Daily Grain / Hogs Marketing Outlook Written by: Jim Gerlach 4/19/2018

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1 Daily Grain / Hogs Marketing Outlook Written by: Jim Gerlach 4/19/2018 Early Call 8:45am EDT: Corn steady, soybeans down $.01, wheat up $.02. Early Thursday morning shows the grain and oilseed complex quiet, with most contracts near unchanged. Meanwhile, Kansas City HRW wheat was able to gain back another nickel of the recent sell-off. The energy complex was mostly higher while metals were lower. The U.S. dollar index was showing a small gain while DJIA futures saw light selling interest. Grains: Soybean futures slid Wednesday on renewed jitters over trade. With few recent signs of better export demand to boost prices, traders are focused instead on threats to demand. In particular, they are worried that China's move to slap duties of 179% on U.S. sorghum could prompt further escalation of tensions between Washington and Beijing, resulting in what many consider the worst-case scenario: Chinese tariffs on American soybeans. Meanwhile, weather forecasts suggesting that upcoming rain in the Plains wouldn't relieve all of the stressed wheat crop boosted grain prices. CBOT May soybean futures fell 0.4% to $ /4 a bushel. May wheat gained 1.9% to $4.75 1/4 while May corn rose 0.7% to $3.83. Corn did little overnight with old-crop July trading in a $.01 ¼ trading range and new-crop December moving only $.01 through early Thursday morning. Technically, at least short-term, is that the July contract has moved back above the midpoint ($3.90) of its continued sideways trading range between the high of $4.02 ¾ (March 13) and low of $3.77 ½ (March 23). While some in the industry continue to tout the bullishness of corn's large outstanding sales figure, others point to the bearishness of the actual pace of export demand. Soybean contracts were fractionally mixed early Thursday following a relatively quiet overnight session. Technically, new-crop November continues to consolidate between resistance at its high of $10.60 (April 2) and retracement support near $10.38 ¼. The wheat complex was higher early Thursday morning, again led by a rally in the Kansas City (HRW) market. There, new-crop July was a nickel higher overnight as it continues to rally off its recent test of technical retracement support at $5.00. Key to the contract will be its ability to get above its previous peak of $5.47 ¾ (April 9). To do this, the U.S. southern Plains 1

2 will likely need to miss out on forecasted rain this weekend, or have traders move back to the side that even if it does rain, the HRW crop is already damaged beyond repair. Support for the late Fri-Sat rain event in the southern/western Plains continues and should offer temporary drought relief of rains (see 7-day NOAA forecast map). The GFS shows wetter Plains risks late in the 6-10 day, but is not favored, with better odds for follow up rain in the south by the day period. Western KS/southeast CO (35% of the belt) is at most risk to miss follow up moisture snows occurred yesterday in southeast SD, southeast MN, northern IA and southern WI. The Midwest will be cold through Monday, with weekend rain mainly in the far south. Light showers scatter across the northern/eastern Midwest Tue-Wed, but the primary corn belt won t see rain until next weekend into the day period. Warming this weekend and late next week eliminates snow in the northern Plains and northwest Midwest, but the late day period cools once again. In Argentina, harvest progresses this week as rains remain limited, but delays could mount next week. Showers remain minimal in the southern 1/3 rd of Brazil s safrinha corn belt the next two weeks, leading to stress during pollination. Parana and MGDS have seen little if any precip the last 3 weeks and account for 45% of the safrinha crop. The top state of Mato Gross has seen just 30% of normal rain the last 3 week. Ultimately, South American corn production could fall 20mmt or more below a year ago. Analytical firm Celeres expects the Brazilian corn crop to hit 91.6mmt in 2017/18, compared to the current USDA number of 92mmt. The Brazil soybean crop is estimated at 115.7mmt by analysts with Celeres vs. the USDA s 115mmt. The USDA ag attache in Australia pegged the 2018/19 wheat crop at 24.0mmt vs. last year s drought-impacted 21.5mmt, but still would be below the 2016/17 record of 30.4mmt. Due to a drawdown in stocks this year, exports in 2018/19 are expected to rise just 1mmt to 17mmt. The ag attache to Malaysia pegged their 2018/19 palm oil production at 21.0mmt, up only slightly from this year s 20.5mmt, with exports rising to 17.9mmt from 17.5mmt this year. Wheat production is estimated to remain high throughout the world according to USDA attache reports out of Canada and the EU. In Canada, the attache estimates 2018/19 wheat production at 29.9mmt as durum yields will likely offset spring wheat issues. In the EU, production is estimated at 151.2mmt as yield increases will offset a 2

