Do corn prices have one more leg up? Seasonal odds of highs and lows in

corn and soybeans can be very helpful in determining the odds of when the cash markets make their bottoms and tops. History is a good indicator although frequently difficult to believe.

We’ve used the seasonal odds charts in this publication many times over the years and they are included again on page 2. In both corn and soybeans odds are very high that the highs and lows occur early or late in the marketing season, since most of the moves are based on weather. This year is a little more unusual in that soybeans have had a fairly wide range but thus far corn has not.

We have traditionally tracked the Central Illinois cash corn market for this study. Since Sept. 1, the low in cash corn prices in Illinois has been $3.37, which was established in September, and the high was $3.82 established in April. It’s rare to go through an entire marketing year with only a 45-cent range in cash corn prices. At the risk of sounding like a two-armed economist, odds favor either new highs or new lows in the cash market before the end of the marketing year, which is Aug. 31.

Clearly, with good growing conditions one can argue that the cash market will make new lows going into the last half of July and into August as producers dump remaining old-crop corn before the new-crop arrives. That may happen. But let’s take a look at the potential bullish scenario. As the seasonal chart indicates, a September low in corn has occurred 22% of years since 1970. The low in the cash corn market has never occurred in March, April, May or June. Of the years the market bottomed in September, there is no completely consistent pattern on when the tops occurred One trend is very concerning to us as a bear, in that of the

years with September lows, the top in the cash corn market has occurred in the month of April only one time; in ‘03/04. Thus far the high is in April at $3.82. So if history is to repeat itself, the odds are leaning toward the possibility of a higher move in cash corn that will carry into either June or July. Only two times following a September low has the top moved into the July/August timeframe. So what it’s saying to us is that if we haven’t already made the top, it is very close and will likely be made by the end of June–but no one can gauge how severe the up move might be if new highs are made.

The bottom line: We are not shifting from a bear to a bull in corn—but we are being very cautious. In December corn futures, the high two weeks ago was at $3.98 ½ and was a key reversal down. If December futures close above that level, we will want to run for the hills on our short corn hedges. Prior to that, we are going to recommend doing nothing, but if there is any inkling of a breakout to the upside, then the odds will highly favor the cash corn market taking out the April top and moving higher into the month of June.

SoybeanS another Story

Thus far the low in cash soybeans occurred in September, but it was also matched by the same price of $8.42 in March. Since 1970, lows in the cash soybean market have occurred in the month of September 16% of the time. The highs have traditionally occurred between May and August. This year the top occurred this month, May 10th, at $10.45. Thirteen percent of the highs have occurred in the month of May and since the high thus far was made on a crop report day, we would conclude that the odds are increased that the cash soybean market has just made its top.

May 13, 2016

new highS in corn?

“An intellectual says a simple thing in a hard way. An artist says a hard thing in a simple way”. - Charles Bukowski

Soy

Surp

riSe

USDA’s first look at 2016-17 balance sheets on Tuesday in-cluded a stunner for soybeans, as USDA projected new crop soy carryout of 305 million bushels, 100 million less than the average analyst estimate. While the stress on South American crops has boosted the outlook for U.S. soy exports, USDA was especially aggressive, raising old crop ex-ports by 35 million and forecast-ing an increase of 145 million for 2016-17, to 1.885 billion.

For corn, USDA’s monthly supply and demand estimates were only mildly bullish at best, as it lowered old crop car-ryout thanks to a hike in exports but still projected new crop carryout at a burden-some 2.153 billion bushels. There was also very little friendly news in USDA’s wheat estimates, although as we note on page 3 world wheat supplies aren’t quite as plentiful as they appear at first glance. See our updated balance sheets for corn, soybeans and wheat on pages 7, 9 and 13.

Where does this leave the markets? USDA’s season-average price projections for corn, wheat and soybeans are all well below current levels, and there are other negative fundamental signals. But trend-following has prevailed over the past several weeks regardless of fundamentals. Respect the trend.

Courtesy of Adam from Russellville, KY

2 800-558-3431

new highs in corn? ...(continued)

Central Illinois 24%22% 22% '13/14

'10/11 '14/15 '12/13

'09/10 '05/06 '02/03

'07/08 '03/04 '97/98

'06/07 '01/02 13% '91/92

'00/01 '94/95 '99/00 '88/89

'95/96 '92/93 '98/99 '85/86

'89/90 '90/91 7% 7% '96/97 '81/82

'87/88 '86/87 '04/05 '11/12 '93/94 '80/81

'78/79 '82/83 '72/73 '08/09 2% 2% '84/85 '76/77

'77/78 '73/74 '71/72 '75/76 '79/80 '74/75 '83/84 '70/71

Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug

Percent Lows

0%

Marketing year begins September 1

31%

2014/15 29%

2009/10 2013/14

2004/05 2012/13

2002/03 2005/06

2001/02 2003/04

1994/95 1999/00

16% 1992/93 1997/98

2010/11 1991/92 1993/94

2007/08 1989/90 1988/89

2006/07 1986/87 1985/86

1995/96 1982/83 7% 1984/85

1987/88 1977/78 4% 4% 4% 1998/99 1981/82

1978/79 1973/74 1996/97 2011/12 1979/80 2% 2% 1990/91 1980/81

1970/71 1972/73 1971/72 2008/09 1975/76 1974/75 2000/01 1983/84 1976/77

Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul AugMarketing Year begins Sept 1

27%13/14

12/13

08/09 20%

02/03 18% 11/12

96/97 10/11 09/10

88/89 07/08 13% 01/02

84/85 89/90 14/15 90/91

83/84 87/88 05/06 82/83

81/82 86/87 04/05 79/80

76/77 4% 4% 85/86 95/96 73/74

75/76 2% 2% 2% 2% 2% 98/99 2% 99/00 78/79 94/95 72/73

74/75 97/98 80/81 00/01 93/94 06/07 91/92 03/04 77/78 70/71 92/93 71/72

Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug

Percent Highs

Marketing year begins September 1

Soybean Seasonality 24%

22% Percent Highs 07/08

14/15 1970/71 - 2014/15 06/07

12/13 Central Illinois 00/01

09/10 95/96

08/09 13% 13% 94/95

97/98 13/14 04/05 92/93 11%90/91 02/03 91/92 89/90 11/12

88/89 99/00 87/88 79/80 10/11

84/85 4% 4% 96/97 86/87 75/76 01/02

83/84 2% 98/99 2% 2% 85/86 93/94 78/79 73/74 82/83

81/82 74/75 80/81 05/06 03/04 76/77 77/78 72/73 70/71 71/72

Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug

Marketing Year begins Sept 1

On the other hand, of the seven years that cash soybean prices made their low in September, the high for the season occurred three times in June, three times in July and once in August. So while this market is looking very toppy right now, we need to be careful because this market still could make another leg up based on historical trends.

Putting it All together

It doesn’t pay to ignore seasonal trends. If corn and beans start to appear as though they are going to make highs above the last two week’s highs, brace yourself for another significant leg up. Corn is in a fairly tight trading range and has been for the last two months. A breakout in either direction is going to result in a big move.

Thursday’s key reversal down in soybeans is acting like the bean complex is topping, but if corn can’t follow through to the down side, volatility is going to increase and a breakout to the upside means we will have to jump on the bull bandwagon. The two

key prices we are watching in corn is the $3.98 1/2 resistance area in the December futures and the support at $3.75. A close below support we become an aggressive seller and a close above the resistance we will be pulling all of our short hedges.

strAtegyNo calls in the market are ever easy

and this one is no exception. We do be-lieve that in the soybeans, however, this is easier than the corn. The bullish consen-sus on soybeans is the highest in months. Large speculative funds have an extremely large long position and commericals an extremely large short position. These are all ominous signs of a market making a major top. Combine that with the funda-mental fact that soybean planted acreage is increasing significantly and this has all the makings of a substantial bear market. We will stay short.

