AgResource Company · 1/17/2019 · This is true despite adverse weather in South America, which looks to continue into the final days of January. &RUQ·VU HFRYHU\IURPP XOWL - year

$Page 1: AgResource Company · 1/17/2019 · This is true despite adverse weather in South America, which looks to continue into the final days of January. &RUQ·VU HFRYHU\IURPP XOWL - year$
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** AgResource South American Weather Discussion ** Jan 17, 2019

4:30 PM CST

** Brazilian Forecast Unchanged; Lite Rain Not Enough: The EU and GFS remain

in general agreement on South America’s nearby pattern. Both models are little

changed from prior runs. Marginally better shower activity begins on the

weekend, but it remains that totals will

be far below average. Net draws in soil

moisture are probable through Brazil’s

first-crop corn pollination and soybean

pod fill periods. Percent of normal

rainfall through the first half of

January is at left.

Lite but daily showers are offered to

the drier areas of Central Brazil Sat-

Mon. Complete dryness resumes next week,

with another round of lite/widespread

showers due the following weekend. The EU

model this evening indicates cumulative

rainfall into Jan 26 of .75-2.50”, or

some 20-50% of normal. Very heavy rain

will be ongoing in Northern Argentina.

The structure of South America’s

pattern looks to go unchanged through the

end of month. An outright shift is need

to hit USDA crop estimates.

** AgResource Farm Marketing Advice ** Jan 17, 2019

4:30 PM CST

** AgResource Daily Farm Marketing Advice for Friday: 1/ Corn Producers: Hedge

15% of the estimated ‘19 corn crop if Dec ‘19 futures reach $4.14. This would

push 2019 corn sales to 50%. 2/ Corn Producers: Hedge

the first 20% of your estimated 2020 crop at $4.24 basis December 2020 corn

futures. This our first sale of the 2020 crop. 3/ Corn Producers: Sell

‘17 and 15% of estimated ‘18 corn production vs Mar futures at $3.94

-----------------------------------------------------------------------------

Ukrainian corn prices continue to rise

on European and talk of Chinese demand.

Despite a record harvest and surplus,

spot basis has so far followed seasonal

trends closely. Deferred offers are not

getting cheaper, and we note that Black

Sea corn basis of $.75-.95/Bu, compares

to US Gulf basis of $.54-.60/Bu.

Safrinha yield loss in Brazil is needed

to really turn bullish above $3.90-

3.95, but in the meantime solid US

export demand and questions over nearby

Brazilian soil moisture are supportive.






** World Corn Trade Update ** Jan 17, 2019

4:30 PM CST

We’ve highlighted recently how corn below $3.80 is fundamentally cheap.

This is true despite adverse weather in South America, which looks to

continue into the final days of January.

Corn’s recovery from multi-year lows in 2016 has been mostly driven by

supply dislocation, but we do that demand has contributed to the rally. It’s

been slow and steady, but

world consumption has hit

new heights, and looks to

rise further in 2019/20.

Monthly world corn trade –

the best indicator of

consumption – is at left.

Oct-Dec trade totaled 38.5

MMTs, a record and up 14%

from last year. The pace of

corn trade so far is

at/above the level needed to

meet the USDA’s target,

which is also record large.

Notice the seasonal spike in

Mar-May, and so ample world

demand still lies in the

offing.

** AgResource World Weather Discussion ** Jan 17, 2019

4:30 PM CST

** US Forecast Features Cold in East, Heavy Snow: The updated US forecast

features abnormally cold temps east of the MS River but frigid temps will be

largely contained there. We do mention that cold in the East will be sustained

longer term. And it remains that a series of moderate to heavy snow events

will impact the Plains and Midwest in the next 10 days, beginning this

weekend. The graphic at

left shows the probability

of snowfall above 4” in the

next 72 hours.

The Polar Vortex at times

drops into the Great Lakes

in the next two weeks.

Temps in the single digits

and teens are expected.

Near normal readings

persist elsewhere,

including a majority of the

Plains HRW Belt. Snow

impacts the Central US

every few days into Feb 1.

Amid coming snow,

winterkill threats are low.







