October 20, 2018 • Vol. 46, No. 42

United We Stand

Corn, beans roll over — Corn and soybean futures strengthened to their highest levels since Aug. 20 to start last week, but buying dried up and both markets finished lower and near their weekly lows. Harvest activity picked up following recent delays and weekly export sales were disappointing. Nearby corn and soybean futures are challenging their uptrends from the September lows. Wheat futures were choppy last week in a continuation of the recent sideways price action. Wheat traders continue to wait on stronger export demand before they return as buyers. Cattle futures slightly favored the upside in choppy trade ahead of Friday afternoon’s Cattle on Feed Report. Cash cattle trade firmed slightly, but it appeared the average price would fall between $110 and $111 for a sixth consecutive week. Hog futures rolled over technically and winter-month contracts widened their discount to the cash index, signaling traders anticipate sharp pressure on cash prices ahead. profarmer.com

Visit your Member website www.profarmer.com

for additional perspective and breaking news.

USDA to grant license for ASF vaccine.USDA published a notice last week it intends to grant Zoetis an exclusive license for a vaccine to combat African swine fever (ASF). There is cur-rently no certified vaccine for ASF. The push for an ASF vaccine is height-ened given the outbreak in China and Europe.

U.S. suspends pork imports from Poland.USDA has suspended all pork imports from Poland amid concerns about ASF. USDA is reviewing Poland’s export protocols after finding a facility there shipped pork to the U.S. without following requirements designed to prevent the spread of serious livestock diseas-es. A second Polish facil-ity is also being reviewed. USDA says there is minimal animal health risk and humans can’t contract ASF.

Trump, Xi agree to November meetingPresident Donald Trump and Chinese President Xi Jinping have tentatively agreed to meet Nov. 29 ahead of the G20 summit in Buenos Aires, Argentina, according to the South China Morning Post. An official with a Washington-based think-tank with ties to the Trump admin-istration says the two countries are “trying to have a framework coming out of the meeting.” There is some hope on the China trade front.

China’s economic slump worsensChina’s GDP slumped to 6.5% in the third quarter — down from 6.8% in the first half of this year and the weakest quarterly growth since the first quarter of 2009, at the height of the global financial crisis. While exports remained a bright spot in September, econo-mists are lowering their Chinese growth forecasts into 2019 as the trade war with the U.S. is expected to tighten its grip on China’s economy. Chinese regulators took multiple steps Friday in an effort to shore up investor confidence as the Chinese stock market has slumped sharply amid economic concerns (see “General Outlook” on Analysis page 4).

U.S. soybean exports severely laggingExporters sold only 293,600 metric tons (MT) of soybeans during the week ended Oct. 11, nearly 1 million MT less than the same week last year. Weekly net cancellations of 78,900 MT to unknown destinations were also reported. USDA also announced daily can-cellations Friday of 180,000 MT of soybeans to China and 120,000 MT of optional origin soybean sales to unknown destinations.

Typically, U.S. soybean exports are surging by now. But with Chinese buyers turning to other sources (see News page 3), outstanding U.S. bean sales and total commitments (exports + outstanding sales) are running 31.5% and 25.2% behind the respective five-year averages.

Disaster aid for Southeast farmersThe Trump administration is urging lawmak-ers to approve a hefty package of disaster aid for farmers in the Southeast in the aftermath of the recent hurricanes. USDA Secretary Sonny Perdue said USDA will need a supple-mental appropriation similar to the $2.4 bil-lion in agricultural disaster aid that Congress funded following the 2017 hurricanes.

EPA to issue E15 rule by FebruaryThe Environmental Protection Agency (EPA) intends to publish its proposed rule on year-round sales of E15 and RIN market changes by February — in time for the agency to final-ize the process by the June 1 start of the sum-mer driving season. Acting EPA Administrator Andrew Wheeler says his agency has the legal authority to expand E15 sales, a stance the oil industry will test with lawsuits.

The significance of year-round E15 and overall use of ethanol to expand the U.S. fuel supply was made very evident last week amid the Saudi situation.

White House to continue deregulationThe Trump administration is focused on eliminating three major regulations: waters of the U.S. (WOTUS), CAFE standards for cars and a clean power plant rule. EPA plans to release a draft version of the replacement WOTUS rule soon, but the agenda projects it won’t issue its new rule until March 2019.

Fed to continue gradual rate hikesMinutes from the late-September Federal Open Market Committee (FOMC) meeting noted the U.S. economy likely warrants fur-ther, gradual increases in interest rates, but that it may move into a “restrictive” mode for a while. Some FOMC members worry a stronger U.S. dollar could crimp economic growth and produce higher inflation.