In corn, the question is what are the possibilities that corn prices can rally while soybean prices go down. Actually, it

could happen fairly easily. The November soybean/December corn spread has moved over $1.60 since the first of March. A mere reversal of that is all that is needed.

But then the question is how high can corn rally in the face of a bear market in soybeans and the fact that there is still a huge supply of corn left. Our estimate is that if December corn futures take out $4.05 on the upside, the upside possibility would be $4.27 to fill the gap left on July 20 of last year. It’s hard to imagine much more upside than that. That being the case, our strategy of being long December $4.10 puts/$4.50 calls would not appear to be at risk. The other strategy of long $3.80 puts/$4.30 calls would likely not be at risk either. To play it safe, as this is written prior to the close, if December corn futures close above $3.99 we will take off the latter strategy ,and we will also take off the short December ‘17 corn on a close above $4.12. It is always easier to put them back on than it is to ride a position in the wrong direction.

corn seasonalityPercent lows

central illinois1970/71 to 2014/15

soybean seasonalityPercent lows

central illinois1970/71 to 2014/15

corn seasonalityPercent highs

central illinois1970/71 to 2014/15

soybean seasonalityPercent highs

central illinois1970/71 to 2014/15

3email breport@brockreport.com

Lead story . . . . . . . . . . . . .1Fundamentals . . . . . . . . .3News Analysis . . . . . . . . .4Corn . . . . . . . . . . . . . . . . .6Soybeans . . . . . . . . . . . . .8Management/Biofuels . .10Wheat . . . . . . . . . . . . . . .12

Rice . . . . . . . . . . . . . . . . .14Cotton . . . . . . . . . . . . . . .15Hogs . . . . . . . . . . . . . . . .16Cattle . . . . . . . . . . . . . . .17Feed/Inputs . . . . . . . . . .18Financials/Energy . . . . .19Positions . . . . . . . . . . . . .20 c

on

ten

ts

As discussed in the lead story, smaller-than-expected soybean stocks were the big surprise in this week’s monthly USDA supply/demand report. Meanwhile, USDA’s projection for world wheat stocks rose again, while world corn stocks were seen holding largely steady.

USDA’s soybean balance sheets have spurred concerns world production can’t keep up with demand. USDA now forecasts 2015/16 world output at 1.3% below a year earlier and sees a modest 2.6% rise for 2016/17. Demand is projected to be up 5.3% this year and another 3.3% in 2016/17. USDA’s 2015/16 crop number will likely fall further as its cuts to South American output were conservative, but its new-crop demand forecast looks aggressive. USDA’s 2016/17 world soybean carryout would be the smallest in 3 years, but would be 10% larger than the 2013/14 carryout.

On USDA’s world wheat balance sheets, record large stocks got even larger, with the old-crop carryout forecast rising another 1.5% and USDA projecting a further 5.9% rise in stocks for 2016/17. What must be noted, though, is the increase for 2016/17 is due to a huge jump of 21.7 million metric tons (MMT) in China’s ending stocks. Wheat stocks outside of China are actually projected to fall by 7.3 MMT.

Conversely, USDA’s world corn balance sheet shows a small cut to carryout next year, but that’s because China’s huge stocks are seen falling 8 MMT. Corn stocks outside China are expected to rise 7.2 MMT. That increase is all in the U.S., with stocks outside the U.S. and China down 1.7 MMT, which should boost U.S. exports.

FUnDAMentALscoMMentAry

Farm Finance Focused Agenda

June 27 - W. Lafayette, IN June 28 - Bloomington, IL

June 29 - York, NE June 30 - Mankato, MN

For details and registration visit

www .SummerDecisions .com

2016 DECISIONS SUMMER SEMINARS

YearBeginning

Stocks Production ExportsTotal

Consumption Ending Stocks Stocks/Use Ratio

2010/11 140.9 835.9 91.3 853.2 123.6 14.5%

2011/12 123.6 889.8 116.9 885.0 128.3 14.5%

2012/13 128.3 869.7 95.1 864.8 133.3 15.4%

2013/14 133.3 990.8 131.2 948.9 175.2 18.5%

2014/15 175.2 1013.5 141.7 980.8 207.9 21.2%

2015/16 207.9 968.9 121.3 968.9 207.9 21.5%Change from April 0.3 -3.3 -1.0 -1.9 -1.0 -0.1%

2016/17 207.9 1011.1 132.9 1011.9 207.0 20.5%Change from last year 0.0 42.2 11.6 43.0 -0.8 -1.0%

YearBeginning

Stocks Production ExportsTotal

Consumption Ending Stocks Stocks/Use Ratio

2010/11 60.3 264.3 91.7 254.4 70.2 27.6%

2011/12 70.2 240.6 92.2 257.7 53.1 20.6%

2012/13 53.1 268.6 100.8 266.2 55.5 20.8%

2013/14 55.5 282.5 112.7 275.9 62.0 22.5%

2014/15 62.0 319.7 126.2 303.7 78.1 25.7%

2015/16 78.1 315.9 132.6 319.7 74.3 23.2%Change from April 0.3 -4.3 0.2 0.8 -4.8 -1.6%

2016/17 74.2 324.2 138.3 330.2 68.2 20.7%Change from last year -3.8 8.3 5.7 10.6 -6.0 -2.6%

YearBeginning

Stocks Production ExportsTotal

Consumption Ending Stocks Stocks/Use Ratio

2010/11 203.2 649.3 132.7 653.9 198.7 30.4%

2011/12 198.7 696.9 158.2 697.7 197.9 28.4%

2012/13 197.9 658.3 137.5 679.1 177.1 26.1%

2013/14 177.1 714.9 165.9 697.8 194.2 27.8%

2014/15 194.2 726.9 164.1 704.6 216.5 30.7%

2015/16 216.5 734.1 166.9 707.7 242.9 34.3%Change from April 1.7 0.9 3.7 -1.0 3.7 0.6%

2016/17 242.9 727.0 163.9 712.6 257.3 36.1%Change from last year 26.4 -7.1 -2.9 4.9 14.4 1.8%

Values in million metric tons; bold numbers are USDA projections. Numbers may not add due to rounding

World supply & Demand

source: UsDA, Brock Associates

corn

soybeans

Wheat

4 800-558-3431

The attaché said the aggressive buying pace is likely to continue as China’s spinners remain short of cotton and it appears this year’s offering price is acceptable to buyers. The daily auction amount of about 30,000 metric tons may continue to be raised. The situation will likely “further temper” China’ s imports, the attaché said.

While theses sales appear to be having negative impact on world cotton prices right now, a sizeable drawdown of Chinese stocks may be what is needed to put an end to the current bear market in cotton. China’s cotton imports are expected to remain depressed through 2016/17, though, with USDA on Tuesday pegging them at 4.5 million 480-lb. bales, up just slightly from this year.

Saudi Grain Buyer SeekS SaleSaudi Grains Organization (SAGO), which oversees that

country’s extensive wheat buying program, is looking to sell a stake to a strategic buyer as part of its privatization and has chosen HSBC’s Saudi Arabian arm as its advisor, sources aware of the matter told Reuters News Service on Monday. Saudi Arabia plans to privatize numerous state bodies under a recently announced economic plan in order to cover budget shortfalls caused by lower crude oil prices. While a number of regional players would likely be interested in taking a stake in SAGO, the Saudis would prefer bringing in a global partner, a separate industry source told Reuters.

