Daily Grain / Hogs Marketing Outlook Written by: Jim Gerlach 9/18/2018

Transcription

1 Daily Grain / Hogs Marketing Outlook Written by: Jim Gerlach 9/18/2018 Early Call 8:45am EDT: Corn down $.01, soybeans down $.03, wheat up $.07. Outside commodities and row crops were mixed to lower overnight, enduring steady bearish pressure as harvest season is underway. Major stock markets are higher in spite of a new round of 10% U.S. tariffs against $200 billion of Chinese goods which are set to go to 25% by the end of this year. Grains: Grain futures started the week lower as traders awaited tariff developments between the U.S. and China, the world's largest soybean consumer. November soybean futures finished down 0.8% to $8.23 1/2 a bushel Monday at the Chicago Board of Trade. December corn futures fell 1.1%, and December wheat futures fell 1%. The Trump administration has announced its plans to enact additional tariffs on $200 billion of Chinese goods, and China, the largest consumer of American soybeans, is expected to retaliate. China first introduced retaliatory tariffs on U.S. goods earlier this year and shifted its soybean business elsewhere. It's a waiting game to see how the countries are going to react and people are getting exhausted by it. Amid the trade uncertainty, strong domestic demand for soybeans to crush into meal has supported soybean prices. The National Oilseed Processors Association said Monday that U.S. soybean processors crushed 158.9mb of soybeans in August, up from the same time a year earlier but less than analysts were expecting. It was the highest on record for August. Meanwhile, any flood damage that tropical storm Florence could bring to grain crops in the Southeastern states will likely be minor, experts said. Flooding has typically been in low-lying areas that would often not be farmed. 1

2 Showers yesterday favored SD, southern MN and western WI (see left map). The heaviest rains this week occur through Thursday, with locally 2-6 in northern IA, southern MN, southeast SD and western WI (see 7-day NOAA forecast map right). Northwestern Midwest rains Mon-Tue also slow down harvest but will breaks this weekend and the rest of the week limit concerns. Weekend rains return to the far southern Midwest/northern Delta but ease by the day period with cooler air. Light frost is possible in ND/MN by month s end, which is near typical timing for frost and won t mean much with this year s crop advanced. Notable southern Plains rainfall late this week aids early wheat germination. Late month showers return to flooded sections of NC. Canada s harvest slows Thu-Sun, wettest in the south before turning drier. In its first soybean harvest report of the season, USDA's National Ag Statistics Service estimated that 6% of the U.S. crop was harvested as of Sunday, Sept. 16, 3% ahead of the five-year average, according to the agency's weekly Crop Progress report released Monday. This year's soybean harvest progress is also 2% ahead of 4% at the same time last year. Nationwide, the crop continued to mature ahead of normal with 53% of soybeans estimated to be dropping leaves, 17% ahead of the average pace of 36%. The crop's good-to-excellent rating dropped to 67% last week, down 1% from 68% the 2