News this week...Page 2: Slow U.S. harvest, fast Brazil planting. Page 3: Dramatic slowdown in China bean buys.Page 4: Our corn, bean and wheat balance sheets.

October 20, 2018 / News page 2

Follow your Pro Farmer editors

on Twitter:Search for

#pfnews.@ChipFlory

@BGrete@JWilson29

@MeghanVick@DavisMichaelsen@DoaneAg_Nelson@DoaneAg_Vaught

Floyd Co., (NC) Iowa:

“I have not started combining any-thing myself yet

as the corn is nearly 30%. A few others have start-ed corn. The wet

ground held com-bines but they could not get

loads out. Virtually no beans are out in our area yet.”

Butler Co., (NC) Iowa:

“Really big corn yields — 10 bu. to

20 bu. per acre better than last year. Beans are not great in our

area and worse to the north, but very

few beans have been cut as there

is no sun and warm air to dry

them out.”

Dixon Co., (NE) Nebraska:“Bean yields are

not that great. Corn is good, but

wet. We already had wind damage

and it seems to get a little worse every time I look

at my fields.”

Thayer Co., (SE) Nebraska:“Beans are split-

ting open and corn is falling down with the rains,

snow and wind.”

Sedgwick Co., (SC) Kansas:

“Wheat that is up looks good. It’s too

wet to drill more. The freeze finished

off the soybeans that were still

green and stand-ing good.”

Brazilian growing season off to a strong startBrazilian farmers are planting the 2018-19 soybean crop at a record clip. Weather across cen-tral and southern Brazil remains favorable for planting and early crop development. The excep-tion is eastern and northern Brazil, where conditions are generally dry, but not severe enough to raise concerns.

Due to the quick start to the growing season, South American Crop Consultant Dr. Michael Cordonnier says some early planted soybeans will be ready for harvest by late December.

Corn planting is also running ahead of normal and the crop is off to a generally favorable start. One of the benefits of the rapid soybean planting and expected early harvest is that producers should be able to plant their saf-rinha corn acres earlier than normal. Cordonnier says that increases odds of more safrinha corn acres and boosts yield potential, as much of the crop should mature before the tradi-tional end of the rainy season.

Environmental deregulation?The front-runner to be Brazil’s

next president, Jair Bolsonaro, is highly popular amongst Brazilian farmers despite his lack of an ag policy stance. The reason: He favors deregulation of Brazil’s strict environmental laws that limit land use.

Argentine growing season off to a normal startArgentina’s corn planting is run-ning in line with its average. While there are some dry pockets in central and western production areas and there were some recent cold temps, weather is “OK for now,” according to Cordonnier.

Soybean planting is just getting started in Argentina. In the drier pockets, farmers may opt to plant more soybeans and less corn than they originally intended.

Cordonnier says the start to Argentina’s growing season is “about normal.”

Soybean harvest falls further behind normal Only 38% of the U.S. soybean crop was harvested as of Oct. 14, 15 percentage points behind the five-year average. Illinois and Indiana were running ahead of their respective normal harvest paces, but virtually all of the other major production states were well behind normal. States lagging the most behind their five-year average harvest prog-ress were in the western and northern Corn Belt, where rains were heaviest since the begin-ning of September.

Deteriorating crop quality and yield loss from splitting pods and sprouting are a growing concern. Saturated soils and slow drying of the crops in fields will continue to limit harvest efforts in the wettest areas.

Corn harvest running just ahead of normalU.S. corn harvest advanced just five percentage points to 39% complete as of Oct. 14, though that was still four points ahead of the five-year average. Illinois, Indiana and Missouri were run-ning well ahead of their respec-tive normal paces, while most other major producing states were near their five-year aver-ages. The exception was Iowa, which was seven points behind normal with only 17% of the crop harvested.

Southeast cotton crop slammed by MichaelImpacts from Hurricane Michael on the Southeast cotton crop were severe. An estimated 750,000 to 1 million bales of this year’s crop were lost due to the storm. Georgia, the second larg-est producer, was hit hardest. USDA’s crop condition ratings showed a 45-point increase in Georgia’s “poor” to “very poor” crop ratings last week. Overall, U.S. cotton crop ratings moved from 13% “poor” to “very poor” the previous week to 25% in the bottom two categories.

November forecast favorable for HRW cropThe extended weather outlook from the National Weather Service (NWS) calls for above-normal temps across the entire country during November. Those warmer temps are expect-ed to be accompanied by above-normal precip over much of the Southern Plains. That combina-tion would be favorable for establishment of the hard red winter wheat crop.