3 slight reduction in acreage. Analytical firm Strategie Grains on Thursday cut its estimate for European grain production, in its fourth forecast update for the season. The crop consultant decreased its monthly forecast for the crop year by 0.4mmt to 303.5mmt, a reduction of 0.1%. In mid-april, winter cereals were generally in good health in most areas of the EU. Yield potentials are currently very good in southeast Europe and reasonably good in east and central Europe, Strategie's report said. Excess water impacts have created a less promising outlook in west EU countries, especially France, whilst in Scandinavia and the Baltic States, the condition of the cereals has been impaired as a result of the difficult conditions at planting time last autumn and the longlasting winter. Ag markets did very little overnight and until the release of the USDA s May WASDE in three weeks, there just won t be much new fundamental input. Midwest corn seeding should start in some areas next week, while soybeans are caught in the trade debate. U.S. weather has been far from ideal, but no one can forecast with certainty what the Trump Administration is going to do next on key issues including China, NAFTA, TPP, North Korea, the RFS. CBOT corn and soybean markets are acting a bit tired, with bullish news largely discounted, an absence of any USDA sales announcements in recent days, large commercial row crop cash longs, improving Midwest spring moisture reserves and a reluctance to embrace late planting concerns until the calendar flips to May. Look for more range bound trade in coming days as ag contracts mark time awaiting more clarity on May weather. Regarding potential planting delays, the 5-year average for U.S. corn planted next week climbs to 15%. The U.S. had 13% planted last year by April 22 nd and went on to post record 176.6bpa national corn yield. The most corn planted in the last 5 years by April 22 nd was 25% in 2016, while the least planted was 4% in Recall that 2016 posted a record corn yield of 174.6bpa, while 2013 corn yield was 158.1bpa, which was the 2 nd highest ever at that point vs. the record of 164.4bpa posted in Thus, I would advise against reading too much into early season planting delays. Longer term, private forecasters indicate low odds of Midwest summer adversity and note that if warming sea surface temps continue to expand eastward and reach the northeast Pacific by early summer, the odds of Midwest summer adversity will be even lower. On the demand front, the USDA attache to Vietnam sees them importing a record 11mmt of corn in 2018/19, up from 9.0mmt last year and 7.5mmt the prior year. From , Vietnam imported just mmt of corn annually. Nearly all of their corn imports are from South America, but that could change this year due to reduced crop size. Vietnam has 903,000mt of U.S. corn on the books for 2017/18 delivery vs. just 251,000mt at this time last year. Prior to this year, the all-time record for U.S. corn imports was 509,000mt in 2013/14. Australian sorghum is up $10/mt to $322/mt 3

4 following China s imposition of a 179% deposit on U.S. sorghum. Combined with the premiums they re paying for Brazilian origin soybeans, it is likely that trade friction is costing Chinese feeders money. Chinese officials announced another ethanol plant to be built in Inner Mongolia s Baotou city. The facility will use 924,000mt of corn and around 350,000mt of straw and sweet sorghum each year once completed. Argentina is reportedly importing soybeans from Brazil in order to sustain their historical shipping pace for soybean meal. Taiwan s tender for 92,975mt of U.S. wheat closes today. A possible decline in U.S. ethanol exports to China amid trade tensions between the two countries could drive ethanol prices lower, making exports of American supplies to Brazil profitable again, according to a market analyst at FC Stone. That may threaten Brazil sugar-cane millers margins, which have recovered since the govt imposed a 20% tariff on U.S. ethanol imports and Petrobras has aligned its gasoline prices with the international market. Although Chinese ethanol sanctions have not yet been imposed, the country s ethanol importers are already wary of signing new contracts. This morning s weekly U.S. grain export