828mmt year on year. Brazil more than doubled soybean exports year on year to 5.353mmt in October, gaining most of the market access from China in midst of the trade war. Likely drought in South Africa during the coming El Nino has the USDA ag attache pegging their corn production at 12mmt vs. 13.5mmt last year, with exports at 1mmt vs. 2.5mmt last year. Wire services reported yesterday that the Russian ag safety watchdog group plans to ask a court to temporarily suspend work at 5 grain loading ports in the Rostov region (Black Sea) due to persistently poor grain quality and a similar action may also be taken in the Krasnodar region (Black Sea) as well. Pacific Ethanol's CEO stated that they have cut their ethanol production by 10% due to low margins. Pacific Ethanol has capacity for 605 million gallons of ethanol production per year. That is 3.7% of the nation s 16.4 billion gallons in capacity per year. U.S. soybean crush for the month of September was reported at 169.3mb, below average market expectations of 171.0mb, as well as the range of ideas of mb and was nearly unchanged from August crush of 169.6mb. While September crush was a bit below expectations, it was still significantly larger than last year's Sept crush of 5

6 145.4mb as well as easily setting a new record for the month in surpassing the previous Sept record of 147.3mb set in Every one of the 11 months from October through August last year reflected the all-time monthly record. With the USDA estimating 2018/19 total crush at billion bushels vs. last year's billion, crush is going to need to run at near record levels again over the coming 11 months just to meet the USDA's current estimate. The 24mb increase in September crush vs last year will certainly help, but Oct-Aug crush still needs to run only 0.5% below last year to reach the USDA's target. While crush was below expectations, the USDA's reporting of end September soybean oil stocks of billion pounds was an even greater surprise, coming in sharply below average market expectations of billion pounds ( billion range of ideas), falling solidly from August stocks of billion, but were still comfortably above year ago Sept stocks of billion pounds. Nonetheless, the soybean oil stocks number was a shocker as it reflected U.S.-wide stocks just 29.9% above NOPA-member stocks, considerably below the % deviations seen in July and August, but much more in line with the average deviation during the Oct-June period of 29.1%. Based on estimated September exports, we see soybean oil domestic usage for the month being up nearly 23% from last year vs. July up 3.1% and August up 7.3%. Looking at the Grain Crushings report, the USDA reported 449.3mb of corn was used for ethanol production in September, marginally above last year's 445.5mb in Sept and compared to 483.4mb in August. The USDA upwardly revised August corn for ethanol usage from the initial reporting of 479.4mb and, accordingly, puts 2017/18 total corn for ethanol usage at billion bushels vs. the billion currently in the USDA's balance sheet. Based on the USDA's 2018/19 corn for ethanol usage estimate of billion bushels and September data officially in the books, the next 11 months' corn usage will need to run roughly 1% above last year's level. We would note that based on the EIA's weekly ethanol production over the last four weeks, October usage of corn for ethanol production looks to be about unchanged from last year at this point. Looking at yields, based on estimated ethanol production in September, the ethanol/corn yield of gallons/bushel compared to in August and in September last year. Hogs: Cash hogs are called steady to $1 lower. The national bid lost $.32 yesterday to close at $58.13, while the IA/MN bid lost $.02 to close at $ The CME Lean Hog Index was down $.03 from the previous day at $63.90 on October 30 th. The USDA pork carcass cutout value was down $.66 at $75.39 on good movement of 300 loads. Estimated packer margins were $27.58/head for non-integrators and $26.52/head for integrators vs. $29.37 and $27.46 the previous day. Weekly kill is up 3.07% vs. last year. While weekly pork production looks high, the seasonal peak in chain speed typically doesn't surface until early December. Weakness in pork values and a jump in 6