The NWS outlook calls for “equal chances” for precip across the Corn Belt next month.

Rains slow winter wheat seeding, but boost emergence The U.S. winter wheat crop was 65% seeded as of mid-October, two points behind normal, as recent heavy rains across the Plains and Midwest pushed farmers out of fields. The key winter wheat states of Kansas, Oklahoma and Texas in the Southern Plains and Illinois, Ohio, Michigan and Missouri in the Midwest are all behind their normal planting progress. But ample soil moisture should allow the crop to emerge quick-ly once planting is complete.

Despite the slower-than-nor-mal planting pace, winter wheat emergence is running three points ahead of the five-year average at 44%.

NWS 30-day Temps

NWS 30-day Precip

A: Above-normalB: Below-normalEC: Equal chances

A: Above-normalB: Below-normalEC: Equal chances November

November

October 20, 2018 / News page 3

Freeborn Co., (SC) Minnesota:“My first 80-acre field yielded 205 bu. per acre. And that’s the best I’ve heard in the area. I’ve got the ker-nels, but I don’t have the kernel size I did last year. There’s a lot of yield talk in the 190-bu. to 200-bu. range in this area. The same varieties and fields last year yielded 245 bu. to 260 bu. per acre with consistency.”

Big Stone Co., (WC) Minnesota:“Have not started fall harvest yet and do not know when that might be. Have heard of some farmers taking beans at 17% moisture and high-er and that was before this last round of rain and snow. Now I am hearing about mold that is showing up on standing crops. What a mess!”

Nobles Co., (SW) Minnesota:“I’d guess we are 15% to 20% done on corn and beans. Have not even tried beans in at least two weeks because of con-stant wet weather. Corn yields are 40 bu. per acre less than a year ago and beans are 15 bu. per acre less than last year.”

West-central Illinois:“Walked some beans. They yield checked in the 80s, but quality problems are starting to show up. I would feel a little better if they weren’t 20% lodged or flat.”

Central Illinois:“Panic is starting to set in as eleva-tors around here are close to full.”

Chinese inflation surged to highest level in monthsChinese consumer prices rose 2.5% over year-ago in September, the biggest increase since February. Food prices jumped 3.6%. While pork prices were down 2.4% from last year, they have risen sharply since the out-break of African swine fever (ASF). Non-food prices increased 2.2%.

China’s producer price index was up 3.6% from last year, but factory-gate prices cooled for a third straight month amid slow-ing domestic demand.

China not manipulating yuanThe U.S. didn’t label China a currency manipulator, but it was critical of Beijing for a “lack of currency transparency.” A twice-yearly report from the U.S. Treasury said the weakening yuan presents “major challenges to achieving fairer and more bal-ance trade.” The U.S. will con-tinue to monitor China’s curren-cy practices, along with those of Germany, India, Japan, South Korea and Switzerland.

China’s hog herd continues to contractChina’s market hog inventory fell 1.8% from year-ago levels in September, according to its ag ministry. The country’s breeding herd dropped 4.8%. Chinese pro-ducers continue to shrink their herds amid low prices and poor returns, while the ASF outbreak has also reduced inventories.

Another feedlot inventory record expectedTraders expect USDA’s Cattle on Feed Report to show a record Oct. 1 feedlot inventory of 11.501 million head, which would shatter the previous high of 11.39 million head from October 2006. Marketings are expected to fall 3.0% from year-ago levels, but this year includ-ed one fewer slaughter day than last year. Placements will likely be the wild card, as there is a nine-point spread in the range of pre-report estimates. Average Estimate estimate range (percent of year-ago)

On Feed Oct. 1 106.4% 105.6%-107.4%Placed in Sept. 100.1% 96.0%-105.0%Mkted in Sept. 97.0% 95.9%-99.3%

Beef, pork stocks likely grew less than normal last monthWe expect Sept. 30 beef stocks to total 505 million lbs. in USDA’s Oct. 22 Cold Storage Report. That would represent a monthly increase of just 1.5 mil-lion lbs., far less than the 10-year average of 15.8 million lbs. dur-ing the month.

We anticipate pork stocks will total 595 million lbs., up 12.4 million lbs. from August versus the normal seasonal increase of 25.7 million lbs. for the month.

September had one less work day this year than in 2017, which largely explains our smaller-than-normal seasonal increases in beef and pork stocks. Damage and repairs from Hurricane Florence to North Carolina’s hog and pork sector also limited pork storage last month.