World neWS analySiS

ChineSe Commodity CollapSeA speculative bubble in China’s commodities markets appears to

have burst in the face of stepped-up efforts by futures exchanges to clamp down on speculative trade at the behest of China’s government securities regulator. China’s Dalian Commodity Exchange said on Monday it would continue to strengthen its market monitoring and may raise transaction fees further to curb speculation risks. Dalian iron ore futures fell by as much as 6% on Tuesday, while steel rebar futures on the Shanghai Futures Exchange were down 7.6% at one point in the day, their largest drop since 2009.

Those markets continued to weaken, more than wiping out their strong April gains before stabilizing on Friday. The sell-off from all appearances started to spread into Chinese agricultural commodities, with Dalian palm oil futures falling 1.9% on Thursday and another 3.0% on Friday and Dalian soybean futures dropping 1.7% on Friday. Those losses in turn are pressuring CBOT soy futures. The Chinese commodity collapse has started to spook global equities markets as well.

Brazil’S rouSSeff SuSpendedBrazil’s Senate on Wednesday night voted 55-22 to begin an im-

peachment trial against President Dilma Rousseff, resulting in her immediate suspension for up to six months while the trial is con-ducted. Rousseff ’s impeachment is generally seen as supportive for the Brazilian real, although that currency weakened slightly against the U.S. dollar on Thursday. A stronger real would be a further boost for U.S. corn and soybean export prospects.

The real has been hovering at about 3.5 to the dollar since late March, although it briefly fell to a one-month low on Monday after the acting speaker of the lower house of Brazil’s legislature said he would try to annul that body’s April 17 vote in favor of impeach-ment. However, the speaker did a quick about face.

While it has recovered significantly since mid-January, the real remains historically weak against the dollar, which along with the recent surge in soybean prices has sparked aggressive forward con-tracting of 2016/17 production by Brazilian growers. Consultant Informa FNP late last week estimated 16-17% of next year’s crop had already been priced, up from just 4.7% of the 2016 crop at the same point a year ago.

China Cotton SaleS JumpChina’s government has sold more cotton out of its state reserves

in one week than it did in all of 2015, the U.S. agricultural attaché in Beijing said in a report dated May 9 and released on Thursday. In fact, sales for the first week of reserve auctions nearly doubled last year’s total sales.

Beijing sold 120,350 metric tons of cotton (more than 550,000 480-pound bales) at auction during the week that began May 3, most of which was imported.

World Weather hotSpotSU.S. corn and soybean planting progress is running ahead of

normal, but the going has been slower in the eastern Corn Belt and above-normal rainfall is expected to limit progress there again next week. An important weather shift is expected late next week, though, as a high pressure ridge builds up. World Weather Inc. says this will be the season’s first significant ridge and should reduce rainfall across the Midwest for at least a week, while bringing above-normal temperatures in the 70s and 80s F.

West Texas is expected to receive two waves of rainfall in the next week to 10 days, which should set the stage for aggres-sive planting of cotton and other crops there. Southern Plains HRW wheat areas will see more rainfall next week as well, which should maintain good crop conditions. Drier conditions will be needed there soon for crop maturation and harvesting.

Argentina’s crop belt is steadily drying out and weather over the next two weeks should be favorable to summer crop maturation and harvesting, World Weather says. Any showers that do pop up will not likely be great enough to cause further problems. The second corn crop in northern Brazil is likely to come under some further moisture stress during the next two weeks, while crops in the south should remain in good condition.

5email breport@brockreport.com

Meanwhile as JBS shifts to the U.S., one of its main rivals, Arkansas-based Tyson Foods, is looking to expand overseas. The company told investors this week it is looking at chicken or prepared food businesses abroad to acquire. CEO Donnie Smith noted to investors that “96% of the population is outside of the U.S., and food consumption is going to grow around the world.” A Brazilian processed food company, BRF, confirmed Tyson officials had visited to examine a possible purchase. Tyson reported second-quarter earnings of $432 million, up from $310 million a year earlier, beating analyst expectations.

NO MILK FOR TODDLERS?The U.S. dairy industry is lobbying the White House to challenge

proposed guidelines from the World Health Organization that would discourage milk consumption for young children.

The WHO “guidance document” would, according to dairy groups, dictate sweeping new restrictions and discourage milk and other dairy products in children up to age 3. The WHO document issued at the beginning of the year was titled “Ending Inappropriate Marketing

of Foods for Infants and Young Children.” Jim Mulhern, president and CEO of the National Milk Producers

Federation, called it “a de facto criticism of all milk consumption by toddlers.” The WHO is scheduled to present the document to the World Health Assembly later this month.

While denying milk to toddlers would seem to defy common sense for generations of parents, many food fads as well as official nutritional guidelines have defied common sense over the years, and an anti-milk guideline from a U.N. agency would surely sway some moms. The dairy industry sent a letter to the Obama Administration asking for it to push back against the WHO proposal, writing that dairy provides 26.7% of children’s energy intake between ages 12 and 24 months, as well as 40% of the potassium and protein intake.

SEED MERgER TaLK hEaTS upMonsanto, which tried unsuccessfully to woo Syngenta into a

merger deal last year, may soon be wooed itself, as two German companies are reportedly pursuing a deal with the St. Louis based company. On Thursday morning, Monsanto shares shot up by more than 10% after Bloomberg reported Bayer was engaged in “pre-liminary discussions internally and with advisers” about a potential takeover bid.

Monsanto has considered the possibility of a merger with Bayer or BASF, but told Bayer in March that it was not interested in sell-ing and viewed itself as an acquirer, according to Bloomberg’s re-port. The company has a market cap of approximately $40 billion.

Merger talk in the seed and ag chemical industry is likely to persist throughout 2016. Syngenta re-buffed Monsanto’s roughly $43 billion takeover bid, in part because of what it deemed to be significant anti-trust hurdles, and then an-nounced a merger deal with ChemChina ear-lier this year, in a deal that has raised some concern among U.S. politicians and ag groups. A Bayer/Monsanto deal may be less likely to raise anti-trust red flags, as there is less overlap between the two companies. Bayer, best known for aspirin, nonetheless is a major player in seed treatments and has been trying to expand its seeds business. It recently said it planned to introduce a new soybean seed into the South American market to compete with Monsanto.

A separate report this week has BASF also considering a bid for Monsanto. Given the wave of consolidation that will ultimately in-clude a new combined Dow and DuPont ag business, BASF could feel pressure to match any offer for Monsanto put forth by Bayer, to avoid being the only major seed company on the dance floor without a partner.

JBS TO RELOCaTE TO u.S.The ground is also shifting in the protein industry globally. JBS

SA, the world’s largest meat producer, announced a corporate restructuring centered around a move to New York. The Brazil-based company, which over the past decade has bought Pilgrim’s Pride and Swift, will create a new unit, JBS Foods International, to be headquartered in the Big Apple. It will hold virtually all of the non-Brazilian businesses.

The move comes amid an expanding political and financial crisis in Brazil that has pushed up financing costs for the company and limited its access to capital markets. JBS separately said this week that it lost $790 million in the first quarter, versus a profit of $400 million a year earlier. The decline was due in part to weaker cattle prices, but also to a whopping $1.67 billion loss on currency hedges.