sales were below expectations for wheat, above expectations for soybeans and within expectations for corn, soybean meal and soybean oil. Wheat sales reductions of 66,900mt for delivery in marketing year 2017/2018--a marketing-year low--were down noticeably from the previous week and from the prior 4-week average. For 2018/2019, net sales of 240,400mt were reported. Corn sales of 1,091,700mt for 2017/2018 were up 30% from the previous week, but down 4% from the prior 4-week average. For 2018/2019, net sales of 112,200mt were reported. Soybean sales of 1,040,700mt for 2017/2018 were down 31% from the previous week, but up 12% from the prior 4-week average. For 2018/2019, net sales of 1,090,700mt were reported. Soybean meal sales of 164,900mt for 2017/2018 were down 48% from the previous week and down 41% from the prior 4-week average. For 2018/2019, net sales of 6,800mt were reported. Soybean oil sales of 28,000mt were up 27% from the previous week, but down 18% from the prior 4-week average. U.S. ethanol production for the week ended 4/13/18 declined to million barrels/day (297 million gallons/week) from million barrels/day a week prior and reflected the lowest production in 14 weeks going back to the first week of January. A decline in ethanol production during mid-march through May has been common in recent years. Despite the decline, production was still 1.6% above last year's same-week production, which was right in line with the average year-over-year gain in production we estimate is needed if the USDA's 2017/18 corn for ethanol usage estimate of billion bushel is to be met. Corn marketing year to date ethanol production has averaged 2.2% above last year. This week's drop in production may have helped contribute to the notable decline in stocks, as well, but stocks of late had been seeing an impressive drawdown even with production running at mostly steady levels. Ethanol stocks declined 21 4

5 million gallons (502,000 barrels) last week to 896 million gallons ( million barrels) and put the total stocks decline over the last five weeks at 123 million gallons (12%), easily the largest 5-week stocks drop since EIA has been reporting weekly data since June In fact, the previous largest 5-week consecutive stocks decline was just 92 million gallons during a period in June-July Moreover, current stocks are now 7.3% below last year's same-week stocks, the largest year-over-year stocks decline since late December With the summer driving season ahead and ethanol margins still running in the black, production should continue to run at least in line with, if not stronger than, the 1.6% year-over-year needed gain to meet the USDA's corn demand target. U.S. gasoline demand last week surged to an all-time record million barrels/day, up sharply from the previous week's million barrels/day and 6.9% above last year's same-week demand of million barrels/day. Hogs: Cash hogs are called $1 higher as the early spring cash hog trade continues to explode as packers sense tightening market numbers and are anticipating better carcass value. At this time, the Saturday hog kill is estimated to total 118,000 head. The national bid rose $1.92 yesterday to close at $54.19, while the IA/MN bid gained $2.00 to close at $ The CME Lean Hog Index was up $.49 from the previous day to $ The USDA pork carcass cutout value was up $.25 at $68.46 on good movement of 305 loads, with ham and belly reported lower. Estimated packer margins were $21.95/head for non-integrators and $15.17/head for integrators vs. $27.50 and $16.10 the previous day. Weekly IA/MN hog weights hog weights were lbs. vs lbs. last week and lbs. last year. This is the closest weights have been to a year ago in sometime and suggests that producers are getting very current, especially with feed costs up and pork prices down. Weekly kill is up 1.98% over last week, with no comparison to last year due to holiday week differences. Weekly pork export sales of 17,900mt for 2018 were down 18% from the previous week and 12% from the prior 4-week average. Export shipments of 16,100mt were down 30% from the previous week and 29% from the prior 4-week average. For the week ending April 14, U.S. hatcheries set 229 million eggs in incubators, up 3% from a year ago. At the same time, chicks placed totaled 182 million chicks, up 1% from June hogs broke out to the upside and rallied past resistance at $77.80 and $78.42 on its way to the high at $ It settled at $78.525, above resistance. A continuation higher could see price test resistance at $79.77 and then $ A pullback could see price consolidate within the Wednesday range. Lean hog futures should open moderately higher, supported by follow-through buying and signs of aggressive cash spending in the country. Hog futures rose on Wednesday as packers sought more pigs to slaughter, pushing cash prices higher. CME June lean hog contracts rose 2.3% to cents a pound. Increased buyer support quickly flooded into nearby lean hog futures with the most aggressive support developing in summer 5

