Morning Comment – Tuesday September 6, 2016

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Last week’s markets were higher for corn, lower for soybeans and wheat.    The energy markets were lower, financial markets higher and the Dollar Index was higher, closing the week at $95.86.  The US bond market weaker with the 10 Year Bond yielding 1.61% and the 30-year bond closed at 2.28%.  For the week, SEP Corn was 0.25 cents higher, closing at $3.165, SEP Soybeans lost 22.25 cents, closing at $9.685 and SEP wheat was 10.25 cents lower, closing at $3.7325.  For the week, Crude Oil lost $3.03, closing at $44.31.  The DOW gained 95 points, closing at 18,492 and the US Dollar Index closed at $95.86, up $0.38.  October Heating Oil futures closed at $1.4047, down $0.0885 for the week.  CBOT closes in the NOV-DEC contracts were $3.285, $9.525 and $3.9925 for 2016 DEC Corn, 2016 NOV Soybeans and 2016 DEC Wheat, respectively.  JANUARY 2017 soybeans traded 14 cents lower for the week and settled at $9.6975.  MARCH 2017 corn closed at $3.385, up 4 cents for the week, MAY 2017 corn closed at $3.4525.  MARCH 2017 wheat lost 10.75 cents, closing at $4.2125, MAY 2017 wheat closed at $4.3475, JULY 2017 wheat closed at $4.4625.  The Baltic Dry Index closed at 712, down 6 points from last week’s 682, a new all-time low for the index was set on 2-12-16 when the index hit 290, establishing a new low for the index stretching back thirty plus years.  The Baltic Dry Index is up 48.95% YTD.

There were three crop estimates released on Friday.  Informa Economics released a corn estimate of 174.8 bpa (15.3 billion bushels) and a soybean estimate of 49.5 bpa (4.127 billion bushels).  The national corn estimate released by FC Stone was 175.6 bpa (15.195 billion bushels) and the national soybean estimate was 50.1 bpa (4.163 billion bushels).  An internet based computer algorithm driven company, Kernel-TellusLabs, released their updated estimate on Friday at 170.9 bpa (14.78 billion bushels) for corn and 51.1 bpa (4.24 billion bushels) for soybeans.  A small company based in Boston, MA that is using cloud-based technology to harness and compute massive amounts of satellite crop data, weather data, crop harvest data and machine learning, is developing Kernel (a daily computer feed giving up-to date crop yield predictions).  Back testing 15 years worth of data has shown their system to be 70% more accurate than the USDA WASDE reports.  Time will tell if they are more accurate, but one thing is sure, they are timelier as the predictions that they released are based on nearby historical data and up to the minute data.

The ProFarmer Crop Tour released their estimates of corn production a week ago, at 14.728 billion bushels (170.2 bpa) with a range of 1.7 bpa in either direction.  ProFarmer’s soybean yield estimate was 4.093 billion bushels (49.3 bpa) with a range of one bpa in either direction.  Some analysts are now touting the prospect of a national soybean yield as high as 52 bushels per acre.  This would dramatically alter the soybean carryout picture.  Commodity Information Systems (CIS) is predicting a near term rally in soybeans to be followed by a move down below $9.00 during harvest.

Weakness in the global Palm Oil markets has pressured both Soybean Oil and Soybean Meal.  October SBM closed Friday at $309.50, down $8.70 for the week and down $109.20 from the high of $418.70 set on June 13, 2016.  With the high yields being discussed for the US soybean crop, one would think that soybean meal would continue to trade lower going forward.

The USDA WASDE report estimate for corn was 15.153 billion bushels and 175.1 bpa.  The estimate for soybeans was 3.929 billion bushels and 48.9 bpa.  The estimate for 2016-2017 US Ending Stocks was 2.409 billion bushels of corn, 330 million bushels of soybeans, 60 million bushels of grain sorghum and 1.100 billion bushels of wheat. The estimate for 2015-2016 US Ending Stocks was 1.706 billion bushels of corn, 255 million bushels of soybeans and 60 million bushels of grain sorghum.  WORLD ENDING STOCKS for 2015-2016 were estimated at 209.3 MMT for corn, 73 MMT for soybeans and 241.9 MMT for wheat.  WORLD ENDING STOCKS for 2016-2017 were estimated at 220.8 MMT for corn, 71.2 MMT for soybeans and 252.8 MMT for wheat.  Corn and wheat global ending stocks are expected to grow by 5.2-5.5% for corn and 4.5-5.0% for wheat.  Global Soybean Stocks are predicted to decline by 1.8 MMT (2.5-3%).

