Daily Grain / Hogs Marketing Outlook Written by: Jim Gerlach 5/31/2017

Transcription

1 Daily Grain / Hogs Marketing Outlook Written by: Jim Gerlach 5/31/2017 Early Call 8:45am EDT: Corn up $.04, soybeans up $.02, wheat up $.03. Given Tuesday's sell-off, it looks to be a "Turnaround Wednesday" in the grain markets. Corn led the charge overnight, gaining back about half of Tuesday's loss, while rallies in Chicago wheat and soybeans were a bit more subdued. Outside commodities remained under pressure with energies, metals, and softs mostly lower. Weak crude oil and drier Midwest weather could largely offset yesterday afternoon s bullish U.S. corn/wheat condition reports. The U.S. dollar index and DJIA futures also failed to turnaround Tuesday's action, with both showing small losses again. Grains: Soybean futures dropped for the 5 th session in a row to a fresh 2017 low on Tuesday as oilseed prices tumbled through technical support levels. Soybean contracts fell through the lower end of technical indicators on Friday, which spurred followthrough selling this week. Regulatory data released late last week also showed managed funds increasing bets that oilseed prices would fall, coming to a total net short position of 62,000 contracts. The market is working on cleaning out any last remaining soybean bulls at the moment. Soybean futures for July delivery fell 1.5% to $9.12 3/4 on Tuesday, the lowest close since early April A USDA announcement that private exporters sold 130,000mt of soybeans to unknown buyers failed to excite traders, who are focused on the tough competition the U.S. will likely face in the coming season from South American exporters. Ongoing political turmoil in Brazil continues to concern traders, creating the potential to destabilize the Brazilian real and make that country's oilseeds cheaper relative to American produce. Grain futures also fell sharply Tuesday, as weather over the long Memorial Day weekend was less severe than expected. That prompted traders to peel back bets that excessive rain would derail some planting and harvesting. CBOT July wheat futures fell 2% to $4.29 1/2, while corn futures fell 1.9% to $3.67. Crude oil futures, which fell again after a rout late last week, increased pressure on grain and soybean contracts. 1

2 Most of the corn belt was dry yesterday (see map left), with showers to remain spotty until the weekend. Showers will favor the eastern and far northern Midwest before expanding into the south (see 7-day NOAA forecast map right). Drier weather next week in the Midwest will favor seeding, with showers delayed and shifted to the south/west, although the GFS model has a wetter risk day showers return, favoring the central/southeast Midwest. IN/OH and the northern Delta will struggle the most with late seeding. Rains will slow the early TX/OK harvest, with the wettest weather Fri-Sat. The period dries out, but the western Plains will be unfavorably wet in the 6-10 day period. Rain chances are reduced the next 10 days for dry spots in the northern Plains/southern Canada, with partial relief possible in the day period. A cold shot this morning brought light frost as far south as central ND, with limited risk for spring risk, but it was too far west to threaten corn/soybeans. Fairly frequent showers still hinger wheat/canola seeding in northern Alberta/northern Saskatchewan the next two weeks. In Brazil, corn harvest in the northern ½ of the safrinha belt will speed along the next two weeks, but will be very limited in the southern 1/3 rd of the belt due to frequent rains. 2

