Daily Grain / Hogs Marketing Outlook Written by: Jim Gerlach 9/17/2018

Transcription

1 Daily Grain / Hogs Marketing Outlook Written by: Jim Gerlach 9/17/2018 Early Call 8:45am EDT: Corn down $.02, soybeans down $.05, wheat down $.01. Grains were mixed overnight, with row crops anticipating the oncoming harvest, although progress could be slow this week with moderate to heavy rainfall across the Corn Belt. Weaker global equity markets occurred overnight to begin the week as anxiety over trade reigns supreme. Grains: Corn and soybean futures fell for the week as traders continue to fear higher supplies. November soybean futures lost 0.3%, to $8.30 1/2 a bushel, Friday at the Chicago Board of Trade. December corn futures finished up 0.4% and December wheat futures finished up 2.9% for the day. Absolutely abundant supplies are the main drivers in corn and soybean price changes. The U.S. Department of Agriculture's forecast of larger production hurt grain futures prices last week. Corn prices took the biggest weekly hit, losing more than $.15 since last Friday's close. The report came during a season when prices already tend to grind lower as farmers harvest their crops. As Hurricane Florence progresses in Southeastern states, traders will be watching to see if the storm causes disruptions to harvest. Analysts say that, while some regions could see flooded fields, any damage to grain crops won't significantly hurt widespread U.S. production. Wheat futures rallied Friday as traders' hopes were renewed for possibly lower Russian wheat exports after the country said it will be doing tougher inspections on exports, which could delay shipments. Russia has been exporting wheat at a rapid pace, and wheat traders are looking for the country to slow down exports. 1

2 Rain is ending in the Carolinas, with severe flooding (mostly ) in central/southeast NC, and northeast SC from Hurricane Florence. The majority of the Midwest was dry with the exception of the far north over the weekend (see left map). Midwest rains arrive into Thu and again early next week, slowing dry down ahead of a drier day period. The wettest weather occurs in MN, northern IA, WI and eastern SD (see 7-day NOAA forecast map right). Rains also expand across the southern Midwest this weekend and favor the southwest Midwest into the Great Lakes late in the 6-10 day period and early day period. Some wheat seeding will occur ahead of late-week rain in the southern Plains. Occasional 6-15 day rain in the northern Delta threaten only minor delays to harvest, with needed drying occurs in the Southeast. Light showers linger today and Friday in the Canadian Prairie, but most notable delays occur in the southern during the 6-10 day period. Widespread frost has dented hopes that wheat growing areas in Australia s west could provide a much-needed boost to output, analysts and traders said on Monday, further tightening supplies amid a prolonged drought. Australia, the world s fourth largest wheat exporter, expects production of its largest rural commodity to hit a 10-year low this season at 19.1mmt as drought across the country s east wilts output. Many private forecasters had pegged production from Western Australia at above the 9.6mmt recently estimated by the country s chief commodity forecaster. But as temperatures plummeted over the weekend and meteorologists warned of further cold weather this week, analysts said estimates were being quickly wound back. Another few frosty nights lie ahead, and the damage will not be able to be assessed for another days. However, a similar frost event in 2016 cut more than 2mmt from Western Australia production. The odds are now strong that WA will harvest a crop less than 10mmt and potentially as low as 9mmt. This would tug total Australian wheat production down to 17-18mmt. Tight supplies from Australia will add to concerns over global shortfalls that helped push benchmark prices to a three-year high last month. Lower production from Western Australia may limit the country s exports. Australia typically ships out more than twothirds of its production, but with drought drying out grazing and crop land across the 2