NaTIONaL NEwS aNaLySIS

Congrats to Adam with Hendricks Farms in Russellville, Ky., the latest winner of our Farm Photo contest. He wins a free month of The Brock Report. His photos are shown above, and on pages 1 and 11. Enter your photos at BReport@BrockReport.com. Thank you!

6 800-558-3431

330340350360370380390

Nov Dec Jan Feb Mar Apr May

Weekly continuous

central illinois cash corn

corn

14 Day rsi

support

supportcontract size: 5,000 buDaily limit: 25 cents/bu

July 2016 high: 5.82 3/4

1/13/13low: 3.51 1/4

4/1/16

key reversal down

7email breport@brockreport.com

Marketing year begins Sept 1 14/15 15/16 Proj 16/17 Proj. 15/16 16/17ACREAGE (million)

Planted Area 90.6 88.0 93.6 88.0 91.5Harvested Area 83.1 80.7 85.9 80.7 83.7Yield 171.0 168.4 168.0 168.4 169.0

SUPPLY (mil bu) Beg. Stocks 1,232 1,731 1,803 1,731 1,787Production 14,216 13,601 14,430 13,601 14,145Imports 32 55 40 50 30

Total Supply 15,479 15,387 16,273 15,382 15,962USAGE (mil bu)

Feed & Residual 5,324 5,250 5,550 5,300 5,500Food/Seed/Ind 6,560 6,610 6,670 6,595 6,625

Ethanol & By-Products 5,200 5,250 5,300 5,225 5,250Domestic Use 11,883 11,860 12,220 11,895 12,125Exports 1,864 1,725 1,900 1,700 1,850

Total Use 13,748 13,585 14,120 13,595 13,975Ending Stocks (mil bu, Aug 31) 1,731 1,803 2,153 1,787 1,987

CCC 0 0 0 0 0Privately-Owned 1,731 1,803 2,153 1,787 1,987Stocks/Use 12.6% 13.3% 15.2% 13.1% 14.2%Farm Price ($/bu) $3.70 $3.50-3.70 3.05-3.65 $3.20-3.80 $3.15-3.75

BrockUSDA

3.25

3.50

3.75

4.00

4.25

-500,000

-400,000

-300,000

-200,000

-100,000

0

100,000

200,000

300,000

Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun

Commitments of TradersFutures and Options Combined, as of May 3, 2016

Commercials

PriceContracts

LargeSpecs

Source:CFTC

Price (dotted line, left scale)

VOLUME

OpEn intErEst

cOrn

U.s. sUppLY & DEManD

DEcEMbEr 2017 High: 4.75

12/17/13Low: 3.80

3/2/16

cOMMEntarYThere was nothing bullish in this

week’s supply/demand report for corn. What is bullish is planting delays, particularly in Ohio. We are seeing more acreage shifted to soybeans and thus corn acreage will probably not reach the USDA’s estimate.

Technically, the price trend is sideways. A close in December corn above $3.99 will shift the trend to up and strongly indicate this market could rally into the July 4th weekend. A close below $3.75 is the turning point to throw bears back into the lead and set the stage for a move to new contract lows, but we do not antipicate that’s going to happen before July. Cash-Only Marketers’ Strategy: Old-crop is 90% sold. Catch up if not there. New-crop is 30% sold. Hedgers’ Strategy: Old-crop is gone. In the new crop, 20% is forward con-tracted. Another 20% is covered with long December $4.10 puts/short (2) $4.50 calls, while 20% is covered with long December $3.80 puts/short (2) $4.30 calls. We currently have no short position on December ‘17 corn.

sEptEMbEr 2016 High: 4.91 1/4

4/1714Low: 3.55 3/4

4/1/16

DEcEMbEr 2016 High: 5.60

12/18/12Low: 3.64

4/1/16

* prospective plantings report

*

reversal down

reversal down

support

support

reversal down

support

8 800-558-3431

14-day rsi

soybeans

80085090095010001050

Nov Dec Jan Feb Mar Apr May

Central illinois Cash soybeans

source: Usda aMs

weekly ContinUoUs

resistance

key reversal up

Contract size: 5,000 budaily limit: 60 cents/bu

JUly 2016high: 12.16

5/22/14low: 8.59 1/2

11/23/15

brokenresistance support

9email breport@brockreport.com

commentary

8.00

8.50

9.00

9.50

10.00

10.50

-300,000-250,000-200,000-150,000-100,000-50,000050,000100,000150,000200,000

Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul

Commitments of TradersFutures and Options Combined, as of May 3, 2016Price

ContractsLarge Specs

CommercialsSource:CFTC

Price (dotted line, left scale)

VoLUme

open interest

aUgUst 2016High: 11.86

6/5/14Low: 8.61 1/4

11/10/15

soybeans

Marketing year begins Sep 1 14/15 15/16 Proj. 16/17 Proj. 15/16 16/17

ACREAGE (million)Planted Acres 83.3 82.7 82.2 82.7 83.5Harvested Acres 82.6 81.8 81.4 81.8 82.7Yield 47.5 48.0 46.7 48.0 47.0SUPPLY ( mil bu) Beg. Stocks 92 191 400 191 426Production 3,927 3,929 3,800 3,930 3,887Imports 33 30 30 30 30 Total Supply 4,052 4,150 4,230 4,150 4,343USAGE (mil bu) Crush 1,873 1,880 1,915 1,870 1,900Exports 1,843 1,740 1,885 1,725 1,850Seed 96 95 95 95 97Residual 49 34 30 34 40 Total Use 3,862 3,750 3,925 3,724 3,887

Ending Stocks (mil bu, Aug 31) 191 400 305 426 456 CCC 0 0 0 0 0 Privately-Owned 191 400 305 426 456Stocks/Use 4.9% 10.7% 7.8% 11.4% 11.7%Farm Price ($/Bu) $10.10 8.85 8.35-9.85 $8.50-9.20 $8.25-9.50

BrockUSDA

U.s. sUppLy & DemanD

support

Very few people believe USDA’s ‘16/17 carryover forecast of 305 million bushels. Their acreage is too low. In the South and the eastern U.S., acreage is being shifted to soybeans as it is getting too late to plant other crops, particularly corn and to a lesser extent cotton. We may even be low on our estimate of 83.5 million acres.

Technically, Tuesday may have been a blow-off top in this market. Prices have been working lower since. Thursday was an outside day down in November beans. This market has likely discounted all the bullish news at this point. With the current fundamentals, we don’t want to get bullish $10.75 November beans. Cash-only Marketers’ Strategy: Old-crop sales are at 100%. Get there if you’re not already. In the new crop, 40% is now forward contracted. Hedgers’ Strategy: New-crop is 30% cash contracted. 20% is covered with long November $8.80 puts/short (2) $9.60 calls and we are short November futures on 20%. We have made no sales yet for the ‘17 crop.

noVember 2016High: 12.56 1/2

12/6/12Low: 8.509/11/15

noVember 2017High: 11.30

6/19/14Low: 8.57 8/24/15

support

Key reversal up

Key reversal up

* prospective plantings report

*

support

10 800-558-3431

weather

MANAGEMENT INSIDe BrOCK

ON tOpIC

WHAT ARE THE TRAITS OF THE BEST MARKETERS? Katie Hancock

Marketing Consultant

On top of providing timely information and perspective, we also want our clients and subscribers to be successful. That’s one of the reasons we have this page 10 space each week. Recently, someone said to me: “You guys talk about great marketing, but what does this great marketer look like? What should I be doing to imitate these skills?”

