AgResource Company Eastern South American Coastline. This ... · 10/1/2019 · trend of below to much below normal rain and rising temperatures as the soil moisture profile declines

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** AgResource South American Weather Discussion ** Jan 10, 2019

** EU Model Stays Parched for Brazil; Long Range Pattern Unchanged: The

afternoon run of the EU model is a tad wetter in parts of Goias and Minas

Gerais Jan 19-20, but keeps key areas of Mato Grosso do Sul and Mato Grosso

completely dry. Our confidence in this rain is low. Any rain is welcome, but

our climate work suggests this upper air flow is rather structural in nature.

Warm water off the east coast of Brazil will continue to fuel high pressure

Ridging. This Ridge is forecast to stay largely intact for the next two weeks.

** EU Model 6-10 Day Precip ** Little rain is offered to the whole

of Brazil in the next 7-8 days. High

temps are pegged in the 80s and low

90s. Steep draws in soil moisture are

expected. Rainfall of .50-1.50” is

projected in Goias late in the 6-10

day period. But keep in mind normal

weekly rainfall there totals 2.50-

3.50”. Close attention will be paid

to the trend in extended range

forecasts for any sign of a more

lasting and significant change.

Today’s 16-30 day outlooks maintain

well below normal precip in Central

Brazil and ongoing heavy rainfall

across North/Northeast Argentina.

Our weather concern is rising.

** AgResource Farm Marketing Advice ** Jan 10, 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

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

% of Normal Jan 1-24 Rain

The month of January is aggravating existing

moisture trends that extend back to late November. A

stagnant weather pattern shows no sign of ending

over the next 2 weeks. Brazil will continue to see a

trend of below to much below normal rain and rising

temperatures as the soil moisture profile declines.

And 300-400% of normal rainfall drops across

Northern Argentina.

The is stagnant as warm ocean water holds off the

Eastern South American Coastline. This keeps a high-

pressure Ridge dislodged to the south with an active

jet stream passing across Northern Argentina.

This means that the next 6 weeks of South American

weather will hold an oversized impact on CBOT soy

and corn prices. Market volatility looks to increase






** CONAB’s January Crop Production Report ** Jan 10, 2019

4:30 PM CST

Brazil’s national crop forecasting agency - CONAB - released their January

crop report on Thursday. CONAB lowered their estimate of the ’19 soybean crop

to 118.8 MMTs, down from the Dec estimate of 120 MMTs. Most of the decline was

due to a lower crop yield, but CONAB also made a rare cut to the total cropped

area. As seen in the chart, CONAB estimated a total crop yield of 3,248 Kg/Ha

or 49.4 BPA. If realized, the crop yield would be 1 BPA under last year’s

record, but just above the 30-year trend yield forecast.

CONAB estimated total soybean

area at 35.8 Mil Ha, a 1% decline

from December, but still a 2%

increase over last year. The

lower yield more than offset the

higher area, and total soybean

production of 118.8 MMTs is just

under last year’s record of 119.3

and would still be the 2nd

largest

crop on record. However, weather

over the next month is crucial

for determining final soybean

yields for much of the country.

Unfortunately, the forecast

remains drier/warmer than

desired.

** AgResource US Weather Discussion ** Jan 10, 2019

4:30 PM CST

** US Climate Outlook Warm/Dry into

February: Short, medium and long term

Central US forecasts are similar. The Polar

Vortex stays confined to Canada, and so

bitterly cold temps remain unlikely through

most of winter. The graphic at left features

the CFS model’s Feb temp (top) and precip

probability forecasts. Warm/dry weather is

expected through the foreseeable future. We

do mention this general forecast has been

unchanged for some time. World weather

patterns have turned stagnant.

Nearby, meaningful rain/snow will impact

the Southern Midwest and Delta/Southeast. No

major precip events are forecast elsewhere

in the next 10 days. Cold temps are pushed

out of the Great Lakes in the next 48 hours.

Normal/above normal temps return on the

weekend and are expected to linger into the

following week.

It’s a benign forecast, but temps in Feb-

March will grab more producer/trade

attention should abnormal warmth continue.







4:30 PM CST

CONAB altered its Brazilian corn production estimate only fractionally, from

91.1 MMTS in Dec to 91.2 MMTs. First-crop corn area declined very slightly,

while a very modest boost in first-crop yield more than offset this. Safrinha

production is expected to account for a record 70% of Brazil’s total

production. This implies that weather in Mar-May heavily outweighs Dec-Jan

weather in terms of importance.

However, we do expect a modest

first-crop yield reduction in

CONAB’s Feb report amid recent

and upcoming dryness – this AM’s

updates only accounted for

weather up till January 1st.

We also mention that CONAB’s

total corn area is a full

800,000 HA below USDA’s. CONAB’s

production estimate is down 3.3

MMTs from USDA. Near perfect

weather is needed in Brazil

throughout spring to push major

exporter stocks higher, and so

Brazil’s wet season must be

extended this year well into

April and May.