3 country s east coast, domestic millers and livestock producers are likely to dominate consumption. A gap has emerged in the wheat market between official estimates and those from private commentators, with the USDA in particular facing skepticism over data with surprised investors this week. The USDA Wednesday raised global wheat ending stocks by 3.3mmt vs. private estimates for a 1.4mmt downgrade. The revision reflected an upgrade to the Indian harvest, but more controversially a 3.0mmt increase to the estimate for the Russian crop, and figures for EU and Australian harvests above readings from many other commentators. The USDA s decision to keep the EU wheat harvest at 137.5mmt was in line with an official European Commission figure of 137.6mmt, but ahead of an estimate from influential analysis group Strategie Grains, which on Thursday further lowered its forecast by 900,000mt to 135.0mmt. For Australia, the downgraded their wheat crop 2.0mmt to 20mmt vs. 19.1mmt from official Australian agency ABARES and even further ahead of estimates from some private analysts, especially after frost in Western Australia over the weekend. FC Stone on Thursday pegged the crop at 18.78mmt, while overnight Sydney-based commodities group Ikon pegged the crop at 18.17mmt. For Russia, the USDA s 3.0mmt upgrade to 71.0mmt was possibly the biggest surprise from WASDE. The Russian Grain Union estimated Russian wheat production at 68.0mmt and commented that production could fall further if Siberian weather becomes an issue amidst reports of snow in Siberia and the Urals. SovEcon, the respected Moscow-based analysis group, raised its forecast for this year s Russian wheat crop by 200,000mt to 69.0mmt. Since 1972, there have been 20 years when U.S. Sep corn production gained on August and in those 20 years, Oct production was higher than Sep 16 times. Last year saw a 1.9bpa from Sep to Oct followed by a 3.6bpa increase in Nov. Last year's record estimate was actually more of a surprise, as drought conditions were more threatening in Comments from private crop tours frequently included the word "variability" for a second consecutive year, but judging from USDA's latest report, the caution in those observations was unwarranted. Based on the past 37 years of guessing yields, Wednesday's corn crop estimate has a 90% confidence interval of plus or minus 7.6%, so there is still ample wiggle room in Wednesday's number. If we get back to our main task of trying to understand what corn prices should trade at, given what we currently know, Wednesday's report was more apt to be a good buying opportunity for end users than the start of a new bearish move. Historically, harvest lows for both corn and beans aren t scored till October 2, which is the seasonal average date. I suspect Wednesday's sharp drop in December corn was largely an emotional response of noncommercial liquidation, which will not stand the test of time. Corn producers, however, should not be swayed by Wednesday's report. After six consecutive years of good 3

4 growing weather, it should be no surprise that cash corn prices are low heading into harvest as that's a common seasonal influence. What is not common is USDA estimating lower ending corn stocks in for both the U.S. and the world as times are a changing. Looking back at last year, the Nov 14, 2017 estimated of 175.4bpa eventually went even higher to a final 176.6bpa in January. November's ending stocks estimate was high at billion bushels. The mood for corn was bearish, non-commercials were net-short 125,113 contracts, and the demand outlook was not so good. Six months later, the National Corn Index was at $3.62, boosted by an unexpected drought in Argentina that was not part of the conversation in November. Once again, corn's bearish harvest mood proved temporary, and prices succumbed to their seasonal tendency. In spite of the initial shock of Wednesday's crop estimate, the outlook for corn prices after harvest looks more bullish than it did a year ago. Among the U.S.' top competitors for exports, Ukraine's crop is expected to be up 271mb from a year ago, while the combined production of Brazil and Argentina was down 1 billion bushels in early Until South America can ship more corn again in mid-2019, the U.S. is well-positioned to benefit from increased world demand. Traders continue to ignore that is offering U.S. corn prices the best demand environment since the ethanol boom. Yes, there is plenty of uncertainty ahead, and this is not a justification for $5.00 corn. However, there is plenty of reason to believe that the current bearish mood will not last, and corn's seasonal influence will likely bring higher prices again in the second quarter of RJO s Rich Feltes noted Friday that commercials are sniffing around the long side of the corn market, but also warned that funds still have room to sell more. The trade in the weeks ahead will be carefully monitoring the extent to which end users opt to extend forward coverage during the typical late Sept/early Oct seasonal lows. Floor sources attributed the 6,000 contract gain in Wednesday s corn open interest to a surge in end user pricing amid the unexpectedly sizeable $.13 ¼ break in Dec corn to the lowest level since mid-july. Thursday corn open interest was up another 8,000 contracts as Dec corn posted another new low for the move, closing just above $3.50 Another key factor in determining direction of corn market into Oct-Dec will be fund willingness to expand their existing short (estimated at 122,000 contracts on the close 9/13/18, up 65,000 since the last CFTC report). Recall the corn short last year swelled from 95,000 contracts on 9/5/17 to 231,000 by 11/14/17, triggering a steady decline in Dec 17 of about $.20 to $3.37 vs. the Dec 18 close near $3.50. WASDE s Sept 2017 crop report pegged 9/18 U.S. corn stocks at billion bushels vs. WASDE s Sept 18 crop report forecast for 9/19 U.S. corn stocks at billion bushels. By this metric, further downside in corn may be limited, thus encouraging end users to extend coverage. 4