The best farm marketers I’ve known weren’t what you’d expect. They couldn’t necessarily tell you exact stocks-to-use ratios or how to indicate technical signals. It’s not necessarily the most experienced, or the wealthiest. Intelligence, education, experience, and wealth definitely help identify and quantify those that may be great, but those aren’t always the qualities that stand out. In my opinion, anyone can be a great marketer regardless of one’s situation and background.

It’s about using the common sense principles ingrained in the producer’s day-to-day thought process. Farmers have an innate “boots on the ground” feel for what needs to be done- especially with the land and livestock. This easily translates into risk management when the following qualities are applied to marketing:

Decisive. Technical and fundamental experts aren’t necessarily great farm marketers. Why? Education and information don’t equal action. I would never discredit knowledge, but actually making a decision is what counts. Risk management rewards action and that takes the ability to decide and execute what to do, when to do it, and which tools to use.

Consistent. I can explain this best by what not to do. The worst trait I see is inconsistency. Those that beat themselves up for selling too early one year, may refuse selling early the next year, and ultimately miss the opportunity both years. The past isn’t necessarily an indicator of future price trends. As prices move in cycles, consistent marketers may not necessarily hit the high or low, but they won’t do the opposite of what should have been done. For example, the consistent marketer could average $4.50 corn two years in a row, while the inconsistent may make $3.50 one year and $5.50 the next. Both averaged $4.50, but if the $3.50 year knocks you out of business, the inconsistent method didn’t pay. And this situation could be even worse if the inconsistent marketer hit the low multiple years in a row by locking in the lowest price range.

Persistent. It’s no secret successful business owners work at it. Like any other sector of a business, he or she worked for the results. He didn’t put his head in the sand and ignore risk management. Fewer people fail by trying than those who wait for luck to hit. It’s common to see a great producer that ignores marketing. Sometimes he will hit the high, but over time the persistent effort is most rewarded.

Discipline. Emotions are minimized. Everyone is emotion-al—especially when money is involved. When I think of disci-pline, it’s not always what I want to do, but what I know I need to do. These marketers can stick to a plan and overcome the fear and greed that hold others back.

Open-minded. These marketers are willing to try new things. They consider new marketing tools, advice from others, and embrace change. For new marketers, that may mean looking for different ways to protect risk rather than sticking to tradi-tion. These marketers are open to new ways to think and how to improve. It’s not wise to change for the sake of changing, but is wise to double-check that previous methods are the best.

Honest. You will never hear them brag about excellent or near-perfect marketing. They are honest with themselves about mistakes. I think honesty creates confidence in one’s decisions because you can admit what worked and what didn’t and know how to improve. They say “Last year, I did well at this and poor-ly at that.” You can’t improve until you admit what can be better.

Realistic. Great marketers know they can’t foresee the best pricing opportunities. There’s no such thing as perfection in marketing—not long term at least. It’s a tough lesson, espe-cially for new marketers. Besides selling at the high, they also acknowledge they may not be able to lock in break-even prices each year. Overall, he knows success in marketing doesn’t mean being perfect. Realistic expectations prevent discouragement down the road.

Farming takes a level of risk the average person couldn’t han-dle or understand. It’s an amazing act of faith and persever-ance. Any person that can invest millions of dollars in a group of plants or animals and rely on weather and a pile of dirt to keep him going is the ultimate risk-taker. Production agricul-ture takes a unique and ambitious mindset, so I am confident everyone who can handle farming already has the qualities it takes to be an excellent marketer.

(Email Katie at khancock@brockreport.com)

11email breport@brockreport.com

biofuels

million bushels in 2014-15 to an estimat-ed 125 million this marketing year, will drop back to 100 million in 2016-17.

More than ethanol, the driving force be-hind sorghum’s re-emergence in the western Plains was increased import demand from Chi-na, which made the crop especially attrac-tive for growers that have wrestled with poor wheat growing condi-tions and prices in recent years. However Chinese import demand has fallen sharp-ly in recent months. Sorghum plantings are expected to drop to 7.2 million acres from 8.5 million last year.

USDA’s corn-use-for-ethanol estimate for 2016-17 is 5.30 billion bushels, up from 5.25 billion in the current market-ing year, on increased blending and de-creased competition from sorghum.

bill To liMiT bleNDiNG Ethanol foes in Washington continue to

press their case. While an end to the RFS seems unlikely any time soon, opponents are at least trying to stop the industry’s growth. A bipartisan group of four U.S. House members this week introduced a bill they called the “Food and Fuel Con-sumer Protection Act,” which would cap the ethanol blend rate at 9.7%. The argument is that this is needed to avoid

the so-called “blend wall,” although op-ponents’ objections to ethanol go beyond that. A Renewable Fuels Association of-

ficial called the bill “dead on arrival.” The effort was led by Rep. Bob

Goodlatte, R-Virginia, who has introduced anti-ethanol bills in the past.

It’s worth noting that with Donald Trump and Hillary

Clinton seemingly headed to-ward their party nominations,

the 2016 General Election should feature two candidates that have voiced

strong support for ethanol in the past: Trump during the heated Iowa Caucus, and Clinton during her time in the U.S. Senate and on the campaign trail.

NoT MissiNG The boaTA group of mechanics, engine perfor-

mance exports and pro fisherman took to Washington this week with an ethanol industry trade group to push back against the idea that ethanol is harmful to en-gines. Makers of boats and small engines have been a vocal opposition to ethanol, although as the group in D.C. showed this view is far from universal. “We work on a wide variety of racing engines for watercraft, and they run at their absolute best on a high-octane ethanol blend,” said Keith Holmes, President and Owner of CK Motorsports in Nunica, Mich. The briefing was hosted by Fuels America.

larGesT plaNT iN europe closes

Abengoa’s financial woes, which have caused lawsuits and plant closures in the U.S., are also causing shut-downs in Europe. The Spain-based company’s Rotterdam plant, the largest in Europe, was closed this week after feedstocks contracts were terminated, according to various reports. The parent company is trying to find buyers for ethanol assets in the U.S. and Europe as it tries to avoid what would be Spain’s largest-ever bankruptcy. The Rotterdam plant’s capacity is 125 million gallons.

aN eNcouraGiNG eThaNol reporT

After sagging for several weeks, etha-nol production rebounded strongly in the first week of May. EIA reported output of 962,000 barrels per day on the week ended May 6, up 38,000 barrels from the prior week.

Meanwhile stockpiles fell to 21.3 mil-lion barrels, from 22.2 million last week, although this remains 4.7% higher than a year ago. Gasoline demand remains well ahead of a year ago, and should continue to pick up as summer driving season ap-proaches, boosting ethanol demand with it. EIA reported weekly gasoline product supplied at 9.658 million barrels per day, up from 9.502 million the prior week. The four-week average for gasoline demand is up 5.1% from a year ago.

As the chart below shows, gasoline has moved back to a premium to ethanol, which is as it should be given its higher energy content, but ethanol’s discount is still much too small to encourage motor-ists with flex fuel vehicles to fill up with E85.

sorGhuM less sWeeT Sorghum use for ethanol has increased

significantly in the past year, but the growth is likely an aberration rather than a trend. USDA’s supply and demand re-port this week noted sorghum use for ethanol is expected to decline in 2016-17. It projected sorghum use for “food, seed and industrial,” which surged from just 15

GasoliNe - eThaNol spreaD

July 2016 ethanol(dotted line)

July 2016 Gasoline(solid line)

12 800-558-3431

chicago Weekly

chi #1

chi #2

chi #3

Wheat

high: 6.53 12/17/14

low: 4.75 3/4 3/2/16

December 2016

chicago July 2016

high: 6.49 3/4 12/16/14

low: 4.89 3/43/2/16

contract Size: 5,000 buDaily limit: 35 cents/bu

march 2017

high: 7.32 5/6/14

low: 4.49 1/23/2/16

resistance

Support

Support

Support

Support

Support

13email breport@brockreport.com

400

425

450

475

500

525

Nov Dec Jan Feb Mar Apr May

550

575

600

625

650

675

Nov Dec Jan Feb Mar Apr May

The fundamentals are overwhelm-ingly negative in this market—but everybody knows it. Under $5.00 per bushel it is important to be some-what cautious and not overly nega-tive on prices. It is logical to assume that most of the bearish fundamen-tals are built into today’s market.