4:30 PM CST

A review of CONAB’s track record of forecasting crops in January does not

offer much guidance. In the last 12 years, CONAB has underestimated total

soybean area every single year by an average of 1.2%. So lowering their

estimate for total soybean area is a little surprising. In 7 of the last 12

years, CONAB has

underestimated the total

crop size by an average of

5.7%. Most recently, the

2018 estimate was too small

by more than 7%, and in 2017

CONAB’s Jan crop forecast 9%

too low. As is seen in the

chart, differences between

the Jan crop estimate and

the actual crop size are

very closely related to

CONAB’s yield estimate.

Their near trend yield

estimate is reasonable for

today, but if rains do not

soon fall across key crop

regions, crop yields will

continue to roll back.






** AgResource Corn Comment and Analysis ** Jan 10, 2019

4:30 PM CST

** Funds Shed Length on Lack of Demand News: CBOT corn futures ended sharply

lower. We’ve mentioned this week that speculative funds since mid-December

have established a sizable long position. This position should be maintained

amid adverse dryness in Brazil, but periodic liquidation can be expected when

fresh news is lacking. US/China trade progress is occurring, but traders are

still waiting for fresh Chinese buying of US corn, DDGs and sorghum.

US ethanol margins are slowly improving with profits returning to parts of

the Midwest. Blend margins have rallied to profitable levels following recent

strength in crude and gasoline

prices. Peak bearishness in energy

markets has now passed.

Gulf corn since the US gov’t

shutdown has sustained a $4-6/MT

discount to other origins for Jan-Feb

delivery. Large US export sales will

be reported when the gov’t reopens.

We caution against chasing breaks

until more is known about US trade

policy as Brazil’s overall climate

pattern will be stagnant into late

month. Strong support rests at $3.72

and ARC sees no reason for spot CBOT

corn to fall much below $3.68.

** AgResource Soybean Comment and Analysis ** Jan 10, 2019

4:30 PM CDT

** Soybean Futures Fall Sharply On Tired China News: Following lower trade

overnight, soybean futures fell sharply from the morning open. Overall, there

was not any specific negative news for the market. Rather there was only

limited information from the just concluded US/China trade meeting. Funds were

estimated sellers of; 11,000 soybeans, 6,000 soymeal and soyoil futures.

The Buenos Aires Grain Exchange estimated that soybean planting progress

advanced 6% last week to 96% complete. After a slow start, planting progress

is now back in line with the longer-term average. But the early year delays

will push back the start of harvest

and new crop availability. The

Exchange reported that crop condition

ratings improved to 49% GD/EX, versus

41% last week and 40% a year ago.

7% of the Argy crop was setting

pods, which is right in line with the

5-year average.

Major moving average support in

March soybeans is at $9.03 and again

at $8.90. With no change in the S

American weather pattern this

correction will be short-lived. Who

really wants to be short into the

weekend amid adverse weather?






** AgResource Farm Hedge/Cash Positions ** Jan 10, 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

------------------- 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 10, 2019

4:30 PM CST

** World Wheat Prices Weaken Following Recent Tenders: EU futures fell

moderately as French origins may be excluded from Algeria’s recent purchase.

US futures weakened following the lack of any Egyptian purchase. Both markets

were disappointed by the large tonnage offered to Egypt via Russia.

World wheat cash markets are generally flat. Other fresh news is lacking,

and the absence of US export data is noticeable. We haven’t heard of any large

purchases of US wheat – including by China – but the US is in position to

boost market share significantly moving forward. The graphic shows weekly HRW

export sales against whether HRW

was offered above or below Russian

origin. A broad relationship is

evident. Notice that Gulf HRW is

offered $8/MT below Russian today

and has maintained a discount since

late December – when FAS shut down.

As a side note, our contacts

suggest Russia’s grain

transportation subsidy will only be

awarded to less than 100,000 MTs of

wheat in Siberia.

Breaks are end user buying

opportunities. The Index Fund

rebalance is nearly completed.






** AgResource Hog Comment and Analysis ** Jan 10, 2019

4:30 PM CDT

** Hogs End Mixed Following Quiet Trading: Feb hog futures were back and forth

in Thursday’s trading and ended firm. The rest of the market ended mixed. The

lean hog index gained another $.25 to $55.10, while the cutout value gained $.79

to end at $70.46.

Monthly International Trade reports and weekly export reports from the USDA’s

FAS have been withheld until the gov’t shutdown ends. The lack of trade

information has been frustrating to

traders. However, the USDA’s

Mandatory Price Reporting operations

have continued, which includes

weekly export sales from packers. On

average, the data has captured 22-

25% of total pork exports on a

monthly basis and today it is the

best barometer of trade. The latest

data released on Monday showed that

total packer sales for the week of

Jan 4th

totaled just 13.8 Mil Lbs,

which was the lowest weekly total

since October 2017. The data will be

closely watched in early 2019, while

traders anxiously await results of

China trade negotiations.

** AgResource Ag Investment Trades ** Jan 10, 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/ Buy 2 May Corn at

$3.825, stops on a close below $3.70.

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

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

1/02/2019 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 Eastern South American Coastline. This ... · 10/1/2019 · trend of below to much below normal rain and rising temperatures as the soil moisture profile declines