7 weekly weights suggest producers are dragging their feet on marketings, which could weigh on December contracts, while 2019 contracts continue to draw support from ideas China could be a massive player in the export market next year. Yesterday s jump in U.S. weekly export sales and shipments should help support these ideas. Lean hog futures are expected to open on a mixed basis, with nearby issues losing ground on their deferred counterparts. CME hog futures ended lower Thursday as cash prices largely remained steady, falling 0.4% to $ However, it's really unrealistic to expect a surge in the cash late in the week when we're in the middle of processing nearly 2.6 million pigs, yet the stability in cash prices this week has been somewhat surprising. Lean hog contracts finished on a mixed basis with settlements ranging from $.55 higher to $.25 lower. Nearby issues lost ground to deferreds thanks to bull-spreaders taking profits. Unlike the soybean pit, hogs have been unwilling to trade the potential for a deal with China following the President s positive tone about negotiations. China has increased trucking regulations for the movement of live hogs in an effort to control the spread of ASF, now requiring all trucks to have corrosion resistant and leak proof walls and floors, as well as location-tracking devices. Cleaning and sterilizing vehicles before and after transport is now required as well. Cattle futures should open moderately higher, supported by short-covering and general cash optimism. Live cattle futures settled moderately higher Thursday, with closing prices ranging from up $.15 to $.52. Needless to say, neither side felt confident about late-week cash potential to aggressively push their arguments. Beef cutouts closed higher with the choice up $1.62 ($218.55) and select up $0.22 ($204.25). Box demand was called moderate to fairly good with light offerings. Futures were mostly quiet as November brings holiday demand for turkey and ham rather than beef. Once again, the cash cattle trade was limited to an odd assortment of bids and asking prices that didn't match up in terms of significant trade volume. Dressed bids of $180 in the North fell short of asking prices of $185 plus. Similarly, bids of $112-$114 in the South fell short of area asking prices of $117-$118. Beef packer spending potential has consistently grown through the week, and we assume that buyers have reached a late-week level where they can at least partially match higher asking prices. New spot November feeders closed $.17 lower, while the rest of the complex closed moderately higher in rather lackluster action. The U.S. chicken industry has continued to expand, with new plants and added shifts at existing ones, and Pilgrim's Pride CEO Bill Lovette says he doesn't expect that to reverse despite sharply lower chicken prices and competition from other meats that have posed a stiff challenge for chicken profits this year. "We're not aware of any production cut intentions," Lovette says, referring to the meat industry's historic practice of 7

8 throttling back production or idling plants when supply outpaces demand. Beginning in 2019, he says, when retailers and foodservice operators historically tend to ramp up chicken orders, "we do expect demand to improve." Weather: The U.S. and European models are in fair to good agreement during the first few days of the outlook period, only fair agreement during the last couple of days. Today's U.S. model is favored a bit for the end of the period, although there is some uncertainty. The mean trough position continues to deepen and move south over the Ontario area of Canada during the first few days of the outlook period. A cold surface high, excepted to reach to about 1038 mb, moves southward on the back side of this trough, reaching to the Dakotas and Minnesota by Friday of next week. This suggests a turn to somewhat colder conditions for the Canadian Prairies, the northern Plains and the Midwest region during the middle of the period. It also looks to be drier for many areas, except possibly the Gulf coast states and the east coast states. At the end of the period, the trough is shown weakening and lifting northward again. This is especially evident on today's European model while the U.S. model holds more trough and surface high pressure over the Midwest region. The U.S. model supports a continued cooler/colder, drier pattern for the Midwest region through the end of the ten day period. The European model is warmer at the end of the period, especially over the Plains region. Neither model has much rainfall in the picture for either the Midwest or the central/south Plains areas. Today's mean map from the U.S. model covering the 8 to 10 day period continues to show the north Europe ridge bridging across the Atlantic to Greenland and north-central Canada. This is likely the reason for the continued cool/cold pattern in the Midwest at the end of the ten day run. This idea is supported by the Canadian Model as well. However, the European model shows the ridge mainly in Europe and without the high latitude ridging in North America this model allows the trough in southern Canada early in the period to weaken and shift back to the north late in the period. Either of these solutions is plausible, which makes today's extended range outlook somewhat uncertain. Rains of fell across the southern 1/3rd of IL and into most of IN and OH, with things mainly dry in the rest of the Midwest region yesterday. Temps ran average to above, with highs in the 50 s and 60 s and lows in the 40 s and 50 s in most cases. The forecast sees another 24 hours of fairly favorable weather for harvest in the northwest Midwest and then a system over the weekend and another later Monday into Tuesday will produce enough precip to slow/stall harvest there, with things turning dry for the middle to end of next week. Frequent precip still looks to slow/stall remaining harvest in the southeast Midwest through the first half of next week, then things look to turn dry. Temps will be running a bit above average across the region for the next day or two, with highs in the 50 s north and 60 s south. Lows will run mainly in the 30 s and 40 s, 8