Technically, however, the trend remains down and there certainly is no reason to get bullish wheat with world supplies at all-time highs and the U.S. winter wheat harvest not far off. Further rains in the south-ern Plains this coming week should maintain good crop conditions and an expected late May warm-up will help crop maturation. This is still a market where rallies need to be sold.

Cash-only Marketers’ Strategy: 20% is contracted. Sit tight for now.

Hedgers’ Strategy: Nothing is sold on cash contracts. Stay short July futures on 20% for now.

commentary

Marketing year begins June 1 14/15 15/16 Proj. 16/17 Proj. 15/16 16/17

ACREAGE (million)Planted Area 56.8 54.6 49.6 54.6 50.2Harvested Area 46.4 47.1 42.8 47.1 43.3Yield 43.7 43.6 46.7 43.6 46.2SUPPLY (mil bu) Beg. Stocks 590 752 978 752 978Production 2,026 2,052 1,998 2,052 2,000Imports 149 120 130 120 110 Total Supply 2,766 2,924 3,106 2,924 3,088USAGE (mil bu) Food/Seed 1,037 1,026 1,032 1,034 1,040Feed & Residual 122 140 170 140 170

Domestic Use 1,159 1,166 1,202 1,166 1,210Exports 854 780 875 780 875 Total Use 2,014 1,946 2,077 1,946 2,085

Ending Stocks (mil bu, May 31) 752 978 1,029 978 1,003 CCC 0 0 0 0 0 Privately-Owned 752 978 1,029 978 1,003Stocks/Use 37.3% 50.3% 47.3% 50.3% 48.1%Farm Price ($/Bu) $5.99 $4.90 $3.70-4.50 $4.90 $4.50-5.10

BrockUSDA

U.S. SUPPLy & DemanD

400

425

450

475

Nov Dec Jan Feb Mar Apr May

minneaPoLiS caSh (U.S. #1, 14% Protein)

high: 6.69 7/2/15

Low: 4.93 3/1/16

wheatkanSaS city

July 2016high: 7.42 5/7/14

Low: 4.41 1/4 5/11/16

Source: USDa amS

kanSaS city caSh

St. LoUiS caSh

Source: USDa amS

Source: USDa amS

minneaPoLiS July 2016

Daily Limit: 60 centscontract size: 5,000 bu

Daily Limit: 35 cents/bucontract size: 5,000 bu

* Prospective Plantings report

*

Brokenresistance

BrokenSupport

resistance

14 800-558-3431

Marketing year begins Aug 1 14/15 15/16 Proj. 16/17 Proj. 15/16 16/17ACREAGE (Mil. Acres)

Planted Area 2.95 2.61 3.06 2.61 2.92Harvested Area 2.93 2.58 3.03 2.58 2.90Yield (Pounds) 7,576 7,470 7,618 7,470 7,610

SUPPLY (Mil. cwt) Beg. Stocks 31.8 48.5 43.4 48.5 41.8Production 222.2 192.3 231.0 192.3 220.7Imports 24.7 23.5 24.0 23.5 24.6

Total Supply 278.7 264.4 298.4 264.3 287.1USAGE (Mil cwt) Domestic & Residual 129.9 121.0 135.0 121.5 131.5Exports 100.3 100.0 113.0 101.0 110.0 Rough 34.0 33.0 35.0 35.2 36.2 Milled (Rough Eq.) 66.3 67.0 78.0 65.8 73.8Total Use 230.2 221.0 248.0 222.5 241.5Ending Stocks 48.5 43.4 50.4 41.8 45.6 Farm Price ($/cwt) 13.40 12.30-12.70 11.30-12.30 12.50-12.90 11.50-12.75

BrockUSDA

Futures ended higher for the sixth straight week, driven by concerns about Asian crops and world sup-plies, along with technical buying as the market posted a new three-month high in the July contract and four-month high on a spot-month basis. July posted a bullish outside week higher.

Tuesday’s USDA supply/demand report was not bullish, as it projected a larger 2016-17 U.S. crop and bal-looning long-grain ending stocks at 38 million hundredweight, up from an estimated 22.5 million in 2015-16 and the largest stockpile in 31 years.

USDA also sees world ending stocks increasing slightly, although this is due to higher Chinese stocks, which won’t be available in the export market. This increase masks a decline in ending stocks for major exporters to 16.39 MMT in 2016-17, down from 21.37 MMT in 2015-16 and 31.15 MMT in 2014-15.

Strategy: We are now 100% sold on the 2015 crop after selling the final 20% this week, and currently have no hedges in new crop futures.

commentarynearby contract

deferred contract

rsi

weekly continuous

14-day rsi

rice

u.s. suPPly & demand

contract size: 2,000 cwtdaily limit: $0.90/cwt

sePtember 2016

July 2016High: 14.14 10/6/15

low: 9.703/31/16

High: 13.60 9/14/15

low: 9.42 1/23/31/16

Year Beginning Stocks Production Exports

Total Consumption

Ending Stocks

Stocks/Use Ratio

2009/10 92.6 440.7 31.3 438.4 95.0 21.7%

2010/11 95.0 450.4 35.1 445.3 100.0 22.5%

2011/12 100.0 467.6 39.9 460.8 106.8 23.2%

2012/13 106.8 472.5 39.4 465.5 113.8 24.5%

2013/14 113.8 478.4 42.3 477.9 114.3 23.9%

2014/15 114.3 478.7 44.0 478.7 114.4 23.9%

2015/16 114.4 470.5 41.4 478.4 106.4 22.2%Change from April 10.8 -0.1 -0.2 -5.6 16.3 3.6%

2016/17 106.4 480.7 40.7 480.5 106.6 22.2%Change from last yr. -8.0 10.2 -0.7 2.1 0.2 -0.1%

Values in million metric tons; bold numbers are USDA projections.

world suPPly & demand

support

brokenresistance

* Prospective Plantings report

*

brokenresistance

brokenresistance

support

15email breport@brockreport.com

weekly continuous

commentary

14-day rsi

cotton

Marketing year begins Aug 1 14/15 15/16 Proj 16/17 Proj. 15/16 16/17

ACREAGE (million acres)Planted Area 11.04 8.58 9.56 8.58 9.60Harvested Area 9.35 8.07 8.80 8.06 8.93Yield 838 766 807 771 795

SUPPLY (million 480-lb. bales) Beginning Stocks (August 1) 2.35 3.70 4.00 3.70 4.03Production 16.32 12.89 14.80 12.94 14.79Imports 0.01 0.04 0.01 0.00 0.00

Total Supply 18.68 16.63 18.81 16.64 18.82USAGE (million 480-lb. bales)

Mill Use 3.58 3.60 3.60 3.60 3.70Exports 11.25 9.00 10.50 9.00 10.50

Total Use 14.82 12.90 14.10 12.60 14.20Unaccounted 0.16 0.03 0.01 0.01 0.00

STOCKS (million 480-lb. bales) Ending Stocks (July 31) 3.70 4.00 4.70 4.03 4.62

Farm Price (¢/lb) 61.30 58.00 47-67 60-62 52-62

BrockUSDA

u.s. suPPly & demand

High: 68.74 10/31/14

low: 54.332/29/16

July 2016

High: 80.44 5/16/14

low: 54.192/29/16

daily limit: 3¢/lb.contract size: 50,000 lbs.