4:30 PM CST

Corn’s discount to other grain markets will sustain a record pace of trade

in the near/medium term. The graphic below makes clear that corn’s discount

to wheat (both milling and feed) and barley is abnormally large. Gulf corn

is offered this evening at $167-170/MT for delivery into April. Wheat and

barley are quoted at $236-

245/MT, a premium of $69-

75/MT. A year ago corn’s

discount to other grain

markets was just $20-25/MT.

Recall that huge acreage

or very favorable weather

is needed this summer to

even stabilize world barley

stocks. And GDP growth in

Asian countries other than

China has had a noticeable

effect on corn demand

there. There are host of

models that suggest corn is

undervalued. Downside risk

is limited until

spring/summer weather is

better known.


4:30 PM CST

The USDA pegs Oct-Sep world corn trade in 18/19 at 163.2 MMTs, up 12 MMTs

from last year. Since 2010, world corn trade has expanded by an incredible

72 MMTs (78%). This growth in demand has not impacted price like biofuel

policies did in the mid-2000s, but we do expect rising trade to underpin

spot futures at $3.50-3.60

longer term. The primary

issue for the US farmer is

that prior to 2017, the US

didn’t get to fully

participate based on weak

exporter currencies. But

following the loss of

exporter stocks, the longer

term outlook has shifted.

Rather than needing adverse

weather for rallies, rather

favorable weather is now

needed to turn bearish.

And the graphic at left

shows that the USDA tends to

understate world corn trade

in its December report,

often by a sizable amount.






** AgResource Corn Comment and Analysis ** Jan 17, 2019

** Corn Rallies, Exceeds Several Moving Averages: March corn ended 6 cents

higher on suspected elevated export demand. Confirmation is lacking, but we

hear that corn off the PNW is offered level money with Argentine corn – even

given weak harvest basis in Argentina. China is reportedly paying a decent

premium for Ukrainian corn, and Chinese demand for US origin is still eyed.

Recall US corn has been the cheapest feedgrain for five consecutive weeks.

It remains that spec funds need data and clarity over US trade policy to

push the market to new highs. But

current world fob relationships

suggest downside risk will stay very

limited into late winter.

Argentine corn planting this week

reached 89% complete, vs. 93% on

average. Additional heavy rain this

week will keep activity slowed. It’s

possible final acreage there is down

300-450,000 Hectares from

expectations. The crop is rated at

56% GD/EX, but stress is evident in

North/Northeast growing areas.

March corn stays bound to a range

of $3.70-3.90, though there’s more

upside than downside risk. Extend

supply coverage on breaks.

** AgResource Soybean Comment and Analysis ** Jan 17, 2019

4:30 PM CDT

** Soybeans Rally on Technical Buying/China Rumors: Following firm trade

overnight, soybean futures rallied to strong gains through the day on

Thursday. Key technical support had held at midweek, and rumors that the US

was considering lifting tariffs on some Chinese products supported a rally in

both CBOT grains as well as other US financial markets.

In its weekly crop report the Buenos Aires Grain Exchange estimated that

planting progress was now 99% complete; however, the Exchange also lowered the

estimate for the planted area by 200,000 hectares (494,000 acres), to 17.7 Mil

Ha. Too much rain in two provinces that will prohibit planting was cited for

the lower soybean area.

Crop conditions continued to improve

and were at 51% GD/EX vs. 35% last

year. Additionally, 47% of the crop was

blooming, with 15% setting pods, right

in line with the 5-year average.

March soybeans closed back above the

50-day moving average on Thursday, and

follow through technical buying is

expected to lend support at the end of

the week. Ultimately we see CBOT

markets rangebound, waiting on both a

Chinese trade deal and the reopening of

the USDA.






** AgResource Farm Hedge/Cash Positions ** Jan 17, 2019

4:30 PM CST

Date Position %Hedged Explanation Exit/Stop

=============================================================================

-------------------- 2016/17 AgResource Cash Sales Advice --------------------

Corn: Sold 100% of production at $4.05 Dec/Mar/May futures

Soybeans: Sold 100% of production at $9.83 average.