September NOPA crush smashes recordMembers of the National Oilseed Processors Association (NOPA) crushed 160.8 million bu. of soy-beans in September, smashing the previous record for the month by nearly 21 million bush-els. September marked the 11th straight monthly crush record.

Despite the larger-than-antici-pated monthly crush estimate, soybean oil stocks fell below expectations at 1.531 billion pounds. A drop in the oil yield of 0.05 lbs. per bu. helped trigger a 92-million-lb. drop from August, but soyoil use for biodiesel pro-duction also remains strong.

Quality concerns with this year’s soybean crop due to poor late-season weather means crushers will likely get lower output from each bushel they process. Given strong processing margins, ample new-crop sup-plies and a slowdown in soy-bean exports to China, the soy-bean crush pace is expected to run near full capacity for the 2018-19 marketing year.

China Q4 Soybean ImportsNon-U.S. supplies

U.S. supplies

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018*0

15

25

* Tra

de es

timat

e

Sources: Thomson Reuters; China customs data

Millio

n m

etric

tons

Chinese Q4 bean buys to drop sharply, especially from U.S.China’s soybean imports will likely fall to around 18 million met-ric tons (MMT) to 20 MMT, according to trade sources cited by Reuters. That would be down from imports of 24.1 MMT last year and a 12-year low for the quarter. China has near-record soybean stocks at ports after aggressively buying soybeans from Brazil through September. Plus, Chinese feed makers are slowing use of soybean meal in feed rations given the trade war with the U.S.

While U.S. soybeans are cheaper than Brazilian prices, even with the 25% tariffs, the U.S. is expected to supply just a small fraction of China’s soybean imports from October through December. Outstanding U.S. soybean sales to China at 884,987 metric tons are running only 7.6% of the five-year average.

October 20, 2018 / News page 4

News alert and analysis exclusively for Members of Professional Farmers of America® 402 1/2 Main St. Cedar Falls, Iowa 50613-9985CEO and President, Grey Montgomery • Editor, Brian Grete • Editor Emeritus, Chip Flory • Sr. Market Analyst Jeff Wilson • Chief Economist, Bill Nelson • Washington Policy Analyst, Jim Wiesemeyer

Digital Managing Editor, Meghan Vick • Inputs Monitor Editor, Davis Michaelsen • Sr. Economist, Dan Vaught • Sr. Economist, Rob HatchettSubscription Services: 1-800-772-0023 • Editorial: 1-888-698-0487

©2018 Professional Farmers of America, Inc. • E-mail address: editors@profarmer.comFarm Journal CEO, Andrew Weber

Still some crop uncertainty, but focus shifting to demandby Editor Brian Grete, Chief Economist Bill Nelson & Sr. Economist Rob Hatchett

Heavy late-season rains and snow across the Corn Belt, especially western and northern states, and tropical

storm/hurricane damage in the South and Southeast leave some questions on the supply side of the 2018-19 balance sheets for corn and soybeans. Still, market focus will swing more toward demand with each passing week.Corn: In years when USDA has lowered its yield from

September to October, there are 2:1 odds the yield esti-mate will come down again in November. Given recent weather struggles, we anticipate another 0.7-bu. reduc-tion in yield, which pushes our total supply for 2018-19 63 million bu. lower than USDA’s. We also project total use to be 25 million bu. higher than USDA on greater ethanol grind. That trims our ending stocks forecast 88 million bu. below USDA’s October forecast and pushes our 2018-19 average price projection up a dime from the midpoint of USDA’s range.

For our initial look at the 2019-20 marketing year, we anticipate an increase in corn plantings to 92 million acres and a trendline yield of 177.0 bu. per acre, which would lower total supplies 180 million bu. from this year. We project use to decline by that amount and ending stocks to hold steady with the current marketing year. Beans: History favors USDA raising its yield estimate

again in November, but given harvest-loss concerns due to weather, we lowered our yield by 0.1 bu. per acre. Combined with a smaller import projection, our total supply outlook for 2018-19 is 11 million bu. less than USDA’s. On the demand side of the balance sheet, we project 7 million bu. more total use than USDA on greater crush and exports. But our aver-age cash price is 40¢ below the midpoint of USDA’s range.