3 Ukraine farmers are starting to worry about recent warm/dry weather and how long the weather trend will last? The forecasts call for at least days of additional warm/dry weather which could take the top end off Ukraine wheat yields as the crop starts to push past the reproductive stage (see graphic courtesy of Commodity Weather Group Analytical firm UkrAgroConsult estimates the 2017 Russian corn crop at 14.5mmt compared to 15.3mmt last year. UkrAgroConsult estimates the 2017 Russian wheat crop at 67mmt versus 73.3mmt last season. India s monsoon, which provides the country with about 70% of its annual rainfall, reached southern locations yesterday, the earliest start to the monsoon since The current forecast for this year s monsoon coverage/amounts is favorable. Coceral cut their EU grain output estimate by 2.2% on problems in Spain and France. Grain production was forecast at 297.6mmt in vs. their previous estimate of 304.4mmt, lobby group Coceral said. Spain's wheat imports will rise by more than 1.3mmt next season, inflated by the dent to prospects from the newly-started harvest from hot and dry weather, which has cost some 1mmt in barley output too. The group cut its forecast for Spanish soft wheat output this year to 4.95mmt, a drop of more than one-quarter year on year, and taking the figure well below estimates from many other commentators. The International Grains Council last month pegged Spanish soft wheat output at some 5.5mmt. Agroinfomarket cut its barley harvest forecast to 6.15mmt, taking it 35% below last year's result. And the group warned that further downgrades may be in offing, saying that "given the high temperatures that are occurring at the moment, the scenario is more likely to worsen", especially in central regions of the country. 3

4 For the last week or so, I ve been telling clients that if everything goes perfect from here, the U.S. could still grow a trend yield corn crop at best as late planting/replanting, cold temps and slow emergence/growth have taken the top end off of U.S. corn yields. Still, traders seemed to be discounting the huge issues we re seeing in the southeastern ½ of the corn belt, instead focusing on planting pace (which doesn t include replanting) that has run near average. That may now change as the first, national condition report was issued yesterday afternoon. U.S. corn crop conditions were 65% good/excellent vs. 68% expected (65-71% range of ideas), 72% last year and the lowest late-may conditions in 5 years. U.S. corn planting was 91% complete vs. 92% expected (89-96% range of ideas), 84% last week, 93% last year, and 93% average. Yield is not the only test facing corn production, with the amount of the crop that actually gets seeded important, too. Such states include IN, where growers are 9 points behind their typical pace, KS, with an 11-point lag, and OH, where farmers are 6 points behind. Not all parts of the U.S. are doing that well and standing water is still an issue in southern IN and several fields have yet to be planted. The first two weeks of June show temperatures, while still seen mostly below normal, not quite as cool or below normal as seen in recent weeks and outlooks. Precipitation also is moderating with more windows to complete planting in the east of the Corn Belt. However, the forecast still has a large area that just can't find the heat. U.S. soybean planting was 67% complete vs. 68% expected (60-75% range of ideas), 53% last week, 71% last year, and 68% average. U.S. winter wheat crop conditions were 50% good/excellent vs. 52% expected (52-53% range of ideas), 52% last week, and 63% last year. U.S. spring wheat crop conditions were 62% good/excellent vs. 71% expected (65-75% range of ideas), 79% last year and were the 2 nd lowest late-may conditions in the last 9 years. U.S. spring wheat planting was 96% complete vs. 96% expected (95-98% range of ideas), 90% last week, 98% last year, and 91% average. It has been one of the wettest springs on record in many areas making corn planting difficult and flooding previously planted acres, yet the corn market has been reluctant to 4