3 previous week. The U.S. corn harvest also continued at an ahead-of-normal pace with an estimated 9% of the crop harvested as of Sunday, 2% ahead of last year and 3% ahead of the five-year average. The crop continued to mature ahead of normal with 54% of corn estimated as mature as of Sunday, 18% ahead of the five-year average of 36%. Corn condition, at 68% good to excellent, was unchanged from the previous week. Meanwhile, winter wheat planting progress was estimated at 13% as of Sunday, near last year's pace of 12% and also near the five-year average of 14%. Spring wheat harvest had nearly wrapped up with 97% of the crop harvested as of Sunday, near last year's 98% but ahead of the five-year average of 92%. Highlights of RJO weekly crop roundup included a week of warm/dry weather pushing crops rapidly to maturity/dry down. Soy yields are exceeding expectations and the prior year record. High silage yields suggest big corn yields. Corn yields in the eastern Midwest are improving as harvest advances. Historically low (and still eroding corn/soybean basis) is encouraging farmers to hold. Forced selling of excess harvest bushels on small rallies will exceed expectations. Harvest pace ramps up considerably next week, weather permitting. IN commentator was surprised at soy yields, 60bpa and many over 70bpa, IL is seeing 70-80bpa soybeans. MN corn/soybean river basis is -.62 Dec and Nov, respectively, while processors are at -.42 Dec and -.65 Nov. Delta soy basis is -.60 Nov, an unheard of low. Farmers are hoping for quick resolution of the U.S./China trade flap. There was another light frost across southeast Australia overnight, with lows dipping near 30 degrees. Producers claim that repeated frost events have impacted yield, it s just a question of amount. Australian weather forecasts offers no rain for next days, which only deepens the drought. September is the key timeframe for moisture and most private Aussie wheat crop estimates have slipped to 16-18mmt vs. the USDA at 20mmt. A frost/freeze in Western Australia over the weekend is thought to have damaged both wheat and barley, with the greatest damage occurring in barley, with some putting losses at 500,000-1mmt. The slow development of the wheat crop may have saved the crop from sustaining more damage as it is said to be not heading yet in many locations, but as is the case with any frost/freeze event, it will take weeks to ascertain damage. Harvesting of corn is getting off to an early start in the European Union and analysts expect severe summer heat and drought to have hurt yields in countries like France and Germany, contributing to record import demand. Analyst firm Strategie Grains on Thursday cut its monthly forecast for the EU's corn harvest by nearly 5%. Chinese officials in the province of Heilongjiang expect losses of about 275,000mt of soybeans due to frost. The USDA s current estimate for all of China is 15.0mmt. 3

4 A look above at the 5/10/15- year seasonal patterns for CBOT soybeans shows the time for a seasonal bottom approaching in early October, but also shows a market vulnerable to some additional downside ahead of that point. However, yields continue to impress, basis is weak, Trump shows no signs of back down on tariffs, the Chinese show no signs of caving to U.S. demands, futures are sitting near contract lows, and seasonal price trends stay weak into early October. Record U.S. yields will more than likely combine with a large increase in South American planting/production, pumping world soybean supplies to very burdensome levels. The job of the U.S. bean market is to discourage acres/production next spring to prevent supplies from ballooning further. Seasonals are great to trade during normal years, but this year is far from normal for soybeans. In fact, I would say when you combine record U.S./global stocks and stocks/use, China s embargo against U.S. soybeans and Argentina s drought (nearly 50% of the global trade in meal/oil), this year is the most atypical year I can remember. On the demand front, Malaysian palm oil futures dropped 2.2% to a nearly 3-week low Tuesday, pulled down by weaker competing oils. Market sentiment was further weakened by intensifying trade tensions between the U.S. and China, with most investors staying on sidelines. However, improvement in export demand gives a ray of hope. Malaysian palm oil exports for Sep 1-15 were up 92.4% vs. a month ago, according to a private cargo surveying company. The Gulf spot soybean offer this morning is $.05 over November futures while Brazil is $2.55 over for a $2.50 Brazilian premium. This amounts to a 30% premium for Brazilian soybeans or 5% more than the existing tariff. U.S. Gulf soybean basis (CIF) went negative for first time in 10-years as supply grows and the trade dispute with China continues and right on time, the USDA reported a 241,000mt sale of 2018/19 soybeans to an unknown yesterday morning. There s also talk that Argentina may have bought 8-10 cargoes of U.S. soybeans last week. Corn CIF premiums were weaker for September and unchanged for October. Saudi Arabia ended up buying 630,000mt of optional origin wheat in their recent tender. Analytical firm SovEcon pegged Russian wheat exports in August at 4.6mmt, putting July-Aug marketing year to date exports at 8.4mmt, with Sep wheat exports estimated at 4.0mmt. Global wheat prices are expected to be on average 9% higher in the year ended June 30, 2019 than they are this year as lower wheat production is forecast in major exporting and importing countries, which will reduce the supply of wheat in the world markets, the Australian Government said in a quarterly report. However, it added that 4