9 with some 20 s in the north from time to time. Cooler than average temps are then seen for most of next week. Light rains brought totals of generally less than.20 to eastern OK, with things mainly dry in the rest of the central/southern Plains region. Temps were in the 50 s and 60 s for highs, with lows in the 30 s. The forecast sees decent weather for catching up on remaining planting. Mainly dry weather looks to dominate the western ½ to 2/3rd of KS, OK and TX in the next 10 days, with systems to bring moderate rains to the east Sat and again Monday of next week. Temps will be running above average and in the 70 s and 80 s early this week, with 60 s and 70 s by the second half of the week, into the weekend and first half of next week. Things were mainly dry in most of Argentina s growing regions yesterday. Temps were average to below, with 60 s and some 70 s for highs and 40 s and 50 s for lows. The forecast sees a mix of sun and some rain for most of their growing regions in the next week to ten days. Rains of.50-1 will fall in most of La Pampa and Buenos Aires today. Some hit and miss activity then look to occur across their growing regions from later in the weekend into most of next week. Estimates on amounts with that activity are running in the , with some 1 + amounts also likely and coverage of around 75%. Showers and thunderstorms in Brazil brought rains.50-1 to most of the growing regions of Parana, MGDS and Sao Paulo, with hit and miss tropical activity bringing totals of generally less than.35 to 25% of Mato Grosso, Goias and Minas Gerais. Things were mainly dry elsewhere. Temps were in the 80 s and some 90 s for highs. The forecast sees average rains to fall in most areas in the next 10 days. Totals of.50-1, isolated to 1 +, will fall in most areas in the next 5 days and totals in the 6-10 day period also look to be in the range. Coverage looks to be around 75% in both time frames. North American Weather Highlights: Another round of rain through the southern and eastern Midwest early next week will continue to delay harvests in the area. There s some chance for improving conditions during the 6-10 day period. The western Midwest will see light to moderate rainfall during the weekend before turning drier next week. Rain and some accumulating snow today will lead to harvest delays in the northern Plains. Snow is most likely in northeast Montana and western North Dakota but may be more widespread than that. It will be drier again after the weekend. The central/southern Plains see favorable soil moisture and temperatures for development of recently planted wheat at this time. A few areas may experience planting delays this week, but many will not. Global Weather Highlights: Brazil sees mostly favorable conditions for development of early planted soybeans and full season corn in areas from Mato Grosso to RGDS. Rain, some heavy rain, likely means delays to seasonal field work at times. Recent moderate 9

10 to heavy rainfall has improved soil moisture and will favor development of early planted crops in Argentina. A somewhat drier trend will allow for improving conditions for planting. Spring rainfall has helped to improve soil moisture and irrigation in key cotton and sorghum areas in Australia following well below normal winter rainfall. The region may be turn very hot early next week before the next cold front arrives with a chance for showers later in the week. This region needs to be watched during the next few weeks, especially with the potential for El Nino conditions in the Pacific. The recent stretch of hot and dry weather in South Africa has come to an end. Scattered thunderstorms and cooler temperatures moved into the area at the end of this week. Rainfall is needed to ensure favorable development of early planted crops in east and south areas. Rain is needed to encourage increased planting of corn in western growing areas. Europe sees a cooler and more unsettled weather pattern during the past 7 days. Rainfall has helped improve conditions for development of winter grains and oilseeds. However, some areas missed out and are still in need of better rains. In addition, reports suggest that subsoil and irrigation levels are still very low due to the summer drought in the north-central Europe area. Continued rain and winter snow will be needed to recharge soil moisture and irrigation for the spring growing period. Macros: The macro markets were mixed as of 8:30am EDT, with Dow futures up 0.8%, the U.S. dollar index is down 0.1%, crude oil is down 0.3% and gold is down 0.4%. The S&P 500 on Thursday rallied to a 1-week high and closed 1.06% higher. The DJIA gained 1.06% and the Nasdaq 100 gained 1.47%. Bullish factors included reduced trade concerns after President Trump tweeted that progress has been made in trade negotiations with China, and signs of strength in the U.S. labor market after weekly continuing unemployment claims unexpectedly fell 7,000 to a 45-1/4 year low of million, stronger than expectations of 4,000 to million. A bearish factor was the 2.1 point decline in the Oct ISM manufacturing PMI to 57.7, weaker than expectations of -0.8 to 59.0 and the slowest pace of expansion in 6 months. The S&P 500 index in October suffered a substantial loss of 6.94%, which was the largest monthly loss in seven years (since Sep 2011). However, the good news is that the seasonals have now turned favorable for the next three months (Nov-Jan). Since 1950, the best month of the year has been December with an average monthly gain of 1.61% and November has been the second-best month of the year with an average gain of 1.56%. January is the sixth best month of the year with an average gain of 0.95%. The other piece of good news is that September and October are over, which are the two months that have seen the largest number of plunges of more than 10%. In the past six decades there have been eight times when the S&P 500 has shown a monthly decline of more than 10%. Disproportionately, four of those eight plunges occurred during the dangerous 2-month period of Sep-Oct. Specifically, there were two 10%-plus plunges in September (in 1974 and 2002) and in October (in 1987 and 2008). Still, November (1973) had one of 10