5 embrace the weather concern and rally. Time after time huge amounts of rain has fallen, especially in the eastern half of the corn belt, creating a huge mess for farmers. There has been a massive amount of acres that have needed to be or will need to be replanted and in some areas, emergence has been slow at best. This has led many to believe that corn prices should be going higher here and now. However, that has not really been the case so far. The fact is that we have massive old crop stocks and the market was fooled into pricing in a significant amount of weather premium last year only to have to take it all away in the second week of June. Traders have been told many times that "rain makes grain" and "don't buy a too wet rally" as rarely is "too wet" a good reason for grain prices to go higher. It is simply too early to get concerned about yields in May as there is a lot that can happen to turn things around this early in a growing season. Take Argentina's last growing season for example. They had tremendous flooding early on, but ended up with a crop very close to what expectations were before the rain started to fall. The 2013 crop year is another good example of why it is difficult to get too excited. Before the 2013 crop was planted, the USDA was using a 158bpa trend-line national average yield. The spring of 2013 was one of the wettest on record and we had a terrible time getting the crop planted. However, at the end of the growing season, the USDA reported a 158.8bpa as their final yield, thus we have proven that a very wet spring does not necessarily mean below trend yields. However, what did suffer in 2013 was acreage. In the long run, I do think the stage is set for strength in corn, but I am not surprised it didn't come in the spring. There will be adverse effects from this wet planting season that can only be covered up by near perfect weather going forward. I also think the expectations of a 171bpa national average yield (would tie second best on record) are lofty. Not in 20 years has a corn crop initially rated below 70% gone on to produce above-average yields. A prominent, South American analyst estimates U.S. corn yields at 169.0bpa, with 500, million acres of corn shifting to other crops or not being planted due to wet conditions. If realized (and using the mid-point of 750,000 lost acres), that would equate to about 270mb of lost production in 2017/18. The same analyst is using a U.S. soybean yield of 49bpa, up from the USDA s 48bpa estimate. On the demand front, Asian crude palm oil price futures ended 0.3% lower Wednesday following losses in soybean oil prices. Concerns of rising production will continue to weigh on market sentiment. Two, private cargo surveyors pegged May soybean oil exports up % from a month ago. Chinese importers are reportedly asking for shipment delays of soybeans due to poor crush margins. Crush margins are said to be the lowest in 9 months, while soybean meal stocks are said to be the highest since China will auction 5.8mmt of corn reserves from 2013 harvest on June 1-2, according to the National Grain Trade Center. The government will also offer 162,700mt of corn 5

6 from 2012 harvest and 12,400mt of imported corn on June 2. China sold a total of 5.78mmt from state reserves last week. U.S. new crop soybean sales to date are the lowest since 2008, which backs up what I ve been saying that it will be U.S. 2017/18 first and possibly second quarter soybean exports that suffer the most from large, South American crops. Brazilian consultancy Safras & Mercado estimates 28% of the country s safrinha corn crop has been sold through mid-may vs. 54% last year. Safras estimates Brazil will need to export 5mmt of corn/month through January to keep ending stocks near a maximum of 10mmt. Brazilian farmers are not selling any new crop corn and soybeans as prices have fallen below breakeven for most producers. The slowing sales pace has caused exporters to raise their basis bids again in an effort to garner supply. Brazil has built considerable storage in the past few years which is helping to limit farm sales. Argentine port workers are planning a 3 day strike at Rosario beginning Wednesday morning. Malaysia bought about 60,000mt of Black Sea corn for Nov-Dec shipment for around $13-$18/mt cheaper than U.S. origin. Jordan bought roughly 50,000mt of hard milling wheat on Tuesday as part of a tender that closed on the same day. It is due to be shipped in the first of half October. Egypt issued an international tender to buy an unspecified amount of wheat for shipment from July U.S. or Black Sea offers were expected to be the most competitive. Results are expected later today. Yesterday s weekly grain export inspections saw U.S. corn exports for the week ended 5/25/17 at 47mb, little-changed from the previous week's 46.0mb. While this week's exports were well above last year's same-week exports of 31.0 million bushels, that is likely to be coming to an end as exports last year ran at historically strong levels from early June through the end of the marketing year as a result of the sharply-reduced Brazilian safrinha corn crop, with just the opposite expected this year given the record prospects for the crop. With cumulative exports now at billion bushels, which are still up 52% on the year, corn exports will need to average roughly 30mb/week through the end of August in order to reach the USDA's current billion bushels export estimate vs. last year's 52.4mb/week average from this point forward. U.S. soybean exports last week of 12.3mb were little-changed from the previous week's 13.0mb and right in line with average exports over the last four weeks of 12.4mb. As with corn, soybean exports are expected to run as seasonally-depressed levels through the end of the 2016/17 marketing year given the strong South American crops this year. Soybean exports only need to average roughly 8.0mb/week through the end of August to reach the USDA's current billion bushel export projection. Hogs: Cash hogs are called steady to $1 higher. It sounds like analysts are expecting this week's kill to total close to just under 2 million head. Processing margins remain well into the double-digits, and for Saturday, could total as much as 220,000 head. The 6