Our early look at 2019-20 anticipates a decline in soybean plantings to 83.5 million acres and a trendline yield of 50 bu. per acre. That would sharply reduce the crop size and pull total supplies down 120 million bu. from our 2018-19 fore-cast. Due to more supplies and lower prices, we expect total use to rise 78 million bu. from the current marketing year and carryover to decline 230 million bushels. That would push the average price up 40¢ from our 2018-19 forecast.Wheat: The supply side of the 2018-19 balance sheet is

better defined than for corn and soybeans. The only dif-ference we have with USDA at this stage is imports, which we project to be 5 million bu. lighter. On the usage side, we are less optimistic than USDA regarding exports. As a result, we project carryover will decline to only 1 bil-lion bushels. Our old-crop price forecast is 20¢ below USDA’s midpoint.

For the 2019-20 marketing year, we expect total wheat plantings to rise 2.2 million acres to 50 million and yield to tick up 0.1 bu. per acre. That would increase crop size by 120 million bu. and total supplies by only 12 million bushels. We project total use will rise 42 million bu. from our old-crop outlook. That would lower carryover by 30 million bu. and push the average cash price up by 20¢.

Corn Supply/Demand 2017-18 2018-19 2018-19 2019-20 USDA USDA PF/Doane PF/DoanePlanted (mil. acres) 90.2 89.1 89.1 92.0Harvested (mil. acres) 82.7 81.8 81.8 84.5Yield (bu./acre) 176.6 180.7 180.0 177.0 million bushels Beginning Stocks 2,293 2,140 2,140 1,725Production 14,604 14,778 14,718 14,957Imports 36 50 47 43Total Supply 16,934 16,968 16,905 16,725 Feed and Residual 5,302 5,550 5,550 5,600Food, Seed, Industrial 7,054 7,130 7,155 7,200 Ethanol for Fuel* 5,601 5,650 5,675 5,700Total Domestic Use 12,355 12,680 12,705 12,800Exports 2,438 2,475 2,475 2,200Total Use 14,793 15,155 15,180 15,000 Carryover 2,140 1,813 1,725 1,725Carryover, days’ supply 52.8 43.7 41.5 42.0Stocks-to-Use 14.5% 12.0% 11.4% 11.5%Proj. avg. price/bu. $3.36 $3.00-$4.00 $3.60 $3.60 * “Ethanol for Fuel” is included in the Food, Seed & Industrial total.

Soybean Supply/Demand 2017-18 2018-19 2018-19 2019-20 USDA USDA PF/Doane PF/DoanePlanted (mil. acres) 90.1 89.1 89.1 83.5Harvested (mil. acres) 89.5 88.3 88.3 82.6Yield (bu./acre) 49.3 53.1 53.0 50.0 million bushels Beginning Stocks 302 438 438 865Production 4,411 4,690 4,680 4,130Imports 22 25 22 25Total Supply 4,734 5,153 5,140 5,020 Crush 2,055 2,070 2,080 2,100Exports 2,129 2,060 2,065 2,150Seed 104 103 97 99Residual 8 34 33 36Total Use 4,296 4,268 4,275 4,385 Carryover 438 885 865 635Carryover, days’ supply 37.2 75.7 70.8 50.4Stocks-to-Use 10.2% 20.7% 20.2% 14.5%Proj. avg. price/bu. $9.33 $7.35-$9.85 $8.20 $8.60

Wheat Supply/Demand 2017-18 2018-19 2018-19 2019-20 USDA USDA PF/Doane PF/DoanePlanted (mil. acres) 46.0 47.8 47.8 50.0Harvested (mil. acres) 37.6 39.6 39.6 42.0Yield (bu./acre) 46.3 47.6 47.6 47.7 million bushels Beginning Stocks 1,181 1,099 1,099 1,000Production 1,740 1,884 1,884 2,005Imports 157 140 135 125Total Supply 3,077 3,123 3,118 3,130 Food 964 970 970 972Seed 63 62 67 67Feed/Residual 50 110 81 121Total Domestic Use 1,078 1,142 1,118 1,160Exports 901 1,025 1,000 1,000Total Use 1,979 2,167 2,118 2,160 Carryover 1,099 956 1,000 970Carryover, days’ supply 202.5 161.0 172.3 163.9Stocks-to-Use 55.5% 44.1% 47.2% 44.9%Proj. avg. price/bu. $4.73 $4.80-$5.40 $4.90 $5.10

Game plan: Fed cattle p r o d u c e r s should hold the fourth-quarter hedges in December live cat-tle futures at $117.625. We are willing to wait on a test of the highs to add to hedges unless futures signal a top.

Corn IV’18 0% I’19 0% II’19 0% III’19 0%Meal IV’18 0% I’19 0% II’19 0% III’19 0%

Analysis page 1

October 20, 2018

Hogs

Cattle

FeedFeed Monitor

Game plan:We continue to feel winter-month futures are undervalued in relation to the cash market. We’ll wait on a price rebound before add-ing hedges. We may also add 2019 hedges on price strength.