11 those eight 10%-plus plunges, meaning there is a potential warning flag for this month even though November since 1950 has seen an average monthly gain of 1.56%. President Trump and Chinese President Xi on Wednesday had a "long and very good" phone conversation "with a heavy emphasis on trade," according to a tweet from President Trump. Mr. Trump added, "Those discussions are moving along nicely." White House economic advisor Larry Kudlow said that the Trump-Xi phone conversation was a "thaw" in relations, but he also said that China has still not put forward a trade proposal. The Trump administration has said that China must make an offer on protecting IP and other issues before the U.S. would agree to formal negotiations. The outlook for US/China trade tensions depends heavily on the outcome of the Trump-Xi meeting on the sidelines of the Nov 30/Dec 1 G-20 meeting in Buenos Aires. Bloomberg reported on Monday that Mr. Trump in early December will slap tariffs on the remaining $257 billion of Chinese products if the Trump-Xi meeting does not produce enough progress on trade. President Trump's favorable Chinese trade comments on Thursday may have been designed in part to provide some stock market support ahead of this coming Tuesday's U.S. mid-term elections. Nevertheless, the markets are hoping that Presidents Trump and Xi might at least reach a ceasefire agreement at their upcoming meeting involving the beginning of formal trade negotiations and a promise not to impose new tariffs. That would be similar to the recent U.S./Japan and U.S./EU agreements for a cease-fire and formal negotiations. Shares charged ahead Friday in Europe and Asia after President Donald Trump and his Chinese counterpart Xi Jinping spoke by phone and both Trump and the Chinese state media reported progress in resolving trade tensions between their two countries. The CAC 40 in France jumped 1.3 percent to 5, and Germany's DAX advanced 1.4 percent to 11, Britain's FTSE 100 rose 0.6 percent to 7, Futures augured a strong start on Wall Street, with the Dow future contract up 0.9 percent to 25, and that for the S&P 500 up 0.7 percent at 2, Hong Kong's Hang Seng index jumped 4.2 percent to 26, and the Shanghai Composite index added 2.7 percent to 2, Japan's Nikkei 225 index surged 2.6 percent to 22, while South Korea's Kospi climbed 3.5 percent to 2, The S&P ASX/200 in Australia erased early losses to end up 0.1 percent at 5, and the SET in Thailand rose 1.1 percent. Shares also rose in Taiwan, India and Southeast Asia. A Chinese foreign ministry spokesman told reporters the discussion was quite positive and that the two leaders were optimistic about resolving the dispute over technology that has resulted in both sides imposing penalty tariffs on billions of dollars' worth of each other's exports. Meanwhile, Chinese state media said Xi has promised tax cuts and other help to China's entrepreneurs in a renewed effort to revive the cooling, state-dominated economy. 11