7 national bid gained $.94 to close at $72.03 yesterday, while the IA/MN bid gained $1.37 to close at $ The CME Lean Hog Index for 5/25 was up another $.09 to $ The USDA pork carcass cutout value was $.15 lower at $90.13 on average movement of 298 loads. Estimated packer margins were $30.90/head for non-integrators and $62.62/head for integrators vs. $34.46 and $63.03 the previous day. Tuesday s kill was unchanged with a year ago. July hogs couldn t reach the $82.30 resistance level yesterday. They opened at Friday s settlement price and grinded lower the remainder of the day, making a low at $80.77, just above support at $ A breakdown from here could see a test of support at the 8-day moving average at $80.25 and then the 13-day moving average at $ If the market rallies above the high, a test of resistance at $82.30 is possible. Hog futures fell sharply as pork prices slid Tuesday. CME June lean hog futures fell 1.6% to 80.5 cents a pound. Nearby lean hog futures failed to tap follow-through buying strength and technical potential Tuesday by closing sharply lower. Such action supports ideas that the board is overbought and/or running out of gas. Lean futures should open on a mixed basis tied to residual selling and short-covering. Despite the clumsy start to the short trading week, lean hog futures continue to sport both bullish short and long market trends. Bellies hold the key to summer highs for the cutout, hogs and futures. The good news is that seasonal odds favor a sharp belly appreciation as we speed toward BLT season over the next 30 to 60 days. A Canadian shipment of pig feet to China has tested positive for residues of banned growth drug ractopamine and may curb future trade, Canadian government and industry officials say. Cattle futures rose on Tuesday even as the supply of cattle grows. The USDA said on Friday that total cattle-on-feed as of May 1 rose 2% from the same time last year, a larger-than-expected increase. Cattle placement and marketing for the month of April also rose above expectations. That weighed on the futures trade on Friday and early Tuesday, combined with lower wholesale beef prices as the Memorial Day weekend grilling boost fizzled out. Wholesale beef prices fell 37 cents to $ on Tuesday morning. Analysts said that the continued premium in the cash prices for cattle would limit losses, however, with traders waiting to see how this week's cash trade would develop before betting on price direction in the futures market. A little over 2,000 cattle are listed at Wednesday morning's online Fed Cattle Exchange auction. That's a smaller show list than last week, at which live cattle averaged at $1.33 a pound. Stable prices at the auction will likely help futures, analysts say. Live cattle contracts for June delivery opened lower, continuing Friday's sell-off, before reversing course to close 0.2% higher at $ a pound. 7