Position Monitor Lean Hogs

IV’18 0% I’19 0% II’19 0% III’19 0%

Corn game plan: On Oct. 17, we advised extending corn-for-feed coverage another month in the cash market through December. Meal game plan: On Oct. 17, we advised exiting the remaining fourth-quarter hedg-es in December soybean meal futures. We also advised extending meal coverage another two weeks in the cash market through mid-December.

Fundamental analysisFutures followed the seasonal retreat in the cash market and wholesale pork last week. The retreat in cash hogs has been wide-ly expected, as evidenced by December futures already trading at $15 discount to the CME lean hog cash index. Daily slaughter last week hit 477,000 head on consecu-tive days, the second-highest ever. Weekly totals the last few months have been running slightly below expectations. Adding to the bearish supply story was the 1.9-lb. weekly gain in Iowa/Minnesota slaughter weights, which are now above a year ago. But demand is strong. Weekly export sales rose 24% from week earlier, reflecting strong new business with Mexico. Shipments rose to a six-month high.

Feds Feeders IV’18 25% 0% I’19 0% 0% II’19 0% 0% III’19 0% 0%

Weekly Cattle Slaughter

Daily December Live CattleTrend is higher.

Daily December Lean HogsShort-term trend is lower.

The June 29 low at $53.575 reemerged as initial resistance last week. Stronger

resistance is at the June 5 low of $55.425.

Initial support is now marked by the July 11 high of $50.40. Additional support is at the July 12 low of $47.15.

Last week’s bounce confirmed initial support

at the 40-day moving average (green line), now near $116.30.

Fundamental analysisCash cattle trading started last week in the $110 to $111 range for a sixth straight week. Packers con-tinue to use captive supplies and cattle feeders have been willing to keep selling cattle rather than risk adding extra tonnage as market weights are rising. Rain also has made feedlots sloppy this month, another reason to keep market-ready steers moving to town. Slaughter is slightly above a year ago but in a seasonal retreat. Beef markets were mixed last week as Choice cuts rose and Select fell to new lows for 2018. Consumer meat demand remains strong with more people working. U.S. beef exports slowed in the week ended Oct. 11. New sales fell 15% below the prior four-week average.

Initial resistance at the Feb. 16 high of $118.975 is backed by channel resistance at $120.40.

Daily December MealTrend is choppy.

The 40-day moving average (green line) near $313.20 is still initial support.

Initial resistance remains at the July 5 low of $323.30.

Position Monitor

$111.725

$338.10$323.30

$55.425

$118.975

$113.60

$50.40

$53.575Weekly Hog Slaughter

$302.60

$115.875

$47.15

$57.70

’000 head

Million head

$354.20

Position Monitor — All Wheat ’18 crop ’19 cropCash-only: 55% 15% Hedgers (cash sales): 65% 15% Futures/Options 0% 0%

Game plan: We are targeting a rebound to the $5.50 level in December SRW futures for addi-tional 2018- and 2019-crop sales.

October 20, 2018 / Analysis page 2

Corn

Daily March Corn

Total Corn Export Bookings

Average Corn Basis

Trend is choppy Daily SRW December Wheat

Daily December CornTrend is choppy.

Trend is choppy.

Wheat

Fundamental analysisCorn futures popped out to the highest level since Aug. 20 before consolidating recent gains. Drier weather forecasts will aid U.S. har-vest progress and put additional supplies into the pipeline after recent rain and snow curbed collec-tions. The weekly USDA export sales data probably was a short-term anomaly, but it helped to push prices into key support. Still, the long-term demand story is intact. Shipments since Sept. 1 are up 80% from a year ago and total sales com-mitments are 41% higher. Global meat production is expected to rise for a fourth straight year in 2019, while global ethanol output also reaches a new record. The market will be focused on actual yield results to gauge overall supplies ahead of the next USDA Crop Production Report on Nov. 8.

Fundamental analysis

SRW: Prices retreated after reaching a two-week high as improving global weather may stabilize yields in devel-oping crops and improve Northern Hemisphere harvesting. Export demand is slowly improving but it is still far below the pace needed to recover already lost business.

Basis Dec. futures

Position Monitor

Million metric tons

Initial support is now marked by the June 20 low at $3.69. Stouter support persists at the 40-day moving average (green line), now at $3.62 3/4.