12 U.S. stocks continued their gradual rebound from a plunge that lasted almost the entire month of October, and many of the biggest gains Thursday came from stocks that struggled badly last month like chipmakers and other technology companies and smaller, domestically-focused companies. The S&P 500 index added 1.1 percent to 2, The Dow Jones Industrial Average also picked up 1.1 percent, to 25, The Nasdaq composite climbed 1.8 percent to 7, and the Russell 2000 index jumped 2.2 percent, to 1, The pound fell back after a rally based on a report that that Britain and the European Union had reached a deal to give U.K. financial services companies access to the bloc after Brexit. The article by The Times cited anonymous sources, and other reports suggested a deal had not yet been finalized. The British pound rebounded to $ from $ The dollar rose to yen from yen, while the euro gained to $ from $ Oil prices continued to weaken after the Department of Energy said U.S. crude stockpiles increased for the sixth straight week. Benchmark U.S. crude slipped 15 cents to $63.54 per barrel in electronic trading on the New York Mercantile Exchange. It slumped 2.5 percent to $63.69 a barrel in New York. Brent crude, used to price international oils, gave up 2 cents to $72.87 per barrel. It shed 2.9 percent Thursday to $72.89 a barrel in London. Summary: December corn closed up $.03 ½ at $3.66 ¾ Thursday, modestly benefiting from a tweet by President Trump shortly after 10am EDT which suggested progress in trade talks with China. Of course, the larger market response was in soybean prices, but after two weeks of lower trading and bearish market mood, corn prices also got a lift. Thursday's lower U.S. dollar also helped grain prices. Heavy rain moved through eastern Texas and Arkansas late Wednesday and is bringing more moisture to the eastern Midwest Thursday with damaging storms in Alabama. The seven-day forecast expects more rain in the central and Eastern Corn Belt, adding to harvest challenges in those areas. Early Thursday, the USDA said export sales and shipments of corn totaled 15.5mb and 29.7mb last week, a neutral showing. Corn shipments are up 76% in , still a bullish pace, but sales have dropped off the past few weeks. With help from Thursday's rally, the trend in corn remains up as we head toward a quieter time of year. January soybeans closed up $.30 ¼ at $8.82 Thursday, a session that was dominated by an unexpected tweet from President Trump, which said trade discussions with China were "moving along nicely." President Trump is expected to meet with China's President Xi Jinping at the G20 meeting in Buenos Aires on November 30 and Thursday's tweet will build anticipation for that event. It remains to be seen whether Thursday's tweet has merit or was a pre-election political ploy, but traders took it seriously enough to show a short-covering response after two weeks of bearish gloom. Early Thursday, USDA said last week's export sales and shipments of soybeans totaled 14.5mb and 48.3mb, respectively, another bearish showing that has total soybean shipments down 39% in from a year ago. Once again, China remained largely 12

13 unmentioned, except for a small old-crop cancellation and new-crop purchase. On the other hand, U.S. soybean meal exports are up 34% so far in the new season. Thursday's higher close helped soybeans stay in their sideways trend and remain well above their September low. December K.C. wheat closed up $.08 at $5.01 ¼ Thursday, benefiting from a higher price in Europe, a lower U.S. dollar, and indirectly, from the president's tweet. December milling wheat in Paris was up 2.25 euros (1.1%) Thursday as dry weather remains a concern, even though Western Europe has seen beneficial rains lately. Here in the U.S., more rain came to Oklahoma and Texas Wednesday, adding to this fall's planting challenges. An unexpected drop in Thursday's U.S. dollar index also contributed to Thursday's higher close in wheat, just as wheat futures were close to making new lows again this week. Early Thursday, USDA said last week's export sales of wheat totaled 21.4mb, a higher amount than we have seen lately, thanks largely to Japan, the top buyer. Total wheat exports are still dragging however, down 21% in from last year's dismal pace. The trends in both, K.C. and Chicago wheat futures are currently down, but prices are holding sideways, while the trend in Minneapolis wheat is sideways. January soybeans skyrocketed to a dramatically firmer close Thursday. The large rally move propelled January beans to a close above its 10-day, 20-day, and 40-day moving average, which is a bullish near-term trend signal. The large rally day pushed January beans above the middle daily Bollinger Band line, which opens the door to a test of the upper daily Bollinger Band line at $9.04 ½, which roughly coincides with major chart resistance at the $9.06 ¼ high, scored on Oct. 15. On the downside, the 20-day moving average becomes support and as long as that holds, bean bulls will retain the short-term technical edge. December corn closed out Thursday's session with minor gains but finished in the lower half of the daily range. Corn bulls tested higher levels propelling the contract as high as $3.71 on Thursday, but sellers emerged to press the market off the daily high. Technically, the near-term corn pattern remains negative as a minor series of lower daily highs is seen from the recent top and resistance at $3.78 ½, the Oct. 15 high. On the upside, the burden lies on corn bulls to pierce the Oct. 29 high at $3.71 ½ to break the minor daily downtrend. On the downside, corn is building value above support at $3.60 ¼-$3.60 ½, the Oct. 11 and Oct. 25 lows. The short-term December corn trend is neutral-weak in a consolidation phase. 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 13

14 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. 14