5 Nonetheless, we think Dec corn upside is limited until the trade gets a more accurate fix on 2018/19 U.S. corn supply which is unlikely until the October 11 th crop report. There is a risk that historically wide soy basis will spawn above average corn sales at harvest, yet another headwind for corn. Additionally, the Dec/July corn board carry is $.27 vs. Nov/July soy board carry of nearly $.50. On the demand front, Palm oil exports for Sep 1-15 were up 79% vs. last month, according to a private cargo surveyor. Brazilian analytical firm Safras and Mercado said Brazilian farmers have solidly increased new crop sales in recent weeks as the Brazilian currency continues to weaken. Farmers have now sold 23% of expected soybean production, more than double last year s pace, but still a bit below the 26% average for this time. They also said new crop corn sales in the largest producing state of Mato Grosso increased 10% in August, with 24% of the upcoming new crop now sold. U.S. new crop corn sales are at 15.2mmt vs. 10.5mmt last year, new crop soy sales are at 17.0mmt vs.17.0mmt last year, while wheat sales are at 9.7mmt vs. 12.7mmt last year. NOPA this afternoon is expected to report Aug crush at mb (record if realized) vs mb in July, along with oil stocks of billion lbs. vs at the end of July and at the end of Aug An auction of Chinese state reserves saw 1.026mmt of corn sold on Friday, totaling 25.69% of the amount offered. Friday s CFTC report showed that managed funds in corn, beans, meal, oil and wheat were net short 181,000 contracts vs. 143,000 short last week. The managed fund corn short was up 7,000 contracts at 63,000 short, the soybean short was up 6,000 contracts to 68,000, the wheat long was down 24,000 contracts to 18,000, the soybean oil short was up 9,000 contracts at 97,000 and the meal long was up 9,000 contracts to 30,000. The wheat long was smaller than expected. The soybean short was the most bearish since January. Hogs: Cash hogs are called steady to $1 higher, with packers starting to focus on potential long-term supplies heading through the end of the year. Plant runs are expected at 440,000 head through the day Monday. The national bid lost $.30 on Friday to close at $48.96, while the IA/MN bid lost $1.54 to close at $ The CME Lean Hog Index was up $1.49 on September 12 th to $ It appears the seasonal bottom is in place, with a second risk period in late October or November. The USDA pork carcass cutout value was $3.48 higher at $74.53 on slow movement of 221 loads. The belly was up $7.66, and all other cuts reported higher. Pork cutout values continued to 5

6 firm through the month of September, with domestic movement of pork remaining strong following the Labor Day holiday. Pork values have hit their highest level since July 31 st. Estimated packer margins were $46.44/head for non-integrators and $24.58/head for integrators vs. $37.95 and $18.00 the previous day. Weekly kill was off 5.9% vs. last year, with pork production off 7.3%. Long-term impacts of Hurricane Florence have not yet fully been assessed to the hog industry in North Carolina and through the East Coast. This may take days to weeks in order to fully understand what short- and long-term impact this will have on the industry as a whole. Bloomberg says that the Smithfield Tar Heel plant, which was shuttered ahead of the storm, was not damaged and "production schedules would be announced based on employee safety." Once the NC plants come back online, we could see a period of elevated slaughters and heavy hogs hit the market. Lean hog futures activity is expected to remain firm, but the overall focus on outside market shifts and the potential to maintain narrow trading ranges over the next few days has limited aggressive activity through the entire complex. Additional market direction is expected through the entire complex following firm market support in nearby contracts. Firm gains developed through the lean hog complex Friday. There has been increased support through the entire livestock trade Friday (0.10 lower to $0.72 higher). Continued firm market support in cash trade as well as underlying aggressive support trickling into the complex from the cattle market has sparked increased overall support in nearby contracts. This may add even more support to the complex as traders look for more activity late in the month. Pork values have surged higher Friday afternoon with increased overall support developing across the primal market. Livestock futures rallied Friday as Hurricane Florence made landfall and swine disease outbreaks continue abroad. CME hog futures gained 1% to $56.22, while cattle futures rose 2.7%. African swine fever has been detected in Europe after outbreaks in China, threatening the countries' hog industries. Analysts say Hurricane Florence could also affect meat processing in the region, though hog death loss is not expected have any significant impact on the industry. Following the sharp rally seen in early September, buyer support in lean hog futures has stalled out and is hovering in a narrow range near the top of these levels. This could lead to additional volatility in the near future. Cattle futures are expected to remain mixed, with a combination of position taking and follow-through buying. This could set the tone for the market over the next couple of days. Expect early trade to remain light, although the higher move last week should spark some additional long-term market support. Limit gains developed in October live cattle futures Friday as commercial buyer support moved back into the complex ($0.60 to $3.00 higher). Sharp underlying support moved back into the entire cattle market with prices quickly surpassing short-term resistance levels of $112 early Friday morning. 6