The market stumbled for the sec-ond week in a row, falling to its low-est level since mid-April on a negative USDA report and technical pressure. USDA hiked its old-crop U.S. carry-out estimate to 4.0 million bales, from 3.5 million last month, on reduced ex-ports. Add to that a bigger crop this year with better yields and less aban-donment expected, and the 2016-17 carryout will grow to 4.7 million bushels, according to USDA.

Revisions to the world balance sheet were more supportive, as USDA sees 2016-17 global carryout dropping to 96.48 million bales, from 102.84 mil-lion in 2015-16. China’s imports are expected to rebound slightly to 4.5 million but, that’s still well below 2014-15 imports of 8.28 million.

The December contract found sup-port this week at the 100-day moving average, and the 60-cent level is po-tential support for both Dec. and July.

Strategy: Cash-only marketers are 100% sold in old crop and 30% sold in new crop. Hedgers are also 100% sold in the cash market on old crop. For new crop, hedgers remain 10% sold in the cash market and are short December futures on 40%.

Year Beginning Stocks Production Exports

Total Consumption

Ending Stocks

Stocks/Use Ratio

2009/10 62.6 103.4 35.7 118.2 47.7 40.4%

2010/11 47.7 117.6 34.8 114.0 51.4 45.1%

2011/12 51.4 127.6 46.0 104.4 74.6 71.4%

2012/13 74.6 123.9 46.6 106.6 92.0 86.3%

2013/14 92.0 120.4 40.9 109.1 103.2 94.6%

2014/15 103.2 119.1 35.4 109.9 112.5 102.4%

2015/16 112.5 99.5 34.2 109.2 102.8 94.2%Change from April 0.6 -0.3 -0.7 -0.3 0.6 0.8%

2016/17 102.8 104.4 33.1 110.7 96.5 87.1%Change from last yr. -9.6 4.8 -1.1 1.6 -6.4 -7.1%

Values in million 480-pound bales; bold numbers are USDA projections.

world suPPly & demand

6-year-plus low

december 2016

brokenresistance

brokenresistance

* Prospective Plantings report

*

support

support

key reversal down

key reversal down

16 800-558-3431

9-day RSI

Lean hog futures started out the week under pressure from technical selling, hitting 7-session lows on Tuesday, but then recovered sharply on Wednesday amid renewed strength in cash funda-mentals, before fading again on Friday. Strong pork demand and good packer operating margins kept cash hog mar-kets rising this week with the CME lean hog index gaining another $2.97 during the week ended Thursday to an 8-1/2 month high.

The composite pork cutout value was flat on the week, though, as large production offset strong demand. The cutout value was 20% above a year ear-lier about two weeks ago, but is now roughly unchanged versus last year. Pork prices could weaken seasonally in the second half of May with retailers wrapping up buying for Memorial Day features, although that hasn’t happened the past three years.

With USDA forecasting Q3 pork supplies to be 3.6% larger than a year earlier, pork demand will have to be strong this summer to get hog prices to where futures are now trading. USDA currently forecasts Q3 live hog prices will average $48-$52 per cwt (roughly $65-$70) on a carcass basis.

Wednesday’s breakout by Aug. lean hog futures to a new contract high suggests potential for a move into the $85-$86 range, but the market has not shown strong follow-through and given the Q3 supply fundamentals, there is reason to worry that a top is near. The same is true for Oct. futures, which pushed to a nearly one year high.

Hedgers’ Strategy: Hedgers remain aside futures for now, but should be ready to re-establish some protection on signs of weakness.

commentaRy

hogS

octobeR 2016

high: 82.60 5/13/16

Low: 71.3311/16/15

auguSt 2016

high: 83.975 3/17/16

Low: 70.2511/16/15

daily Limit: 3¢/lb.contract Size: 40,000 lbs.

high: 67.70 10/6/2015

Low: 59.5012/23/2015

decembeR 2016

June 2016

high: 70.95 5/12/16

Low: 62.12511/10/15

Support

Support

brokensupport

$50 $60 $70 $80 $90

$100 $110 $120 $130 $140 $150

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Source: USDA AMS

2016

2015

2014

PoRk cutout vaLue fob omaha

$83.13 as of May 12

brokensupport

brokenresistance

17email breport@brockreport.com

commentary

Weekly continuous

cattle

august 2016High: 145.73

6/1/15 low: 110.93

4/22/16

High: 147.005/28/15

low: 110.904/22/16

Daily limit: 4.5¢/lb contract size: 50,000 lbs.

october 2016

High: 190.00 8/31/15

low: 138.104/29/16

High: 172.23 11/6/15

low: 137.534/29/16

Daily limit: 3¢/lb contract size: 40,000 lbs.

resistance

feeDer cattle august 2016

live cattleJune 2016

High: 151.50 1/5/15

low: 113.904/22/16

october 2016

9-Day rsi

Live cattle and feeder cattle futures continued to charge higher early this week on support from last week’s strong cash trade and a sharp upturn in whole-sale beef prices. Futures ran out of steam at least temporarily on Thursday with nearby June live cattle posting a bearish reversal off of a one month high, even though cash prices rose strongly again.

The huge discount of live cattle fu-tures to cash presents a major dilemma for cattlemen as they lack any reason-able futures hedge opportunities. Despite the negative technical action, the further downside for front-end futures looks limited without confirmation of signifi-cant cash weakness. If feedlots maintain the upper hand in cash markets next week, June futures may narrow signifi-cantly to cash. The problem is that packer demand may fall off as beef plants finish filling Memorial Day orders.

On the positive side, feedlots look to be current on marketings. The average federally inspected live cattle weight has dropped 29 lbs. in the past 5 weeks and cash trade was extremely active in Nebraska this week, with over 64,000 head having changed hands as of Fri-day morning. Live cattle sales took place at mostly $133-$134 in Nebraska and $132-$133 in the southern Plains. Pack-ers were clearly short bought on needs and the choice beef cutout rallied 4.3% during the week ended Thursday.

Feeder cattle futures retraced about half of their April 29-May 9 up move on Thursday and Friday, but firmed signifi-cantly into Friday’s close, leaving their chart picture unclear. Corn prices will be key to market direction. If the corn mar-ket rallies further as we think it may, then feeder prices could slide to new lows.Hedgers’ Strategy: Live cattle hedgers feeder cattle marketers remain aside futures. Feeder cattle buyers are long Oct. feeder cattle futures on 25% of purchase needs through the end of Q3.

resistance

resistance

resistance

resistance

18 800-558-3431

feed/Inputs

Feeds: Soybean meal prices exploded to the upside on Tuesday following the release of the USDA supply/demand report. This has all the indications of a blowoff top in the soybean and soymeal markets. Bullish consensus is the highest in months and traders are as bullish now as they were bearish eight weeks ago.

Technically November soybeans es-tablished a key reversal down on Thurs-day. Soybean oil is testing the lowest price levels in eight weeks. The leader-ship on the upside switched from soyoil to soymeal in the last couple of weeks. Soymeal futures have lost upward mo-mentum, but have not signaled a top. A July soymeal close above $367.70 could signal a move into the low $380s, but this is not the time to be buying meal.