5 the world indicator price is expected to remain well below the 10-year average. Egypt is looking to secure wheat for two deliveries between Nov 1-10 and Nov 11-20, with results expected Tuesday. The National Oilseed Processors Association says U.S. soybean processors crushed 158.9mb of soybeans in August, up from the same time a year earlier but less than analysts were expecting. It was the highest on record for August. Soy oil stocks at the end of August were well below estimates at billion pounds. Two Iowa ethanol plants are making plans to close because of poor margins from escalating trade disputes which cut off U.S. access to ethanol markets with China. A third plant in Minnesota is expected to cut back on production for the same reason. U.S. corn exports for the week ended 9/13/18 were 40.6mb, up from the previous week's 30.8mb. Now two weeks into the 2018/19 marketing year, cumulative exports of 67mb compare to last year's 54mb at this time, while weekly shipments will need to average roughly 44mb/week in order to reach the USDA's billion bushel export projection, right in line with average weekly exports last year. U.S. soybean exports last week of 28.8mb were down modestly from the previous week's 34.0mb and were below last year's same-week exports of 34.3mb. Through two weeks of 2018/19, cumulative exports of 60mb compare to last year's 75mb at this time. After two more weeks of modest exports last year, they quickly accelerated in seasonal fashion and averaged 73mb during the following 11 weeks from early October through mid-december. How this year's soybean exports run relative to last year during the typical very strong threemonth stretch in the absence of Chinese shipments will be very interesting to watch. Soybean exports will need to average roughly 39mb/week in order to reach the USDA's billion bushel export projection vs. last year's 39.8 million/week average. Hogs: Cash hogs are called $1 lower to $1 higher. Most bids are expected steady early Tuesday, with an estimated processing schedule of 420,000 head. Given the flooding issues seen across the East Coast following Florence, pork processing schedules continue to be reduced with the expectations that this will return to normal in the future, but not as quickly as some would like. Getting hogs to market continues and moving from one area to another continues to be the main issue due to the flooding. This may continue through much of the week until flood waters recede. The national bid gained $1.80 Monday to close at $50.59, while the IA/MN bid gained $2.74 to close at $ The CME Lean Hog Index was up $1.77 on September 13 th to $ The USDA pork carcass cutout value was $1.49 higher at $76.02 on average movement of 238 loads. Triple-digit gains in most pork primal cuts Monday has rekindled the focus on strong pork fundamentals. This continues to help spark additional support through the month of September. Estimated packer margins were $44.31/head for non-integrators and $27.85/head for integrators vs. $46.44 and $24.58 the previous day. Monday s kill was down 7.14% vs. last year. 5