7 Despite the limited trade in most commodity markets, prices remained unchecked with October futures surging to $ after posting daily limit gains of $3. Beef cutouts were mixed, $0.77 lower (select, $196.47) and up $0.23 (choice, $204.27) with light demand and offerings. Strong triple-digit gains developed late in the week ($1.77 to $3.47 higher). The aggressive move higher in live cattle futures as prices have broken out of the long-trending sideways action, has sparked widespread buyer activity through the entire complex, including feeders. This may add even more support early next week with more volume moving back to all commodity markets. Limited cash cattle trade developed late last week with prices holding a wide range, but mostly around $110 live and $175 dressed. This is as much as $5 higher than the previous week based on the aggressive surge higher in futures trade Friday. October futures hit daily limits, pushing prices to nearly $114 as traders continue to focus on breaking out of the long standing sideways trend seen through the summer months. France called on Thursday for protective measures following reports that African swine fever had been detected in wild boars in Belgium near the French border. "The confirmation today of the presence of the virus in Belgium (in the west of the EU) represents a new progression of the disease, which requires an adequate response given the considerable economic interests at stake for the French agri-food chain," the farm ministry said in a statement. The finding of ASF in Belgium will impact exports from this country to China but likely have little impact on EU pork exports. Where it would be more problematic is if the disease is found within borders of major producers since that would likely lead to automatic closure of export access to major markets in Asia. For now, market participants are right to be concerned about prospects for global pork trade in 2019 and big shifts in demand from other market to another. Two new cases of ASF were reported in China late Friday. A province in southern China is scrambling to find supplies of pork as the spread of African swine fever shuts down the transport of live hogs from major producers and threatens shortages of the country's favorite meat. Pork prices in the country's populous south have risen as China's vast pig market is locked down in the fight against the highly contagious African swine fever. To give you some idea just how important pork is in China, about 1/3 rd of their consumer price index, a measure of inflation, is tied to pork prices! Scientists warn that the worst thing you can do when trying to contain an infectious disease is lie and coverup the truth. Combined with the fact that biosecurity in China isn t nearly as advanced as it is in other, major pork producing nations leads me to believe the ASF outbreak won t be contained easily. The ruling Chinese Communist Party is clamping down on any public discussion of an outbreak of African swine fever among its pig population, shutting down social media accounts and detaining users who warn others not to eat pork. Ren Ruihong, former head of the medical assistance 7

8 department at the Chinese Red Cross, said Chinese officials regard information about disease outbreaks and epidemics as a state secret. "There is a total blackout on this right now; they are just not reporting it," Ren told RFA. "They are now detaining people for talking about this; you can't even talk about it on WeChat." Ren said some people fear that African swine flu could mutate to a form that could infect, and be transmittable between, humans. "That was the case with Severe Acute Respiratory Syndrome (SARS)... so isolation is the safest form of prevention," Ren said. China's public health procedures came under intense scrutiny after an official attempt to cover up the extent of the deadly SARS epidemic of 2003 was exposed by a military doctor in Beijing. SARS spread from the southern Chinese province of Guangdong to other Asian countries and by the summer of 2003, when the disease was contained, more than 8,000 people had been infected and more than 900 had died, according to the World Health Organization. The doctor was detained for several months in 2004 at an undisclosed location, while editors at a newspaper in the southern province of Guangdong that broke news about the SARS virus were also harassed and detained. Ren said the current epidemic may have already spread far beyond the cities indicated in official reports. "Judging by the current speed that it is spreading, it should have reached many cities by now, but they may just not be saying anything," Ren said. "If it gets to Sichuan, that would be terrible, because it will mean that the entire Chinese pig supply chain is unsalvageable." An official at the Ministry of Agriculture denied that the epidemic had spread further than had been officially reported. Authorities have reported 13 outbreaks across the country since last month. Weather: The U.S. and European models are in good agreement over the eastern and the south-central U.S. region during the outlook period, fair to good agreement otherwise. The heights aloft continue near to above normal during the outlook period east of the Miss river and near to below normal west of the river, with well below normal heights aloft for a time over the northern Rockies, the northwest Plains and the southwest Canadian Prairies. Cool or very cool surface high pressure systems run west to east mainly in Canada, possibly in the northern U.S. early in the outlook period. Later in the period, there is some risk of heavier precipitation due to the formation of a surface storm over the northeast Plains and east Canadian Prairies. This is more evident on the European model as the U.S. model is faster and weaker with this low/trough. This is an uncertain forecast as it is fairly late in the period and not supported by the mean of the European model ensemble run. The central and southern Plains region features enhanced chances for rain prior to the 6 to 10 day outlook due to moisture and a disturbance that tracks from Baja through northwest Mexico before merging with an upper level trough over the central/south Plains area. As the 6-10 day period begins this trough/low is moving away from the region and drier weather should follow. The 8