6 contracts. The focus on increased buyer support in pork, as well as appreciating cash hog values, has sparked underlying commercial support in the market. Some additional adjustments are likely over the near future, though prices may focus on combined outside market shifts as well over the next several days. Pork prices bounced higher Wednesday as most primals posted triple-digit gains. The most recent round of support that quickly developed in lean hog futures is likely to add even more fuel to the higher cash market fire. The ability to move pork product through the spring and summer will continue to be the main factor in buyer support. Packers are willing to move as many hogs through plants as they can handle before further price gains are seen in the market. Total slaughter numbers Thursday are expected to be 465,000 head with an estimated 118,000 head Saturday. There are signs that expansion in Chinese hog production in recent years is beginning to slow due to a domestic supply glut, with hog prices moving to an 8-year low in recent months and feed costs rising due to reduced domestic corn production and strong soybean and meal prices on trade tensions with the U.S. Indications are small to mid-size producers are delaying or reducing previous expansion plans, with some outright reducing herd sizes already. However, large producers are likely to continue to expand due to economies of scale advantages. Cattle futures rose after the week's physical trade started higher. Cattle markets fell sharply through March as traders bet that supplies of slaughter-ready livestock would rise in the weeks and months ahead. But prices have rebounded in April as factors including bad weather helped stave off the worst of a surplus. That has forced meatpackers to pay more to secure animals for their plants. Packers want to talk about not needing many cattle, but the truth is they do need them to fill pre-booked beef sales and to cover strong export orders. April-dated live cattle futures rose 0.8% to $ a pound at the Chicago Mercantile Exchange. The more-active June contract also rose. Meatpackers on Wednesday paid more for cattle at the online Fed Cattle Exchange auction, which can help to set the price direction for the week's physical trade. Packers paid $ for cattle to be delivered this week or next, which was $3 above last week's average. Cattle ready for slaughter in 17 to 30 days sold for $120, a sign that feed yards were still prepared for prices to trend lower in the weeks ahead. Higher prices were sparked in part by a late-season snowstorm in northern cattle states like Nebraska and South Dakota, which potentially harmed livestock there and set back supply growth in those regions. Traders were now looking to see whether prices also rose in the broader cash market, which typically starts later in the week. One market observer said meatpackers in Kansas were bidding $116 for cattle, which would mark a downturn from last week. But most analysts expected prices to rise, particularly as good processing margins gave packers extra cash to spend. The HedgersEdge packer margin index was $65.10 on Wednesday. Traders were betting that the worst of oversupply was over, expecting a USDA report due Friday afternoon to show feed yards reduced the 6

7 number of new cattle they started fattening for the first time in months. Analysts surveyed by The Wall Street Journal expect the USDA to show cattle placed in lots in March at 90% of last year's level, with estimates ranging from 85% to 94%. They expect the total number of cattle on-feed as of April 1 to rise 7% from a year earlier, with cattle marketed to fall. In the early months of this year, all factors pointed to 2018 being a relatively good year for pork production. We had abundant grain supplies, adequate packer capacity, reasonable pig health and strong demand for pork both domestically and internationally. In spite of the fact that we harvested 6% more pigs in January ( million versus million in January 2017) pork cutout values moved up from $78 early in January to $83 late in the month and the western Corn Belt base price moved up from $60 to $70. Additionally, we were hitting contract highs for lean hog futures for every month through the next 12 