6 Hog futures are expected to be mixed early Tuesday following the strong market pressure seen Monday. December contracts seem to have been establishing a $3 trading range through the month of September, which could help to contain the market for the time being. Livestock futures ended mixed Monday after last week's rally on news of growing swine disease outbreaks abroad. CME hog futures rose 0.4% and cattle futures fell 0.3%. Experts say traders are watching for disruption of slaughter at hog processors in the Carolinas in the wake of tropical storm Florence, which could put pressure on prices. It doesn't look like we'll see a lot of loss of life of hogs as it's one that they're were well prepared for. Strong pressure developed across lean hog futures, allowing for increased overall pressure in most contracts ($1.52 lower to $0.22 higher). Sharp tripledigit losses flooded into December and February contracts, with increased pressure seen through the rest of the complex. Although the aggressive pressure of $2.50 seen early in the morning Monday did not hold through the rest of the session, traders focused on the overall lack of buyer interest in the market early in the week. This is creating additional market pressure through the entire market, as prices are coming off short-term highs set last week. This could shift the lean hog futures into a short-term sideways trend, with price ranges generally wide. Strong market support developed in pork cutout values following triple digit gains in all primals except loins and butts. African Swine Fever was found again on Monday on a farm in northern China's Inner Mongolia, the second in the region, as the highly contagious disease continues to spread rapidly across the world's top producer of pigs. This case is China's 16 th since early August and comes despite a series of tough new rules announced by Beijing last week to tackle the spread. The cattle futures trade is expected to remain generally firm following the strong underlying support that flooded back into the market late last week. But the question of market activity will limit the overall to develop and sustain increased trade activity with traders looking for additional longer-term support through the end of the month. Live cattle futures closed mostly higher Monday after early morning pressure ($0.37 lower to $0.40 higher). Limited trade was seen through the entire complex as traders seem content with the market surge seen Friday and willing to allow prices to hover in this higher trading range. There was little to no additional technical or fundamental direction with front month October futures leading the market lower with a $.37 loss. All other nearby contracts traded $.02 to $.40 higher with increased long-term focus on the ability to advance beef prices. Beef cutouts were higher, $0.91 higher (select, $197.38) and up $1.77 (choice, $206.04) with good demand and light offerings. Cash cattle activity remained sluggish Monday afternoon with bids and asking prices still undeveloped. It is likely that cash market interest may not become active until midweek or later. Although cash market trade remained sluggish last week, formulated sales increased. Generally, show lists seen Monday are mixed to mostly larger than the previous week. Sharp gains 6

7 seen Friday have allowed for feeder cattle market apathy following a combination of position taking and follow through buying to trickle into the market. Overall volume remains sluggish, allowing for additional firmness in early 2016 contract months. The focus on sparking additional activity through the end of the year and early 2019 is split between firm support in live cattle trade and follow through pressure in grain trade. On the last day of August, spot market hog prices averaged $36.57, which was less than half of what they were two months earlier. Aug 31 hog prices were the lowest for any day since Oct 31, Hog prices have recovered a bit from their sharp drop in July and August. Negotiated hog prices moved up to average $41.28 on Sept. 7 and $49.26 on Sept. 13. Hopefully, the week ahead will bring a further price increase. If hog prices follow the pattern of 2017, the low for the year could be behind us. The 2017 low in hog prices came on Sept 28 at $ The annual low for hog prices usually comes late in the year. The primary reason being that hog slaughter has been highest in the fourth quarter for every year since Calculations by Lee Schulz at Iowa State University peg farrow to finish losses at $40.71 per head marketed during August. That is down from a profit of $10.82 per head in July and the worst red ink since March Schulz estimates the cost of production for August at $62.47 (carcass) or $46.86 (live). Cost of production is likely to decline slightly during harvest. Weather: The U.S. and European models are in fair agreement during the outlook period. The European model is somewhat faster moving an upper level trough and surface cold front through the Midwest region early in the period, which brings the cooler weather in sooner but also allows for a warm up again late in the period. The U.S. model is warmer early in the period but cooler to somewhat colder later due to the slower movement of this trough/surface cold front. The European model ensemble run is slower like the U.S. model but not as deep overall with the trough/surface cold front. Prior to the 6-10 day period, the European model has more rain further north in the central/south Plains region and also over the southwest and central Midwest region. Neither model has the rainfall as far north as the National weather service is forecasting for the central/south Plains or Midwest regions during this period (Friday into Saturday). This rainfall is likely being enhanced by tropical moisture coming in from the Baja region of the Pacific earlier in this period. The European model ensemble run does feature more rain into the south Kansas areas during this period, which is likely the reason for the further north placement of the rain used by the NWS. I would tend to side with this idea in the southern Plains region, but am not certain this rain would carry across to the southwest and central Midwest areas, as the NWS is forecasting as it might come in further south. 7