9 Midwest region will deal with this tropical enhanced moisture during the first day or two of the outlook period. This is some disagreement as to where the heaviest rains will occur in the Midwest with this system. The European model suggests further north and west than what the National Weather service is predicting and much further north and west than the U.S. model would imply. After this system moves by it should be drier, although cold fronts moving in from the northwest may mean showers in the northwest and north belt at times. Global Weather Highlights: Mainly dry, warm to hot weather continues in the Delta this week. This should favor mature crops and crop harvests as well as winter wheat planting. Recent warm, dry weather in the Midwest will have favored mature crops and harvesting. Showers and thunderstorms return to the northwest and north-central areas early this week leading to likely harvests delays. Rainfall may become more widespread later in the week or during the coming weekend. The northern Plains sees mostly favorable weather for maturing crops and harvesting of corn and soybeans during the next 5 days. Recent, drier and hotter weather in the central/southern Plains has likely dried soils somewhat for planting winter wheat. However, there appears to be a good chance for beneficial rainfall occurring later this week. The Canadian Prairie saw showers, rain and some snow during the weekend, with colder temperatures in western and northern growing areas. Precipitation may cause delays, at times, to the harvest of wheat and canola while improving soil moisture for planting winter grains. Northwest Canada remains colder at this time. There is some chance that this cold will move south into the Prairies region at times during the next 10 days. The region will also see more moderate precipitation later this week. Global Weather Highlights: Frost and a light freeze in China was reported early last week in the area of Heilongjiang northwest of Harbin. Late maturing soybeans in the area may be somewhat at risk due to this cold weather. Showers occur at the end of the week mainly in the northwest. Some risk for heavier rain and more cool to cold weather occurs later this week, unfavorable for maturing soybeans and early harvesting. Recent rainfall in eastern Australia has helped ease drought conditions in the area. This is likely too late to significantly improve prospects for winter wheat. Rainfall improves soil moisture and builds irrigation for planting cotton and sorghum, however much more rain is needed. The region continues mainly dry during the next 7 days. The monsoon has picked up again since late last week but mainly over southern India. This will favor south India crop areas while key west-central growing areas are currently drier and hotter. Models suggest some chance for a westward moving disturbance to bring rain to the north Maharashtra, west Madhya Pradesh, Gujarat areas at the end of this week. This will be watched as late monsoon rains would provide a welcome boost to soil moisture and irrigation in the area. Moderate to heavy showers and thunderstorms occurred early 9