months. For most producers, the next 12 months could be locked up at $15 profit per head, more or less. Hindsight would ask, Why didn t we lock them all down at that time and focus on pig production and other things? Well, I would say, recent history is the reason. Going back just one year, the market was driven largely by the belly market. Due to demand, and short cold storage stocks, the belly primal went from under $100 in mid-december of 2016 to over $180 in mid-february of 2017 and then to nearly $215 in late-july. In turn, the belly market moved the pork cutout from $76 in mid-december to $85 in mid-february and finally to a high near $105 in July. No one wanted to leave that kind of market run on the table. Hedging summer production at $85 meant settling for a $90 cutout, when just a year earlier we reached $15 higher. However, this year is not last year as we have more production. January pork production was up 6% year-over-year, February was up 5%, and March was likely up 5% as well. The supply chain, packers, processors, retail, will better manage supply so they do not get caught short again this year if they can help it. Prices will be better managed by buying needs ahead and using cold storage to create a buffer, as has always been the case. The final issue related to market volatility is demand. Demand remains strong domestically for pork, but the question revolves around how much pork can we export and how quickly can we grow that demand? Pork exports have been around 25% of U.S. production, so simple math would say that if we are going to grow our production by 5% and export all of that extra production, exports would have to grow by 20% to 28.5% of production. This is a tall order, but not impossible. If all trade negotiations were to go our way, it would be a challenge to grow that fast and recent trade challenges with the North American Free Trade Agreement, the Trans-Pacific Partnership, and now China are making that growth look difficult. 7

8 Weather: The U.S. and European models are in fair to good agreement for only the first day or two of the outlook period, poor agreement after that. This makes for uncertain forecasts as it concerns the 8-10 day period. Today's European model is favored in the extended range. A moderate, short wave trough is expected to move from the northeast Plains across the northern Midwest early in the outlook period. This is on both models and is basically treated as a cold front passage with some precipitation possible but not a lot. The European model shows the mean trough within the northern branch of the jet stream over northwest and north-central Canada and the polar vortex between Hudson Bay and the Arctic circle. This suggests a return to somewhat colder conditions in the Canadian Prairies following somewhat warmer weather that will occur later in the 5 day period and early in the 6-10 day period, but not much precipitation. The upper level low west of California early in the period is shown moving eastward across southern California and the southern Rockies later in the period. The slow movement of this system suggests a drier outlook for the southern Plains region following the rain chance at the end of this week. It also suggests a slow warm up in temperatures after being fairly cool early in the outlook period. The European model is consistent with its ideas from yesterday. The U.S. model is not consistent with its run of yesterday or with the European model. This model shows a moderate to deep trough moving over western Canada and the northwest U.S. during the middle of the period. The model suggests that the trough will be deep enough to grab the east Pacific trough and pull it into the southern Plains and eventually into the northern Plains. The combination of the northern and southern branch trough over the northern Plains late in the period is shown, by the U.S. model, to cause a major storm over the northern Plains, the southeast Canadian Prairies and the northwestern Midwest regions at the end of the period. This a new development from yesterday on the U.S. model and since it is also not supported by today's European model, I would consider this as a low probability outcome. I would also note that this type of solution only occurs on about 3 of the 12 members of the U.S. ensemble forecast for the period. The one thing in favor of this solution is that it is not that different than what occurred at the end of last week, it is just a little further to the north. Dry weather dominated the southern Plains yesterday. Temps were near average, with highs in the 60 s in KS and 70 s in OK and TX. Lows were in the 30 s in KS, with 40 s and 50 s in OK and TX. Things will remain dry for today and then by later tomorrow into Saturday, an area of low pressure will bring widespread and soaking rains to all of the region. Things then look to quiet back down for the first half of next week and then another low and its fronts to bring light to moderate rains to much of the region by the middle to end of next week. The rains will be much welcomed as crops head through the spring development stages. Temps will be running average to below average across the southern Plains for the next 10 days, with highs in the 50 s, 60 s and some 70 s and 8