8 Rains associated with the remnants of Florence brought totals of to the eastern ½ of OH yesterday. Another area of rains developed in central MN late yesterday and brought totals of to areas there. Dry weather dominated the rest of the Midwest region yesterday and temps remained well above average, with highs in the 80 s in most cases and some low 90 s in the west and south. Low were only in the 60 s in most cases. The forecast sees things getting wetter across the region and slowing harvest activity. A front will bring fairly soaking rains to most areas north of a line from around Kansas City to Chicago to Detroit the rest of this week. The rest of the region will stay mostly dry through the week ahead. The weekend and early part of next week sees a pair of weather systems to bring fairly widespread and soaking rains to most of the region. Temps will run in the 80 s and even some low 90 s for another day or two, but then cool into the 60 s and 70 s in the north, with 70 s and 80 s in the south. Readings then look to hold those levels for the rest of the week, the weekend and early next week. Lows will be dropping off into the 40 s and 50 s in the north, with 50 s and 60 s in the south. By early next week, a punch of colder air could bring the chance for some frost or even a freeze to the eastern Dakotas and western MN. No cold air threats are seen for the rest of the region through Sept 27 th at least. Things were mainly dry across the central/southern Plains region yesterday. Temps ran in the 90 s for highs, with lows in the 60 s and 70 s. The forecast sees mainly dry weather to hang on across most of the region through tomorrow and then the tail end of a cold front will bring fairly widespread rains to the region Thursday-Saturday. Some off and on showers and thunderstorms will bring some light to moderate rains to much of the region in the 6-10 day period as well. Temps will be running above average across the southern Plains through much of the next week to ten days, with highs in the 80 s and 90 s. The day forecast now sees an upper air trough to result in below average temps in most of the Midwest and eastern Plains, including chances for a frost or even freezing temps down to I-80 in the Midwest by around the first of October. Precip would run near average in most of the Midwest and southern Plains. North American Weather Highlights: The Delta will be mainly dry, with warm to hot weather continuing 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 during the next 1-3 days leading to likely harvests delays. Rainfall may shift into southern and east-central areas at the end of this week. There are no significant concerns for maturing crops and harvesting of corn and soybeans in the northern Plains during the next 5 days, although delays may occur at times due to passing showers. 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 or during the weekend. 8

9 Showers, rain and some snow occurred in the Canadian Prairie during the weekend. Colder temperatures occur 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 cold 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 was reported in China 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. Some risk for heavier rain and more cool to cold weather occurs at the end of this week, unfavorable for maturing soybeans and early harvesting. Drought, dryness and low irrigation in Australia has significantly impacted wheat in northern New South Wales and southern Queensland this season and if the pattern does not change soon this will also impact sorghum and cotton. Frost and freeze conditions in southern West Australia during the weekend and in southeast areas of Australia early this week is unfavorable for wheat, especially reproductive wheat. Reports suggest that barley in southwest Australia may have been impacted much more than wheat since not much of the wheat was flowering at the time of the coldest readings. The monsoon has picked up again since late last week but mainly over southern India. This will favor south India crop areas while key westcentral 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, east Gujarat areas at the end of this week or during the weekend. 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 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 sunflowers. Light to moderate showers will occur during the weekend in western and southern Ukraine and south Russia. Macros: The macro markets were mixed as of 8:30am EDT, with Dow futures up 0.3%, the U.S. dollar index is unchanged, crude oil is up 1.3% and gold is up 0.1%. The S&P 500 on Monday closed 0.56% lower, the DJIA lost 0.35% and the Nasdaq 100 lost 1.47%. Bearish factors included increased China/U.S. trade tensions after reports that China will reject new trade talks with the U.S. if the Trump administration moves ahead with the next round of tariffs on Chinese goods, the 6.6 point decline in the U.S. Sep Empire manufacturing index to a 5-month low of 19.0, weaker than expectations of -2.6 to 23.0, and weakness in technology stocks. The Trump administration's tariff 9