Wheat: Sold 100% of production at $5.6275 basis July/May futures

------------------ 2017/18 AgResource Cash Sales Advice ----------------------

Corn: Sold 70% of production at $4.01 basis Dec ‘17/March‘18 futures

Soybeans: Sold 100% of production at $9.9075 basis Nov/Mar/May/Aug futures

Wheat: Sold 85% of production at $5.29 basis July/Dec ’17 futures

-------------------2018/19 AgResource Cash Sales Advice ----------------------

Wheat Sold 40% of estimated production at $5.2575 basis July ‘18 Chi futures

Corn: Sold 60% of estimated production at $4.17 basis Dec ‘18 futures

Soybean: Sold 90% of estimated production at $9.87 basis Nov’18/Jul’19 futures

Diesel: Covered 100% of 2019 Diesel needs at $45.00 spot WTI crude oil.

------------------- 2019/20 AgResource Cash Sales Advice ---------------------

Corn: Sold 35% of estimated production at $4.22 basis December ‘19 futures.

Wheat: Sold 20% of estimated production at $5.74 basis July ‘19 futures.

Soybeans Sold 60% of estimated production at $9.59 basis January ’20 futures.

** AgResource Wheat Comment and Analysis ** Jan 17, 2019

4:30 PM CST

** Wheat Trades Through First Chart Resistance; US Still Cheap: US wheat

futures ended off session highs but rallied 5-9 cents, led by spot KC.

It’s generally more of the same, with much of the world market now

recognizing the US Gulf market’s position in the world. There’s talk that

optional origin purchases are being switched to the US with basis levels in

the S Plains rising. New demand will begin to find the Gulf at current prices,

and as Black Sea fob offers rallied another $2/MT. Gulf wheat’s discount to

Russian origin now rests at $11/MT, the largest in years.

We also mention yet more heavy snow lies

ahead for Ukraine & Russia. Jan 1-17 precip

there rests at 120-300% of normal. Snow

accumulation of 6-15” is expected in the

next 10 days. It’s not a crop issue, but

rather one of obstructed logistics.

Argentina’s wheat harvest has ended with

the Buenos Aires Exchange pegging final

production at 19 MMTs, vs. USDA’s 19.5.

We wonder how much follow through buying

occurs without USDA confirmation of export

sales, but no doubt US demand is elevated.

We remain patient with respect to sales. KC

will benefit most from the coming shift in

world trade.






** AgResource Hog Comment and Analysis ** Jan 17, 2019

4:30 PM CDT

** Hogs End Mixed on Nearby Strength: A sharply mixed day of trade unfolded in

the hog market. Feb hogs fell to new lows and uncovered strong demand, that

carried the market higher into late in the day, while the rest of the hog market

quietly traded lower. February traded a wide $2 range, while April traded a

narrow $.90 range inside day. The cash hog index rose $.37 to an 8-week high of

$58.02, and we estimate another $.16 higher for Friday.

The cash index has gained momentum since the start of the year, but so far is

following a typical seasonal

trajectory. The chart plots price

projections for the year based on 5-

and 10-year seasonal trends, along

with markers for current CME prices.

Relative to seasonal trends, all CME

futures are holding at premiums to

the seasonal trends, with the largest

premiums noted from August forward.

Dec hogs today are close to $8 higher

than the 2018 expiration.

The cash market is moving higher,

and the seasonal outlook is more

bullish for cash prices. Key support

for April is at $63.275, with longer-

term support at $60.

** AgResource Ag Investment Trades ** Jan 17, 2019

4:30 PM CST

----- 696 Closed Trades since March 1, 2004 for a net gain of $290,967.50 ----

** AgResource Ag Speculative Advice for Friday: 1/ No new advice.

"Entry Date" "Positions and Current Open Position Recommendations"

------------- -------------------------------------------------------------

1/15/2019 Long 2 May corn at $3.825. Stops on a close below $3.70.

1/2/2019 Long 2 March Chi wheat at $5.01, stops on a close below $4.84

11/7/2018 Spread: Long 2 KC March wheat/Short 2 Chi wheat at 2 cent KC

premium. Hold.

Documents

AgResource Company · 1/17/2019 · This is true despite adverse weather in South America, which looks to continue into the final days of January. &RUQ·VU HFRYHU\IURPP XOWL - year