10 last week in South Ukraine, the southern portion of east Ukraine, the southern portion of Central Ukraine and the western portion of South Russia. Rain in these areas will help recharge soil moisture for planting winter grains while causing some delay to the planting effort and the harvest effort for corn and sunflower. Light to moderate showers occur during the weekend in western and southern Ukraine and south Russia. Macros: The macro markets were lightly mixed as of 8:30am EDT, with Dow futures down 0.1%, the U.S. dollar index is down 0.4%, crude oil is up 0.8% and gold is up 0.1%. The S&P 500 on Friday posted a 2-week high and closed 0.53% higher. The DJIA gained 0.57% while the Nasdaq 100 gained 0.98%. Bullish factors included the University of Michigan U.S. Sep consumer sentiment report of +4.6 to a 6-month high of 100.8, stronger than expectations of +0.4 to 96.6, and strength in energy stocks as crude oil prices rose 0.58%. Bearish factors included the U.S. Aug retail sales report of +0.1% and +0.3% ex autos, weaker than expectations of +0.4% and +0.5% ex autos, and heightened trade tensions on reports that President Trump instructed aides to proceed with tariffs on $200 billion of Chinese products despite the resumption of trade talks with China. The U.S. markets this week will focus on trade tensions, with reports that the Trump administration on Monday or Tuesday will announce the implementations of tariffs on another $200 billion of Chinese goods even though U.S./Chinese trade talks are scheduled for the next two weeks, Washington politics as Congress races to pass spending bills to avert a government shutdown on Oct 1 and with the Kavanaugh nomination to the Supreme Court dominating Senate attention, anticipation of next week's FOMC meeting, which is unanimously expected to produce a 25 basis point rate hike to 2.00%/2.25%, a light earning week with only 10 of the S&P 500 companies schedule to report including notable reports such as FedEx and Oracle on Monday and Lennar on Tuesday, quadruple witching day for the U.S. stock market on Friday, and oil prices ahead of the OPEC and the Joint Technical Committee meeting on Saturday in Algiers. This week's U.S. economic calendar is relatively light and is dominated by housing reports and Wednesday's Q2 current account deficit (expected narrower at -$103.3 billion vs Q1's $124.1 billion). In Europe, the focus is on the informal EU summit on Wed/Thu in Salzburg where leaders will discuss Brexit and also the migration issues that are critical for Italy's cooperation in the EU. Friday's Eurozone flash Sep Markit manufacturing PMI is expected to show a 0.1 point decline to 54.5, 10

11 adding to Aug's 0.5 point drop. In Asia, attention will mainly focus on U.S./China trade tensions and whether the U.S. goes ahead with tariffs on another $200 billion of Chinese goods. Meanwhile, trade talks continue on other key fronts. On NAFTA, the U.S. and Mexico are ironing out the text of their bilateral trade agreement, which must be presented to Congress by Oct 1. Trade talks are continuing between the U.S. and Canada on a revised NAFTA agreement with reports emerging that protections for the Canadian dairy industry remain a key sticking point. The deadline for US/ Canadian talks is only two weeks away on Oct 1. Global markets were mostly lower Monday following reports that President Donald Trump will place tariffs on $200 billion more in Chinese goods, despite a possible meeting to iron out tensions between the world's two largest economies. In Europe, France's CAC 40 fell 0.4 percent to 5, while the DAX in Germany dropped 0.5 percent to 12, Britain's FTSE 100 declined 0.3 percent to 7, Wall Street was set for a muted open. Dow futures fell less than 0.1 percent to 26, S&P 500 futures shed 0.1 percent to 2, South Korea's Kospi fell 0.7 percent to 2, and Hong Kong's Hang Seng index tumbled 1.3 percent to 26, The Shanghai Composite index lost 1.1 percent to 2, But Australia's S&P/ASX 200 rose 0.3 percent to 6, Japanese markets were closed for a national holiday. Stocks fell in Taiwan and most of Southeast Asia. The Wall Street Journal reported over the weekend that Trump was going ahead with plans to impose new tariffs on about $200 billion of Chinese imports. The report cited unnamed people familiar with the matter who said the tariff level will likely be set at about 10 percent, below the 25 percent announced earlier this year. At the same time, U.S. officials, led by Treasury Secretary Steven Mnuchin, are preparing to hold new talks on the tariff dispute with Beijing. Envoys met last month in Washington but reported no progress. Fears that Hurricane Florence may disrupt supply on the U.S. East Coast boosted oil prices. Benchmark U.S. crude added 51 cents to $69.50 a barrel on Monday. The contract added 0.6 percent to settle at $68.99 a barrel in New York. Brent crude, used to price international oils, gained 47 cents to $78.56 a barrel. It shed 0.1 percent to $78.09 a barrel in London. The dollar eased to yen from yen. The euro strengthened to $ from $ Summary: For the week, December corn closed down $.15 ¼, November soybeans were down $.13 ½ and December Chicago wheat was up ¼ cent. December corn ended up Friday, a quiet finish to a week that lost $.15 ¼ after the USDA increased its corn crop estimate to billion bushels on Wednesday. Almost half of North Carolina's 106mb corn crop was harvested before Florence arrived, but the rest is at risk from high winds and flooding. Meanwhile, crops are drying down across the Midwest, which is helpful to harvest conditions before rain chances increase early next week, especially in the north-central Midwest. This week's higher crop estimate from USDA will take some 11