9 lows in the 30 s and 40 s, with some 20 s in KS from time to time. Snows of 4-8, isolated to 8 +, fell across southern MN and northern IA, with totals decreasing to the 1-4 range in southern WI and generally around an inch or so across northern IL, IN and OH. The rest of the region was dry and temps remained below average, with highs in the 30 s north and some 50 s and 60 s in the south. Lows were in the 20 s and 30 s. The pattern looks to become more favorable for spring fieldwork in the next 10 days. Things look to be mainly dry across the region for the rest of this week and the weekend. The very early part of next week also looks to be mainly dry, with a pair of weak lows to bring light to moderate precip to the region Tuesday and again by the following weekend. Most totals with each event look to be under.50. Temps will be running below average for most of the next 10 days, with highs in the 40 s and 50 s in the northern ½ of the region, with 50 s and 60 s in the south. Lows will be in the 20 s and 30 s north, with 30 s and 40 s south. Things were dry across the Argentine growing regions yesterday. Dry weather also dominated most of the Brazilian growing regions yesterday with some rains bringing less than.20 to MGDS and Mato Grosso. Temps were in the 80 s in the Argentine growing regions, with 70 s and 80 s in Brazil. Rains of will fall across 95% of their growing areas in the next hours and the 6-10 day period also sees rains of to fall with widespread coverage. Rainfall of looks to fall in the Brazilian states of Mato Grosso, Goias and MGDS, with limited activity elsewhere. The 6-10 day period sees.35-1 rains to fall in MGDS and Mato Grosso, with limited activity elsewhere. Temps look to run average to above in most of the South American growing regions in the next 10 days. North American Weather Highlights: Cold temperatures continue to delay any early spring field work in northern areas of the northern Plains and also maintain above normal stress levels on livestock. A somewhat improving temperature pattern is possible during the 7 day. Some precipitation may reach to southern and eastern North Dakota later in the 5 day period. The prospects for heavier rain or snow shown on today s U.S. model at the end of the 10 day period is noted but not used for today's 6-10 day outlook. Much needed rains will move through the driest areas of the southwest Plains wheat belt at the end of this week. Compared to earlier this week, some rain has been taken out of the forecast for the area. While this rain is certainly helpful, it unlikely to be enough to end the drought, especially considering the recent strong and very dry winds that have been in the area. Snow and ice occurred in the northwest and north-central Midwest yesterday. Precipitation and cold spring temperatures will keep field work at a standstill for a while longer. A slow warm up and a storm track well to the south may allow conditions to improve somewhat during the 7 day period. Longer range is more uncertain today as more rain may arrive in the Midwest later in the 10 day period. Rain 9

10 and thunderstorms return to the Delta/Southeast region during the weekend period. Until then, a drier and somewhat warmer period may help to improve conditions, somewhat, for field work. The main planting season in Canada begins in early May. Cold, early spring temperatures have likely limited early field work and may delay the start of the planting season. Top soil moisture has improved somewhat in some locations during the spring, but subsoil moisture is likely still quite low. The spring flood risk is expected to be low. Global Weather Highlights: Episodes of scattered thundershowers and near to below normal temperatures in Brazil continue to favor corn in Mato Grosso, Goias and a portion of MGDS. A somewhat drier period continues for corn areas of Parana. South Africa will be dry or with only a few light showers, with locally heavier during the next 7 days. No significant cold weather in sight. This should favor