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Heartland Daily Newsletter - Wheat and Cattle

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Todays trade was a culmination of the market realization that the price run-up on massive production losses for corn is now being met by also demand destruction. Confirmation that US feed operations in the Southeast are beginning to import South American corn turned up yesterday. Also, Mexico is beginning to secure cheaper corn from Brazil, even though its at smaller quantities, as they do not have the logistics to import large amounts of needed corn.

Informa published this morning pegging new crop corn planted acreage at 84.9 Mil, down 7.9 Mil from NASSs Intention survey. New crop US soy acreage is pegged at 85 Mil, vs. NASSs 84.6. Informa estimates 2019 corn yield at 174, vs. USDAs 176, but estimates new crop soy yield at an elevated 51.1 Bu/Acre, vs. USDAs 49.5. This is one of many opinions of what is going on out there, but the general consensus has corn carryout in the 1.1-1.3 billion Bu range.

The USDA, while confirming that the June 11 crop report will consider late planting, is unlikely to show cuts in production/stocks as large as private estimates are at. USDA is also unlikely to have an accurate fix on 2019 CN/BN acreage on upcoming June 28 crop report. Additionally, USDA will not issue the first report on PP acres until August crop report.

The USDA will post national corn ratings next week. The first corn condition rating last year was 79% G/E, the 5-year average is 73.2%, and the lowest of the last 7 years was 63% G/E in 2013. Recall the near average early season corn condition rating in 2012 of 72% G/E eroded steadily as drought conditions worsened. Suspect national corn rating next Monday no better than 65% G/E. Trade after that will focus on Tues June 11 crop report which is unlikely to cut corn acres/yield as much as private sector forecasts.

The Black Sea forecast remains largely warm/arid into June 20th. Lite rains will extend into Russias Central Region in the 8-14 day period. The trade continues to debate what this means for Russian production. The current pattern would be getting more attention if Apr-May weather there wasnt so favorable. And so far Ukraine has been spared the worst of heat/dryness. Temps in Ukraine will be capped at the mid/upper 80s. Soil moisture in Ukraine is adequate.

North American Weather: The EU and GFS models are in decent agreement into June 12th but lack agreement after that. The EU remains the drier of the two, and also the favored model given recent accuracy. The general theme of the US pattern into the second half of a June is that that theres no structural basis for additional soaking rain outside of the Southern and Eastern Midwest. Even here, rain in the next 7 days will be more lite/scattered. Along with normal/above normal temps, drying and fieldwork lie ahead. The EU solution includes little/no rain west of the MS River over the next 7 days. Planters will be active across the C Plains and Midwest into late next week.

Todays price break is an acknowledgment that the market had blown a lot of steam off already into last week on the historic floods that have hampered the planting of 2019 corn and bean crop. With the USDA crop report due out next Tuesday, July 11, there is always trepidation that their data never seems to help out farm prices. The wonder is, do they still have more 2018 corn supplies to add to the balance sheets can always be a wildcard?

Setbacks are in place now, and support levels will reveal themselves, as end-user buying and the willingness of ownership from index funds which are not that long at all in corn yet, its should bring in support for December corn in the 415-425 range.

The US dollar stalled at the 98.00 valuation and is now threatening the potential of a topping formation again. Chatter that the recession is six months off because of the escalating trade wars with tariffs has many thinking the Federal Reserve will be lowering interest rates later in the year not once but possibly even twice. A weaker US dollar is conducive to improving US exports.

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The 520 range for Chicago wheat had proved formidable for two weeks in a row in spite of the Monday night price pop. We also had targeted July Kansas City wheat to have trouble at 490-510 and 497 was Monday nights high.

Wheat is in a massive correction off of its price run-up, with Kansas already retreating 50 cents in two sessions. Major support for Chicago arrives the 475-480 range. This should arrest any further weakness where consolidation on wheat prices should occur, while damage reports can assess how much winter wheat was actually lost due to disease.

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Cash Cattle: 112-113 South, 113-115 Corn Belt, 180-185 Dressed

Fed Cattle Exchange Auction: 412 listed, 72 sold @ 113

7 Day Feeder Index: 131.79, -0.16

1 Day Feeder Index: 130.16 on 721 head

Choice Beef: 222.80, -0.20

Select Beef: 207.36, +0.15

Packer Margins: +172.05 per head

Live trade seasonal bias June: Firmer early month and then turn down

Beef trade seasonal bias June: Firm early and then turn lower to confirm spring highs are in

The lows have most likely been scored in cattle futures. Support levels have thus far held as shown on the charts below. Cash Live and Beef will have a tendency to work lower through the summer but that shouldnt be a big deal as it is mostly built into the futures already. This should set up for a summer trading range at best, as taking out the spring highs will be more than difficult anytime soon. A 50% rally back to the upside should put a cap on it for now.

The precipitous drop in corn futures has certainly been a helper, and the cattle market will no doubt be paying attention, but theres more to it than that. For starters, the violent selloff got way overdone as it started from a level of historic open interest. There were just too many cows to get through the gate at the same time.

After this carnage, commercials and funds have now switched positions (commercials long, funds short). Commercial positions in Commitment Of Traders reports are worth the attention paid. The seasonal decline in beef prices is being well marketed with beef features on a retail level and will add to consumer demand. Exports have also been increasing, so I wouldnt get too caught up in the supply side thought process.

Play the range a seller on good rallies, and lift hedges on sharp sell offs.

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2019 Hedge Recommendations


Sold 25% of 2018 corn stocks at 4.29.2, with 50% having been sold at a 409 average. Total sales are now 75%.

Sold 25% new crop 2019 on December corn at 4.47. Total sales are at 40%.

Sold 15% of 2019 corn crop at 3.96 Dec corn.


Watch for upcoming alerts


Sold 25% of 2019 production at 910 on the November contract. Total sales at 25%

NOTE: All trades will be entered in the electronic markets unless otherwise noted. Hedge recommendations and Trade recommendations are totally separate, and may sometimes conflict with one another. It is strongly suggested that Spec trades and Hedge trades be done in separate accounts.

A word to the Wise

This material has been prepared by a sales or trading employee or agent o Heartland Investor Capital and is, or is in the nature of, a solicitation. This material is not a research report prepared by Heartland Investor Capital Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.



The risk of loss in trading futures and/or options is substantial and each investor and/or trader

must consider whether this is a suitable investment. Past performance, whether actual or

indicated by simulated historical tests of strategies, is not indicative of future results. Trading

advice is based on information taken from trades and statistical services and other sources that Heartland Investor Capital believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades.

Newsletter provided by Heartland Investor Capital Management, Inc. a registered CTA with the NFA, of which Eugene Graner is principal. This entity is a separate legal entity from the Introducing Broker Heartland Investor Services.

Copyright 2018 Heartland Investor Capital Management All rights reserved

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About the author

Eugene Graner is the founder and President of Heartland Investor Capital Management Inc. As a veteran commodity analyst, broker, and CTA that eats, sleeps, and breathes commodity futures, his priority is to bring clients the latest and most useful information of the markets along with uncannily accurate futures predictions. By balancing risk and reward, Eugene uses his proprietary trading strategies to develop the best possible trading approaches for his clients. He has 28 years of experience in the industry and his voice has been heard around the United States. He is heard on multiple radio stations throughout the day, also has been featured on CNN, Bloomberg, Wall Street Journal, and The New York Times, and is the go-to guy to for multiple TV network stations for interviews about market news weekly.
Contributing author since 1/3/2019 

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