8 Weather: Today's U.S. and European models are in fair to good agreement early in the period, fair to poor agreement later in the period. The U.S. model is favored late in the period. Today's European model features a ridge west and trough east pattern late in the period. The U.S. model is somewhat more variable in nature. The U.S. model does have a trough in the east, but in the west there is only a weak ridge favoring the southwest. Disturbances are still able to move over the top of this ridge before sliding southward into the central Plains and moving east through the Miss and Ohio river valley areas. This remains an active weather pattern for the central and southern Plains, Midwest and Delta areas. However, the heaviest activity appears to favor eastern areas during the period. Temperatures should be variable through the Plains and western Midwest and a little more on the cooler side in the eastern Midwest and the eastern U.S. due to the persistent trough in that area. Drier weather continues for the northern Plains and the south and east part of the Canadian Prairies region. Other than a few light showers dotting areas mainly east of the MS River, things were mainly dry in the Midwest yesterday. Temps were below average, with highs in the 60 s north and 70 s south. Lows were in the 40 s and 50 s. Enough rains will fall to slow fieldwork in at least the eastern ½ of the region, but questions remain on how much rain will fall to the west of the MS River. Temps will run below average for most of this week and then warm to average to above in the south for the weekend and early next week, but remain average to below in the north. Rains of generally less than.30 fell across southern KS and northern OK, with things mainly dry across the rest of the southern Plains. Temps were in the 80 s for highs. Harvest weather will be ok the next 2 days, with more challenging weather for Fri-Sat and again the middle of next week. Temps will run below average for most of this week and then warm to average to above by the weekend and first part of next week. Things remained quiet across the northern Plains region yesterday. Temps were below average, with highs in the 60 s and 70 s and lows in the 40 s, with a few upper 30 s scattered in. Below average precip will continue to be suitable for planting in these areas for most of this week and then rains will slow progress this weekend and again the middle of next week. Rains of generally less than.30 fell across around 45% of the Delta region yesterday. Temps were in the 80 s for highs. Things will be fairly quiet through tomorrow, with showers and thunderstorms to start up Friday and continue into Saturday, bringing totals of Things then look to quiet down for much of next week, which is a drier scenario. The day forecast is strongly mixed, with the European now indicating below average precip for most of the Midwest and eastern Plains, with average precip for the western Plains. The GFS is now indicating above average precip for most of the Plains and Midwest. This is actually a complete flip in the two models and an obvious sign that neither has a good grip on the forecast in this time frame. 8

9 North American Weather Highlights: Cool, wet weather in the Midwest impacts planting, forces some replanting and is unfavorable for crop development. The worst conditions are in the eastern Midwest. Warmer weather in the northern Plains should favor development of corn and soybeans during the coming days, with favorable conditions for developing spring wheat. Episodes of cool, wet weather in the central/southern Plains is unfavorable for maturing winter wheat. Increasing disease issues, along with deteriorating crop quality and lower protein, can be expected. A mostly favorable weather pattern continue for development of corn and sorghum, with planting delays continuing in some sections. Episodes of moderate to heavy showers and thunderstorms in the Delta will maintain adequate to surplus soil moisture for developing crops while leading to some delay in final planting efforts and promoting local flooding. Heavy to very heavy rains have recently been reported in the southern Delta across into Alabama and parts of Georgia. This rain was needed after a dry early spring period, but the excessive nature of the rain has likely caused flooding. Mainly dry conditions occurred in the Canadian Prairie during the weekend and early this week and should help improve conditions for the harvest of last year s crop and planting of this year s crops in central and north Alberta and northern Saskatchewan. Showers return to these areas later in the week. The southern and eastern areas could use more rain to support favorable development of recently planted crops. Global Weather Highlights: Ukraine/southern Russia will see a variable temperature pattern, with episodes of scattered showers that will favor winter and spring grains and oilseeds. Reports suggest that dryness is still of some concern through north-central Ukraine. This area should see showers at times, but will probably need more rain to end concerns. Western Europe will see above to well above normal temperatures and mainly dry weather from late last week into the early weekend period. This is favorable for planting crops and promoting development of winter grains and oilseeds where soil moisture was adequate. The area should see increasing shower activity and less very warm weather during the next 10 days. Key growing areas of northeast China continued warm and drier during the long weekend period. This favors planting progress, but may be unfavorable in areas with less than adequate soil moisture. The North China Plain was very hot and mostly dry during the weekend period. This is favorable for maturing wheat and rapeseed and early harvesting and for planting progress for spring crops, but is unfavorable for germination and early development of spring planted crops. Satellite pictures indicate increasing shower activity through the southeast Arabian Sea and over the eastern Bay of Bengal. The western Bay of Bengal is quiet at this time, cleaned out by the recent passage of a tropical cyclone. The leading edge of the monsoon has not moved much from yesterday and is still in southern Kerala and southern Tamil Nadu and northwest Myanmar. 9