maturing crops and early harvesting. Late filling crops should have adequate moisture reserves for current needs and will benefit from the warm temperatures. Chinese wheat areas turned hot and dry again at the end of this week. The next chance for rain comes this weekend, with scattered thunderstorms expected to favor south and east areas. This should include important winter wheat areas of Henan and Shandong. Macros: The macro markets were mixed as of 8:35am EDT, with Dow futures down 0.2%, the U.S. dollar index is down 0.1%, crude oil is up 1.7% and gold is down 0.2%. The S&P 500 on Wednesday rallied to a 4-week high and closed 0.08% higher. The DJIA lost 0.16% while the Nasdaq gained 0.25%. Bullish factors included reduced North Korean geopolitical risks after President Trump said CIA director Mike Pompeo met with North Korean leader Kim Jong Un last week and a "good relationship" was formed, a rally in energy stocks as crude oil prices rose 2.93% to a new 3-1/3 year high, and strength in metals producers and mining stocks after nickel prices jumped to a 2-3/4 year high and copper rose to a 1-month high. OPEC and non-opec oil ministers will meet Friday in Saudi Arabia to discuss how to proceed with their production cut agreement. Ministers will also discuss how to continue with at least some production cuts into 2019 to ensure that oil prices remain high even in the face of record U.S. oil production. OPEC and non-opec members have fully stuck to their production cut agreement levels and OPEC production has also fallen due to a sharp decline in Venezuelan oil production due to its domestic economic crisis. The OPEC/non-OPEC agreement has been very successful in erasing the oil glut. Indeed, the IEA estimates that world oil inventories have fallen to a surplus of only about 30 million barrels from the 340 million barrel surplus seen at the beginning of 2017 when the production cut agreement began. Moreover, the oil inventory glut in the U.S. has also been erased despite record U.S. oil production. U.S. oil inventories are now 3.3% below the 5-year seasonal average, the tightest such level in 9-1/2 years. May WTI crude oil prices 10

11 yesterday rallied to a new 3-1/2 year high and closed the day sharply higher by 2.93% at $ Crude oil prices rallied sharply on the bullish weekly EIA report and also on speculation that President Trump on May 12 may announce that the U.S. is reimposing sanctions on Iran, which would curtail Iran's current oil exports of 2.1 million barrels/day. The initial unemployment claims series this week should settle down after the Good Friday holiday disruption. The consensus is for today's initial claims report for the week ended April 13 to show a 3,000 decline to 230,000, adding to last week's 9,000 decline to 233,000. Meanwhile, the consensus is for today's continuing claims report to show a 26,000 decline to million, reversing about half of last week's 53,000 rise to million. Unemployment claims remain in very favorable shape. The initial claims series is only 16,000 above February's 45-1/4 year low and the continuing claims series is only 53,000 above its recent 44-1/2 year low. The market consensus is for today's March leading indicators index to show an increase of 0.3%, adding to Feb's strong report of 0.6%. The LEI has surged since late last year with an average monthly gain of 0.8% since October. The LEI in February was up by 6.5%, the strongest growth rate in 7 years. Overnight, Bloomberg News reported that metals extended their stellar gains on Thursday, driving another rally in Bloomberg s commodity index as investors continue to fret about how Russian sanctions will impact the market. Government bonds retreated amid an upbeat global growth outlook. Aluminum and nickel led the advance as the BCOM Index flirted with the highest level since U.S. 10-year Treasury yields climbed to 2.89 percent after leaping on Wednesday in the wake of the Federal Reserve s Beige Book report, which showed a solid outlook for the economy despite trade concerns. European bonds played catch up and yields in the region jumped. In the equity market, European stocks struggled for traction following two days rising and in the wake of a mixed bag of corporate earnings, even after shares across Asia built on gains from a day earlier. Miners rose amid the commodity rally, and energy firms climbed in the wake of an industry report showing crude inventories declining. West Texas oil also advanced. For once though, all the action seems to be outside the equity space as the commodity rally accelerates and investors ponder the outlook for rates and the bond market. Optimism over expansion has been tested by the flattening yield curve, though there s also been some respite for traders as geopolitical tensions showed signs of dissipating. Elsewhere, the Australian dollar fluctuated after employment in the country rose less than forecast in March. It turned higher amid the commodity rally. The yen slipped as U.S. President Donald Trump and Japanese Prime Minister Shinzo Abe agreed to work 11