10 announcement early Monday evening was worse than expected because the tariff will ramp up from an initial 10% to 25% on Jan 1. The markets, by contrast, had been hoping for a tariff of only 10% based on reports over the past few days. Administration officials said that the 10% starting point for the tariffs is designed to give U.S. businesses a few months to move their supply chains out of China before the tariff steps up to 25%. The administration dropped some products from the tariff list due to protests by American businesses, but the total amount was left unchanged at $200 billion. Adding to the hawkish tone of the announcement, the 10% tariff will go into effect in just six days on Sep 24, which means that the Trump administration did not want to leave any time for negotiations to try to avert the tariffs. Now that the Trump administration has gone ahead with its tariffs, China can be expected to cancel the trade talks that were tentatively set for the next two weeks, according to reports from Bloomberg and other news outlets. Treasury Secretary Mnuchin will not get his trade talks and he has again been outmaneuvered by the administration's trade hawks and indeed overruled by the President himself. China can also be expected to quickly announce the retaliatory tariffs it already promised on another $60 billion of U.S. goods, which means that about 80% of U.S. exports to China will soon be subject to a penalty tariff. Assuming that Chinese officials cancel the trade talks, President Trump in addition is likely to make good on his threat to begin the procedure of slapping tariffs on another $267 billion of Chinese goods, as he recently threatened. That would mean that virtually all U.S. imports from China, totaling about $575 billion over the last twelve months, could be subject to penalty tariffs by the end of this year or early There appears to be little prospect for a cooling of U.S./ Chinese trade tensions in the near future. China appears to see little point in negotiating and may be playing the long game of waiting out however long Mr. Trump's presidency may last. Meanwhile, President Trump is frustrated by the refusal of Chinese officials to agree to major concessions and appears determined to keep jacking up the pressure on China until something breaks. As long as the Chinese stock market remains weak and the U.S. stock market remains strong, President Trump is likely to believe that he is in the driver's seat. Indeed, U.S. stocks continue to hold up relatively well despite the tariff threats, while Chinese stocks continue to move lower. The S&P 500 index is up 8.0% year-to-date, while the Shanghai Composite index is down 19.8% year-to-date. The Shanghai Composite index on Monday fell by 1.11% and is poised to take out last week's 2-1/2 year low, where the index had corrected lower by 26.20% from January's 2-3/4 year high. With the downward pressure on emerging market stocks and with the specific downward pressure on China from U.S. tariffs, there is every reason to worry that Chinese stocks could fall substantially farther. Chinese investors may be underestimating the extent of the Trump administration's determination to inflict enough pain on China to bring Chinese officials to the bargaining table with major concessions. 10