Our Annual I-55 Tech Park Tour was held Wednesday, August 24th.  We shared the past year’s plot data and discussed the new genetics, herbicide programs and plant growth regulators.  We had several agronomy folks on hand to discuss genetic programs, herbicide programs and plant growth hormones.  I received many comments on how outstanding the soybean crop looked.  Most folks told me that the depth of genetic testing and the demonstration of different herbicide programs impressed them.  One thing that really stood out to me was the herbicide demonstration where we showed people how many weeds (Waterhemp) could come from 4-year-old seed in the soil seed bank.  We had kept that particular area free of weeds for the last 4 seasons and still had a large escape of weeds in the area where we did not use the Liberty and Scepter spray combination.  More information about our test plots is available on our website:  www.buchheitagri.com

The CIF markets are weaker for corn and soybeans.  Corn exports have moved up and wheat exports continue to be soft, with the off-spec HRW wheat taking over the damaged wheat and feed-wheat markets.  September corn barges are (46 bid-51 ask), October corn barges are (59 bid- 63 ask), October soybean barges are (82 bid-85 ask) and SEP wheat barges are (25 bid-45 ask) and OND wheat (55 bid-80 ask).  Most CIF elevators are focused on corn and soybean programs with little regard for wheat.

Spec funds made significant changes to their final positions this week.  Significant short liquidation in corn stabilized the corn market while the soy complex moved lower and the wheat market moved lower.  Specs removed 41,000 contracts from their short corn position to create a short position of 155,000 contracts net short.  Spec funds added 3,000 contracts to their long bean position to make it 92,000 contracts long.  The Specs added 3,000 contracts to their short wheat position of 121,000 contracts short.  The Specs finished the week, long 44,000 contracts of Soybean Meal.

Most major foreign currencies were mixed-stronger versus the US Dollar.  The Euro finished the week at one Euro per $1.12 US$ (unchanged).  The Japanese Yen finished the week trading at 103.96 per US Dollar (down 2.11).  The Russian Ruble finished the week trading at 65.01 Rubles per US Dollar (down 0.15).  The Brazilian Real finished at 3.24 per US Dollar (up 0.03).  The Argentine Peso closed at 14.97 (up 0.02).  The Canadian Dollar finished at 1.30 per US Dollar (unchanged), the Mexican Peso at 18.56 per US Dollar (up $0.04) and the Chinese Yuan finished at 6.68 per US Dollar (down 0.01).

Live Cattle futures were lower for the week losing $4.12 to $4.75; Feeder Cattle were $3.87 to $5.05 lower and Lean Hog futures were $0.58 to $1.25 lower.  October Live Cattle closed at $101.60, down $4.75 and December closed at $103.48, down $4.12.  September Feeder Cattle closed at 134.88, down $5.05 and October Feeder Cattle closed at $132.08, down $3.87.  Lean Hogs were lower.  October closed at $60.75, down $0.58 for the week.  Cash Hogs are called steady on Tuesday and Cash Cattle are called steady after late week trades at $173-175 in the beef and $110-111 live.  The Pork Cutout finished the week at $78.12, up $1.79 for the week.  Beef Feedlots are asking $113-115 in the South and $176+ in the beef after seeing some offers late week trade at $175.  Choice Beef closed at $192.10, down $7.63 and Select Beef at $188.49, down $5.54 for the week.  The Choice:Select spread ($3.61) has narrowed considerably from spring markets that saw the Choice:Select spread trade out to $26.00+.  The conclusion to be drawn from this spread narrowing is that we are having issues with the sale of the higher value middle meats and that we are still moving hamburger and the cheaper cuts fairly well.

Be sure to check out our website at www.buchheitagri.com and see the marketing information available.  If you scroll down on the front page you will find our market info page supported by AgriCharts.  If you examine the left hand side of that page you will discover the options that allow you to create price graphs or charts and also to check on historical spread information.

Call us for help with marketing decisions or help in preparing crop programs!  A DP program for those producers wanting to wait for a better day in the markets is available.  Check our website or call us for quotes on DP programs.  We can help develop a marketing plan and a floor price program.  Call Katlyn, Chad, Eric or Dave at 800-622-7937, Shon at 573-667-9921 or 768-0489.