Another factor to watch closely in the soy complex is the large shift in acres taking place between corn and cotton and soybeans. We anticpate USDA’s expected soybean plantings of 82.2 mil-lion acres are substantially low and that ours at 83.5 may also turn out to be on the low side. Planted acreage could well exceed 84 million acres.

Fertilizers: A very slow week. Pur-chases for spring planting are complete and thus prices have been flat in all cate-gories. Should the corn market continue its rally, however, anticipate an increase in demand for ammonia.

Fuels: Crude oil prices on Thursday closed at the highest level since Novem-ber. The trend remains up. Inventories are excessively large, but production has dropped enough in the past month to at least stop the growth in inventories. We anticipate crude oil will shift into a trading range between $40 and $50 per barrel over the next few months. Natu-ral gas prices have also stabilized. Major resistance in June is at $2.30 and the support is at $1.70. We do not see any fundamentals that will shift the market out of that range anytime soon.

commentary

HeatIng oIljune futures

soybean oIl july 2016

High: 40.25 6/11/14

low: 26.61 8/24/15

soybean mealjuly 2016

High: 367.40 5/11/16

low: 261.702/26/16

brokenresistance

contract size: 100 tonsdaily limit: $20/ton

support

contract size: 60,000 lbs. daily limit: 2 cents/lb

115

120

125

130

135

140

145

Nov Dec Jan Feb Mar Apr May

$/ton

Source: USDA AMS

dry dIstIllers graIns nebraska

supportThis chart updated at 1 p.m., before the market close.

support

key reversal down

19email breport@brockreport.com

u.s. DOLLAR INDEX

fINANcIALs/ENERgycOmmENtARy

Crude oil advanced another $1.50 to a new high for the move and the highest weekly close since November. The International Energy Agency trimmed its estimate for 1st half 2016 oversupply from 1.5 to 1.3 million bar-rels per day, but in the second half of the year, they see oversupply shrinking to just 200,000 barrels per day.

Two benchmark indicators that guide Fed policy sup-port the argument for standing pat on a potential inter-est rate increase next month. Weaker than expected jobs numbers and soft inflation data indicate that that the economy still has not yet reached “liftoff ” speed.

Following last Friday’s post that the economy add-ed the fewest jobs in 7 months in April, initial jobless claims followed suit this week, surging higher for the second week to its highest level since February 2015. Continuing claims also edged higher, but so far, remain comfortably near the lowest levels of the recovery.

Inflation remained tame in April, despite a 75% in-crease in crude oil prices since February. At the whole-sale level, prices rose just 0.2% in April, with prices unchanged year-over-year. Core PPI (less food and en-ergy) rose just 0.1% in April; 0.9% year-over-year. The Fed’s inflation target is 2.0%.

Business inventories rose 0.4% in March, the biggest increase in 9 months. This larger than expected increase will contribute towards a revision higher for 1st quar-ter GDP (from 0.5%), but with the inventory to sales ratio at a 7-year high, it leaves the economy vulnerable to a slowdown to work off inventories if sales should slow. Retail sales in April however, rose a healthy 1.3%, the biggest increase in 13 months. After excluding the more volatile auto and gasoline components, retail sales still rose a respectable 0.6%. Retail sales are a major component of personal consumption expenditures and therefore, of GDP growth. After the retail sales report, the Atlanta Fed bumped its forecast for 2nd quarter GDP to 2.8% from 2.2% previously.

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E-mINI s&P 500 JuNE 2016

current Positions Open P/L closed P/L

corn s2cZ6 @ $3.87 ($925) ($2,050)

soybeans s1sX6 @ $10.1050 ($2,038) ($16,938)

E-mini s&P 500 s1Esm6 @ 2051.00 ($388) $325Live cattle-Lean

Hog spread L1LEV6 @ $114.375 s1HEV6 @ $ 68.250 $462 $0

Other closed positions None $0 ($5,195)

2016 Total Profit (Loss) as of 5/12/16: ($2,888) ($23,858)2015 profit: $10,349; 2014 profit: $17,316 Recommendations from 5/6/16 through 5/12/2016: 5/06/16: Bought 1 July 2016 soybean oil @ 32.80 to exit

There is a risk of losses as well as profits when trading futures and options. Position size is based on account size of $60,000. Profit/(loss) does not include brokerage commissions.

sPEcuLAtIVE POsItIONs

cRuDE OIL (WtI)JuLy 2016

This page updated at 1 p.m., before the market close.

Broken resistance

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gOLDJuNE 2016

Brokensupport

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This page updated at 1:00 PM, before the market close

20 800-558-3431

The weekly Crop Progress report on Monday and Friday’s Cattle on Feed report are at the top of our Ag calendar. Economic reports include the 1st two regional manufacturing surveys for the month of May on Monday (Empire State) and Thursday (Philadelphia). U.S. Industrial Produc-tion and the Consumer Price Index are on tap for Tuesday. Housing sector reports will be released on Tuesday, (Housing Starts) and Friday (Existing Home Sales), Jobless Claims on Thursday.

THE WEEK AHEAD

15/16 16/17 17/18Strictly Cash 90% 30% 0%

Hedgers Cash 100% 20% 0%Hedgers F&O 0% 40% 0%

15/16 16/17 17/18Strictly Cash 100% 40% 0%

Hedgers Cash 100% 30% 0%Hedgers F&O 0% 40% 0%

15/16 16/17 17/18Strictly Cash 100% 20% 0%

Hedgers Cash 100% 0% 0%Hedgers F&O 0% 20% 0%

15/16 16/17 17/18Strictly Cash 100% 30% 0%

Hedgers Cash 100% 10% 0%Hedgers F&O 0% 40% 0%

HOGS 16-II 16-III 16-IV 17-IFutures 0% 0% 0% 0%

Options 0% 0% 0% 0%

CATTlE 16-II 16-III 16-IV 17-IFutures 0% 0% 0% 0%

Options 0% 0% 0% 0%

FEEDErS 16-II 16-III 16-IV 17-IFutures l17% l25% 0% 0%

Options 0% 0% 0% 0%

mIlK Apr may June JulyCash 0% 0% 0% 0%

Futures 0% 0% 0% 0%

15/16 16/17 17/18Strictly Cash 100% 0% 0%

Hedgers Cash 100% 0% 0%Hedgers F&O 0% 0% 0%

COrN 16-II 16-III 16-IVCash 0% 0% 0%

Futures/Options 0% 0% 0%

mEAl 16-II 16-III 16-IVCash 0% 0% 0%

Futures/Options 0% 0% 0%

CONTACT USFor more information or customer service:

Brock Associates2050 W. Good Hope Rd., Milwaukee, WI 53209

Call 414-351-5500 or toll-free 800-558-3431 Email: breport@brockreport.com

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DAIlY mArKET COmmENTSComments include all new advice, cash strategies, current positions. Issued three times daily; via email/Internet, for $425/year. Also available to subscribers of The Brock Report for $150/year.

mArKET EDGEThese online presentations provide in-depth analysis of USDA’s key reports, as well as occasional other topics of importance to the markets. Issued monthly via email for $249/year for non-subscribers to The Brock Report or Daily Comments; $175/year for subscribers.

COmmODITY NETWOrK SYSTEmUse your phone to monitor recommendations even when you’re away from your desk. Buy a pre-paid block of minutes.

CONSUlTING SErVICESBrock Associates offers different levels of personal marketing assistance. Call 800-558-3431.

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