12 closely on bilateral trade. The Stoxx Europe 600 Index rose 0.1 percent as of 7:25 a.m. New York time, the highest in more than seven weeks. Futures on the S&P 500 Index declined 0.1 percent. The MSCI All-Country World Index climbed 0.1 percent to the highest in almost five weeks. The U.K. s FTSE 100 Index jumped 0.2 percent to the highest in almost 11 weeks. Germany s DAX Index dipped 0.1 percent. The MSCI Asia Pacific Index increased 0.5 percent to the highest in four weeks. The Bloomberg Dollar Spot Index increased less than 0.05 percent to 1, The euro declined less than 0.05 percent. The British pound climbed 0.2 percent to $ The Japanese yen fell 0.2 percent to per dollar, the weakest in eight weeks. West Texas Intermediate crude climbed 1 percent to $69.15 a barrel, the highest in more than three years. Copper declined 0.3 percent to $3.17 a pound. Gold dipped 0.1 percent to $1, an ounce, the first retreat in a week. LME nickel jumped 3.2 percent to $15,770 per metric ton, the highest in more than three years. LME aluminum climbed 2.4 percent to $2, per metric ton, the highest in almost seven years. Summary: Grain markets will be paying very close attention to NAFTA negotiations that are said to be taking place over the next two days, with hopes of obtaining an agreement within the next three weeks. Crude oil traded to a 3-year high. The corn market traded higher on strength in the wheat market. Gains were limited on forecast for warmer temperatures beginning next week. Ethanol production was reported at million barrels per day, down 25,000 barrels per day. This is the fourth week of seeing declines in production, which is normal as the seasonal maintenance period is underway. CIF premiums were $.06-$.07 weaker in April and $.04 weaker in May. Processor bids are mostly unchanged. PNW bids are unchanged for April and $.02 weaker for May. The soybean market was on the defensive from spillover weakness in the soymeal market and concerns that soybeans may be the next target in the tariff spat between the U.S. and China. Profit taking and ideas of a potential increase in soybean acres pressured the market also. CIF premiums were unchanged for April/first half May and $.04 stronger for last half May. Processor bids were mostly unchanged. PNW bids were $.07 stronger for April, $.02 stronger for May and $.01 stronger for October. Brazil bids were $.02-$.03 higher. The wheat market climbed higher again as forecasts for beneficial rains in the Plains began to dial back amounts that are expected to fall. Snow across parts of North and South Dakota renewed talk of too late to plant the whole million acres the USDA projected back on March 29 th. July soybeans erased intraday gains to close modestly lower Wednesday in a bearish outside day formation. The near-term trend is choppy in a bearish correction phase. For now, July beans continue to hold above 20-day moving average support at $ /4, which is positive near-term trend signal. The 20-day moving average coincides with a small daily gap from April 6-April 9 at $ /2-$10.48, which is also support for 12

13 beans. If the 20-day moving average and gap support crack, it would turn the near-term trend to bearish and open the door to more significant declines. On the upside, Wednesday's high becomes first resistance at $ /4 and a recovery above that ceiling would be needed to return the focus to higher levels. July corn bounced to a firmer close in a consolidative inside day session on Wednesday. Significantly, July corn is rebounding from an important Fibonacci retracement support zone on the daily chart. The recent corrective pullback stalled at $3.88 1/2 on April 17, just above key Fibonacci retracement support at $3.88. That represents 61.8% of the April 4-April 9 rally wave from $3.80 1/2 to $4.00 3/4. The corn market's willingness to hold above that key retracement support keeps the intermediate-term bull trend intact. Short-term, corn bulls are testing 20-day moving average resistance. Sustained gains above that zone will be a positive short-term signal, and open the door to upside probing toward minor resistance at $3.94 1/2 and then $3.97 1/2-$3.97 3/4. 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