10 Macros: The macro markets were mixed as of 8:45am EDT, with Dow futures up 0.2%, the U.S. dollar index is down 0.1%, crude oil is down 2.2% and gold is up 0.3%. The S&P 500 on Tuesday closed 0.12% lower, the DJIA lost 0.24% and the Nasdaq gained 0.11%. Bearish factors included carry-over weakness from a slide in European stocks after Reuters reported that the ECB at its June 8 meeting will discuss dropping its guidance on downside risks, the 1.5 point decline in the U.S. May consumer confidence (Conference Board) to 117.9, weaker than expectations of -0.8 to 119.5, and weakness in energy stocks after July WTI crude oil fell 0.28%. The next FOMC meeting is now only two weeks away on June The market is discounting about a 90% chance for a rate hike at that meeting. However, the main question is whether the Fed at that June meeting will offer any details about its balance sheet discussions. San Francisco Fed President Williams on Monday in an interview with Bloomberg mentioned a 5-year balance sheet roll-off program that takes the balance sheet down to $ trillion "or something like that." If his comments did represent a trial balloon, the markets on Tuesday did not seem to express any particular worry about the parameters he mentioned. In any case, a 5-year balance sheet roll-off plan that ends up at $2.5 trillion (from the current $4.5 trillion) would imply a $33 billion per month roll-off ($2 trillion divided by 60 months). Meanwhile, a larger 5-year roll-off plan that ends up at $2.0 trillion would imply a $42 billion per month roll-off ($2.5 trillion divided by 60 months). However, the FOMC in its May 2-3 meeting minutes said the plan under consideration would start out at a low monthly roll-off amount and then ramp up every 3 months until it reaches the full-phase in amount. A Fed roll-off plan could therefore start later this year as low as $2-10 billion per month, and then ramp up over a year or so to $35-45 billion per month. The markets will be watching today's Fed Beige Book for confirmation that the U.S. economy is regaining some momentum after the poor first quarter. The Fed's last Beige Book report, released on April 19, said that the pace of growth in the twelve Fed districts between mid-february and end-march was equally split between "modest and moderate." The market consensus for today's May Chicago PMI is for a 1.3 point decline to 57.0, more than giving back April's 0.6 point increase to A decline in today's report would not be surprising since the Chicago PMI index has risen for the last three consecutive months by a total of 8.0 points to post a new 2-1/4 year high of 58.3 in April. The market consensus for today's April pending home sales report is for a small 0.4% increase, recovering half of March's 0.8% decline. The pending home sales report is a leading indicator for the existing home sales series since pending home sales contracts generally lead closed-home-sales on a 1-2 month basis. U.S. existing home sales remain in very strong shape despite a tight supply of homes available for sale. April's existing home sales level of 5.57 million was only 2.3% below the 10-year high of 5.70 million units posted in March. 10