Initial resistance remains at the June 21 high of $3.89 3/4. The

July 31 high at $3.98 3/4 marks stiffer resistance.

Initial resistance extends from the 40-day moving average (green line) near $5.19 to the Feb. 12 high at $5.24 1/2.

Initial support at the June 20 low of $5.05 3/4 is backed by the psychologically important $5.00 level and the July 11 low at $4.90.

The June 20 low at $3.78 1/2 is initial support. Stronger support is at the 40-day moving average (green line) near $3.74 1/4.

$3.50 1/2

Position Monitor ’18 crop ’19 cropCash-only: 25% 0% Hedgers (cash sales): 25% 0% Futures/Options 0% 0%

$4.90

$5.73 1/4

$3.79 1/4

$3.62 1/4

$3.89 3/4

$3.60

$3.69 1/2

$5.49 3/4

$3.69

$3.78 1/2

Game plan: With the long-term outlook remaining supportive domestically and globally, we are willing to wait on a retest of the July high before increasing 2018-crop sales. We would likely also make initial 2019-crop sales at the time of the next 2018-crop sale. We are looking to get to around half sold on 2018-crop by year-end or early in the new year.

$5.05 3/4

$5.24 1/2

Last week’s price action confirmed initial resistance at the Dec. 18 low of $3.79 1/4. The July 31 high at

$3.88 1/2 is key resistance.

$3.88 1/2

$3.98 3/4

Game plan: On Oct. 16, we advised selling another 5% of 2018-crop for January delivery to take advantage of the strong price recovery. We are targeting the $9.10 to $9.30 level in January futures to sell another one-quarter of 2018-crop, as we feel upside potential is limited, barring a trade deal with China. We would likely also make initial 2019-crop sales at the same time.

October 20, 2018 / Analysis page 3

Daily January SoybeansTrend is choppy.

Average Soybean Basis

Position Monitor ’18 crop ’19 cropCash-only: 25% 0% Hedgers (cash sales): 25% 0% Futures/Options 0% 0%

Fundamental analysisThe market fell back from a seven-week high last week, even as trade tensions with China eased a bit. Talks are tentatively planned for the end of November (see News page 1). Prices slipped on clearing weather for accelerated harvesting of U.S. soybeans. It may take several weeks to accurately measure the weather damage caused to Midwest yields. That uncertainty will maintain a small weather premium in futures prices. Soybeans fell on news that China cancelled prior purchases, even after confirmation that two cargoes were shipped to the country last week. Underlying support from non-Chinese demand for U.S. beans is starting to wane as we move into a period when Chinese sales and shipments historically dominate U.S. exports. Record crush demand should remain supportive into 2019.

SoybeanS

Total Soybean Export Bookings

Average Wheat Basis

Total Wheat Export Bookings

HRW: Drier weather will allow fields across the Plains to dry and help farmers quickly finish up planting. Emergence is already ahead of average and soil mois-ture is plentiful for strong early plant development. The trade continues to wait for the long-anticipated slowdown in Russian exports. U.S. export sales to date equal just 43.4% of USDA’s annu-al projection, down from the prior five-year average of 59%.

HRS: Spring wheat futures are looking for confirmation of lost production in Canada, where har-vest last week was 72% done in Saskatchewan, compared with 98% completed a year ago.

Daily HRW December Wheat

Daily HRS December Wheat

Basis Dec. futures

Basis Nov. futures

Million metric tons

Initial support is provided by the trendline at $5.14 1/4.

The short-term trendline puts initial support at $5.86 1/2.

The Feb. 5 low of $5.19 1/2 marks initial resistance.

Million metric tons

The June 29 low at $8.88 1/4 remains initial resistance.

Stiffer resistance is at $9.08.

The April 4 low at $6.01 1/2 remains initial resistance.

Initial support extends from the 40-day moving average (green line) at $8.64 to the July 11 low at $8.57 3/4.

$5.76

$5.77 1/4

$12.42 1/2

Trend is choppy.Daily November Soybeans

A drop below initial support at the 40-day moving average (green line) near $8.50 1/4 would have bears targeting stronger support at the July 13 low of $8.26 3/4, then the Sept. 18 low at $8.12 1/4.

Initial resistance is again marked by the June 19 low at $8.64 1/2. Tougher resistance

persists at the June 26 low of $8.82 1/2.