11 Many Asian markets turned higher on Tuesday after President Donald Trump's move to place tariffs on an additional $200 billion of Chinese goods was not immediately met with retaliation by Beijing. Investors have been bracing themselves for the tariffs, and the Trump administration has said it is still open to talks with China to mediate an ongoing dispute over trade. Japan's Nikkei 225, reopening after a national holiday, jumped 1.4 percent to 23, The Kospi in South Korea added 0.3 percent to 2, Hong Kong's Hang Seng index rose 0.6 percent to 27, The Shanghai Composite index rebounded 1.8 percent to 2, But Australia's S&P/ASX 200 shed 0.4 percent to 6, Stocks fell in Taiwan and most of Southeast Asia. Speculation that Trump would impose more tariffs on China sparked a sell-off in technology stocks that pulled U.S. indexes lower on Monday, snapping a five-day winning streak. The S&P 500 index dropped 0.6 percent to 2, The Dow Jones Industrial Average lost 0.4 percent to 26, The Nasdaq composite, which has a high concentration of technology companies, gave up 1.4 percent to 7, The Russell 2000 index of smaller-company stocks tumbled 1.1 percent to 1, On Monday, President Donald Trump announced tariffs on an additional $200 billion of Chinese goods starting next week, potentially raising prices on goods ranging from handbags to bicycle tires. The tariffs will start at 10 percent, beginning Monday of next week, and then rise to 25 percent on Jan. 1. Beijing has warned that it would hit an additional $60 billion in American goods if Trump ordered more tariffs, but an official newspaper on Monday called for more aggressive measures to "make American pain worse." If China does retaliate, Trump has threatened to add another $267 billion in Chinese imports to the target list. That would raise the total to $517 billion --- covering nearly everything China sells the United States. Benchmark U.S. crude dropped 21 cents to $68.70 a barrel on Tuesday. The contract lost 0.1 percent to settle at $68.91 a barrel in New York. Brent crude, used to price international oils, gave up 34 cents to $77.71 a barrel. It dropped 0.1 percent to $78.05 a barrel in London. The dollar rose to yen from The euro strengthened to $ from $ Summary: December corn ended down Monday, easing to a new contract low with a large, 14.8-billion-bushel crop expected this fall. Except for rain in eastern South Dakota and southern Minnesota, Monday's map showed favorable harvest weather across most of the Corn Belt for crops that are ready. Later this week however, heavy rain is apt to interrupt harvest activity in the central and Eastern Corn Belt. On the demand side, USDA said 40.6mb of corn were inspected for export last week, a bullish amount that put total inspections up 25% in from a year ago, a brisk start to the new season. For now, December corn remains under harvest pressure and prices are pushing the low end of its sideways trading range. November soybeans fell to a new 11

12 contract low of $8.23 1/2 Monday, still weighed down by expectations for a record soybean harvest of 4.69 billion bushels and lack of trade progress with China. The Wall Street Journal reported over the weekend that President Donald Trump is ready to move ahead with a 10% tariff on $200 billion of Chinese goods. According to Dow Jones, China is saying they will likely pull out of trade talks, set for later this month if the new tariffs go through. Meanwhile, U.S. soybean exports are off to a slow start in the new season. USDA did say 8.86mb of U.S. soybeans sold to unknown destinations for , but total export inspections in the first 13 days of the new season were down 21% from a year ago. While the anticipation of another record soybean harvest is clearly bearish, November soybean prices may not have a lot of downside risk left, already trading at their lowest level in over nine years amid plenty of trade uncertainty. December Chicago wheat closed down Monday after a late sell-off after a quiet day of trading, while the new winter wheat crop is being planted. Moderate to heavy showers in this week's forecast are likely to slow progress later in the week. Meanwhile, Western Australia experienced frost over the weekend, adding more reason to reduce the country's wheat crop estimate. Even though world wheat production is lower in , the U.S. is still struggling to generate export business. Earlier Monday, USDA said 14.9mb of U.S. wheat were inspected for export last week, putting total inspections down 30% in from the previous year's low total. For now, December contracts of all three wheats are holding sideways in a wide range. December corn broke out to the downside from Friday's inside day and slid to a new contract low on Monday. The near and intermediate-term corn trends point down. On the upside, the July swing low at $3.50 1/4 now stands as resistance and as long as that holds firm, corn bears will retain the short-term technical edge. Bearish corn objectives are found at $3.35 1/2 and then $3.29 3/4, weekly corn continuation chart lows from December 2017 and July 2018, respectively. Daily momentum points down with the 14- day relative strength index approaching oversold levels at 31% on Monday. The corn chart is heavy and the bears control the action. But, the corn market is vulnerable to short-term backing and filling as momentum approaches oversold territory. November soybeans edged lower Monday but held above last week's low at $8.21 1/4. The near and intermediate-term November soybean trends are bearish. Soybean bears are testing the water with lower levels after a minor consolidation phase from Aug. 29-Sep. 14. The burden remains on soybean bears to definitively break last week's low to trigger a fresh selling wave. If that occurs, 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 remains 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. Daily momentum favors the bears, 12

13 with the 14-day relative strength index pointing lower at 37% on Monday, down from 39% on Friday. 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