11 Overnight, Bloomberg News reported that European stocks rose a second day as investors shrugged off worse-than-expected inflation data and a slump in both oil prices and energy shares. The pound fell as the outcome of next week s U.K. election appeared increasingly uncertain. The Stoxx Europe 600 Index advanced even as a report showed inflation in the region slowed more than economists forecast in May. Miners and energy companies missed out on the gains as oil extended losses amid doubts prolonged output cuts will clear a global surplus. Sterling dropped for the first time this week as a poll showed Theresa May s Conservative Party may fall short of a majority. The currency trimmed its decline when another poll showed the Tories leading with a comfortable margin. Uncertainty about the reliability of polling has also helped contain the pound s retreat, but the moves are a reminder of the potential risks surrounding a series of national elections in Europe this year. Meanwhile, with key central bank meetings next month on both sides of the Atlantic, investors remain focused on this week s slew of economic data to gauge both the strength of the global economy and the path for interest rates. The euro-area inflation data came two days after the European Central Bank President Mario Draghi argued that ultra-loose policy was still needed to support the recovery. The Stoxx Europe 600 Index climbed 0.2 percent at 7:28 a.m. in New York. Futures on the S&P 500 rose 0.1 percent. The benchmark index slipped 0.1 percent Tuesday, retreating for the first time in eight days. The pound slipped 0.1 percent to $ and the euro jumped 0.3 percent. The yen was little changed at per dollar after rising 0.4 percent Tuesday. The South African rand strengthened 0.4 percent after tumbling for two days. The Bloomberg Dollar Spot Index fell 0.1 percent. Gold rose 0.1 percent to $1, an ounce after a 0.4 percent loss Tuesday. West Texas Intermediate oil dropped 2.3 percent to $48.54 a barrel after retreating 0.3 percent in the previous session. The yield on 10-year Treasuries climbed one basis point to 2.22 percent after declining four basis points in the previous session. Benchmark yields in the U.K. rose one basis point after a drop of two basis points Tuesday. China s offshore yuan jumped the most in four months as funding costs surged amid speculation policy makers were supporting the currency in the wake of a surprise sovereign rating downgrade. The MSCI Asia Pacific Index dropped 0.1 percent, paring its advance for May to 2.6 percent. The Shanghai Composite rose 0.2 percent, after an earlier gain of 1.1 percent on better-than-expected Chinese factory data. Summary: The markets wasted no time trading sharply lower after the long weekend even though the weather hasn t significantly improved. Beans took the biggest hit dropping $.13 ¾ and are now within range of falling below the dreaded $9 mark. Corn followed beans lower, with July corn dropping $.07 ¼. The wheat complex was all 11

12 lower but with varying results. With the weather still cool and wet in much of the Corn Belt, I could understand that beans might come under pressure as not all of the corn will get planted and the easy switch is to soybeans. If that was the case, then I wouldn t have expected corn to be under such pressure. The forecast still has a large area that just can t find the heat (see NWS 6-10 day forecast map) and the eastern belt has also seen the most rain and could use the heat to dry out. July soybeans have a strong seasonal that started yesterday, with 14 of the last 15 years profitable buying on May 30 th and exiting on the 9 th of June. Yesterday s export inspections were a mixed bag, with a strong corn number, a good wheat number, and a very weak soybean number. The beans posted the 2 nd lowest total of the year and we continue to watch South America remain the biggest shipper of beans. The wheat number was good, but is still 57mb behind the USDA pace and there is just one week left of data to report. It is safe to say that the inspection total will fall far short of the USDA number. The continuous soybean/corn ratio has moved to new lows at 2.49, which hasn t been this low since 3/31/16. The new crop ratio is currently at 2.38 so this continues to head lower. Coincidentally, the last time that beans went below $9.00 was also on 3/31/16. July soybeans collapsed sharply lower on Tuesday, as the market drops in a search of new demand. Last week's selling confirmed a bearish breakout from a roughly six-week corrective and consolidation phase. The near and intermediate-term trends point down and bean bears are in control. Very short-term, the July bean contract is technically overextended, trading below its lower daily Bollinger Band line at $9.24. Daily momentum hit oversold levels, with the 14-day relative strength index hitting 27% on Tuesday. These indicators are red warning flag signals that beans are vulnerable to a correction at any time, but beans are falling in search of willing buyers. The daily July bean chart shows an old gap from March that could act as a magnet. That old daily gap is seen from $9.02 1/2-$8.95 3/4. Below there, a major bearish chart target is seen at $8.84 3/4, the March 2 low. The market is approaching technically significant long-term chart support levels that could act as a hook to stabilize the market. Initial resistance lies at $9.16 1/4 and then $9.22 3/4. July corn fell on Tuesday. The action is 12

13 negative and pulled corn to the lower half of its nearly 2 1/2-month neutral trading range. On the downside, corn bears see a target at $3.64 1/4, ahead of major rangebottom support at $3.60 3/4. It would take a strong and sustained downside breakout below $3.60 3/4 in order to break the market out of its recent neutral range and turn the trend bias definitively to the bearish camp. Initial resistance lies at $3.74 3/4, ahead of major range top resistance at $3.79 1/2. 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. 13