12 time for the market to digest as we work through harvest, but after harvest, the demand outlook for U.S. corn is better than it has been in several years. For now, the trend in December corn remains sideways. November soybeans ended lower Friday in light trading after the USDA increased its U.S. soybean crop estimate to a new record high of 4.69 billion bushels on Wednesday. As bearish as that is, coming on the heels of a record soybean crop in Brazil earlier this year, November soybean prices are showing signs of inelasticity, a possible early hint of support at November prices near their lowest levels in ten years. While Hurricane Florence has our attention in North Carolina, the Midwest is enjoying favorable harvest weather and the soybean harvest is likely to make early progress the next several days before increased chances for rain appear early next week. The big unknown factor for U.S. soybean prices in continues to be demand and the first week of the new season started with total sales and shipments roughly even with a year ago. Bloomberg News reported Friday that President Trump instructed his aides to proceed with $200 billion of new tariffs against Chinese goods, keeping the pressure on in spite of this week's earlier news of trade talks resuming. For now, November soybean prices continue to experience harvest pressure yet, the trend remains sideways. December Chicago wheat closed up Friday, possibly finding support near the low end of its seven-month trading range as prices continue to vacillate between roughly $5.00 and $6.00. For the entire week, the December contract was up a tick, surviving any bearish effects it received from Wednesday's WASDE report. Winter wheat planting is just getting started in the U.S. and the seven-day forecast is mostly favorable with heavy rain expected in southern Texas, but lighter amounts elsewhere around the southwestern Plains. For now, the trends in all three wheats remain sideways and erratic. November soybeans edged to a slightly weaker close Friday and also marked out declines on the weekly chart. The near and intermediate-term November soybean trends are bearish. But, for now, November beans are holding just above key support at $8.26 1/4-$8.21 1/4, the July 16 and Sept. 12 lows, respectively. The bean market dipped briefly below the $8.25 level last week, but buyers emerged to the support the market on the decline. Bigger picture, the multi-month trend off the late May high at $ /2 remains bearish. However, the burden lies on the bears to definitively break that support zone to open the door to a new selling wave. The weekly continuation chart shows minor support at $8.10 1/2 and the $8.00 would serve as a psychological objective for bean bears. On the upside, the 10-day moving average is first resistance and beyond there the $8.51 1/2 high from Sept. 4 is secondary resistance. As long as that latter level remains intact, bean bears will retain the short-term technical edge. December corn edged to a marginally firmer close Friday, after consolidating in a tight-range, inside day session. The near and intermediate-term December corn trends point down, but for now the market is hovering just above support at $3.48 3/4. The corn contract posted a 12

13 steep mid-week decline last week and short-term backing and filling is not a surprise. On the upside, minor resistance lies at $3.55 1/2-$3.55 3/4. On the downside, sustained declines below the $3.48 3/4 level would leave December corn vulnerable to a fresh selling wave with potential targets at $3.35 1/2 and then $3.29 3/4, weekly corn continuation chart lows from December 2017 and July 2018, respectively. A/C Trading Co. does not accept orders to buy or sell by , text or any other form of social media. This material has been prepared by a sales or trading employee or agent of A/C Trading Co. and is, or is in the nature of, a solicitation. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions. DISTRIBUTION IN SOME JURISDICTIONS MAY BE PROHIBITED OR RESTRICTED BY LAW. PERSONS IN POSSESSION OF THIS COMMUNICATION INDIRECTLY SHOULD INFORM THEMSELVES ABOUT AND OBSERVE ANY SUCH PROHIBITION OR RESTRICTIONS. TO THE EXTENT THAT YOU HAVE RECEIVED THIS COMMUNICATION INDIRECTLY AND SOLICITATIONS ARE PROHIBITED IN YOUR JURISDICTION WITHOUT REGISTRATION, THE MARKET COMMENTARY IN THIS COMMUNICATION SHOULD NOT BE CONSIDERED A SOLICITATION. The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that A/C Trading Co. believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. 13