$9.20 1/2

$9.27 1/2

$5.53

$8.37 1/4

$8.57 3/4

$8.82 1/2

$8.64 1/2

$8.88 1/4

$4.93 1/4

$6.23

$8.26 3/4

$6.01 1/2

$5.54

$5.19 1/2

$8.12 1/4

$9.08

October 20, 2018 / Analysis page 4

From the Bullpen

Average Cotton Basis

CottonPosition Monitor ’18 crop ’19 cropCash-only: 40% 0% Hedgers (cash sales): 40% 0% Futures/Options 0% 0%

Fundamental analysis:Price strength tied to crop losses from heavy rains in the Southeast and Texas faded last week. That’s because U.S. export business is slow. USDA reported weekly sales fell 55% below the prior four-week aver-age and included additional sales cancellations by China.

Total Cotton Export Bookings

General outlook

Game plan: We are targeting the 80.00¢ level in December futures to make additional cash sales and/or add hedge coverage.

By Sr. Market Analyst Jeff Wilson

Read Pro Farmer on Friday!Put the news and analysis of Pro Farmer newsletter to work for

you as early as Friday afternoon — before it hits the mail. Get Pro Farmer newsletter via e-mail.

Call 1-800-772-0023 for details!

We advised a 5% 2018-crop cash soybean sale for January delivery on Oct. 16. The sales rewarded the 80¢ rally since the September price lows, the 14¢ premium January futures traded to November and the small improve-ment in January basis relative to spot delivery.

It looks like the discount November futures trade to deferred contracts bottomed. Most spreads rose to about 80% of the full cost of carry last month and may remain wide. We want to continue to reward those spreads.

The national average soybean basis was 52 1/4¢ below November futures on Oct. 17, up from 64¢ under in September.

We are now 25% sold for both soybean hedgers and cash-only marketers for 2018 production. We want to continue to sell into price strength to get to 50% sold on 2018-crop and start making some cash sales for

2019-crop. Also, be prepared to increase cash corn sales on price strength during the next two months.

Rallies may not last long. Global soybean inventories before the 2019 harvest will be record-large, providing a big cushion for weather problems in South America or the U.S. Planting progress in South America is off to a fast start with adequate to surplus soil moisture for strong germination and early growth. During seasons with big supplies the deferred futures tend to come down to where the nearby futures expire.

There remains a mountain of soybean sup-plies, with more coming from Brazil by January. Don’t bet a trade deal with China will be a big price booster, because South American prices may simply fall to match the 25% cheaper U.S. value.

with record-low investment growth, tepid industrial output and weaker growth in consumer spending.

Adding to debt worries was an S&P Global Ratings report that said off-balance-sheet borrowings by Chinese local governments pushed a ratio of government debt to gross domestic product to an “alarming” level of 60% in 2017.

The key is when China feels enough of a pinch to resolve U.S. trade tensions.

Chinese Economy: The Shanghai Composite Index has fallen almost 25% this year to a four-year low amid the intensifying U.S. trade war.

Falling confidence and a liquidity crunch sent investors rushing to exit stocks the past five months. Reduced inflation and economic growth mean Beijing may be forced to turn to stimu-lus spending even as it vows to keep debt levels under control.

Data over the past few months shows faltering domestic demand,

Daily December CottonTrend is lower.

’000 running bales

Member discount for MILK conferenceNov. 5-7, 2018 at the Luxor Resort in Las Vegas

Pro Farmer Members receive $100 off standard registration and qualify for hotel rooms at only $45 per night. Use code “ProFarmer” and register to attend today at www.milkbusinessconference.com.

Key Market Items on My ‘To Watch’ List

1) USDA Cold Storage Report— Monday, Oct. 22, 2:00 p.m. CTMeat stocks likely rose in September.2) USDA Crop Progress Report — Monday, Oct. 22, 3:00 p.m. CTDry weather aids Midwest harvests.3) USDA Export Sales Report— Thursday, Oct. 25, 7:30 a.m. CTActive corn sales, wheat improving.4 ) USDA Food Price Report— Thursday, Oct. 25, 8:00 a.m. CTConsumer food inflation remains low.5) U.S. Consumer Sentiment— Friday, Oct. 26, 10:00 a.m. CTThis is a key sentiment gauge before the November elections.

The March 9 high of 78.74¢ remains initial resistance.

Key resistance is at 80.70¢.

A close below initial support at the Feb. 12 high of 75.96¢ would have bears targeting

stouter support at the Jan. 31 low of 74.00¢.

Basis Dec. futures

78.74¢

84.89¢

74.00¢

80.70¢

Weekly Shanghai Composite Index

Bears’ next target is the psychologically important 2,000-point level (not shown).

75.96¢

2,638.3

Last week’s drop carried the index below its

January 2016 low of 2,638.3 points.