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Trade, Tariffs & Weather

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Good Morning from Allendale, Inc. with the early morning commentary for June 6, 2019.

Grain markets are mixed with corn and soybeans lower as the weather maps look to provide an opportunity for more than expected US plantings. Wheat is finding support on continued dryness in Russia. Trade and tariff talks are ongoing and could provide the market direction, while a sudden shift in the near-term forecast most certainly would.

Weekly export sales will be released this morning at 7:30 AM CST. Traders are looking for corn sales of 550,000 to 1,050,000 tonnes (old and new combined), soybeans 250,000 to 750,000, wheat 0 to 600,000, soymeal 100,000 to 350,000, and soyoil 8,000 to 25,000.

Estimates for next week's USDA Supply and Demand report were released by Bloomberg. The average analyst estimate for 2019/20 corn ending stocks is 1,772 million bushels, soybeans 990, and wheat 1,106 million bushels. 2018/19 ending stocks are estimated at 2,149 million bushels, soybeans 1,012, and wheat 1,119.

The maintenance margin to hold one soybean contract will be raised from $1,870 to $1,990 by CME effective with today's close for the front month contracts. Deferred contracts will also see a $120/contract increase.

Ethanol production was reported at 1.044 million barrels per day pace, or +0.3% year/year for the most recent week. The higher than last year numbers are good to see, but to meet USDA's numbers, we need to see better production going forward.

Mexican importers, who usually buy their corn from the United States, have booked a 35,000-tonne corn cargo from Brazil, amid a trade spat between Washington and Mexico City. Brazilian broker and consultancy INTL FCStone said on Wednesday the cargo would be loaded at the northern port of Santarm and scheduled to depart on June 22, according to port line-up data. (Reuters)

Germany's wheat harvest this year is estimated to increase by 21.9% from last year to 24.70 million tonnes as the country recovers from a drought last year according to a farm coop. They see the rapeseed crop down 16.3%.

Trading Funds were sellers across the board yesterday selling an estimated 35,500 corn contracts, 14,500 soybeans, 16,500 wheat, 4,500 soymeal, and 4,500 soyoil.

President Trump tweeted of the US/Mexico tariff talks, "Immigration discussions at the White House with representatives of Mexico have ended for the day. Progress is being made, but not nearly enough!...Talks with Mexico will resume tomorrow (today) with the understanding that, if no agreement is reached, Tariffs at the 5% level will begin on Monday, with monthly increases as per schedule."

Initial and Continuing Jobless Claims will be watched with interest this morning after yesterday's ADP numbers were disappointing. The reports are due at 7:30 AM CDT. Natural Gas Inventories are due at 9:30 AM.

Hong Kong Lawmakers are demanding answers about the seriousness of the African swine fever outbreak after rumours began circulating that at least 30 per cent of pig farms in mainland China that supply the animals to Hong Kong have been hit by the virus. (Reuters)

The Chinese government urged regional bodies to provide financial support for sow farms and large scale hog farms to increase production. They want these bodies to provide credit guarantees on new loans and extensions on expiring loans.

Three lots were sold in yesterday's Fed Cattle Exchange offerings of fat cattle. One of them, 72 head of Kansas heifers, sold for $113. This follows light sales in the past two days. This price would be $2 lower than last week's average.

On the beef end of the possible tariffs against Mexico, it is true they are our number 3 buyer of processed beef with a 14% share of all exports. Ot the same time, we receive 1.3 million head from them in the form of lightweight calves and feeders. That comes out to 5% of our steer/heifer slaughter annually.

Dressed beef values were lower with choice down 0.89 and select down 0.03. The CME feeder index is 131.88. Pork cut-out values were down .58.

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Allendale Inc. was established in 1984 in a country grain elevator located in Crystal Lake, Illinois. The first-hand experience with agricultural and financial markets has worked with Allendale’s combined foresight, ingenuity and expertise to make it the successful firm that it is today. Allendale’s goal is to provide its customers the expertise and service they need to grow their agricultural businesses. Allendale’s staff is called on to provide their commentary for TV, radio and newswires on a daily basis.

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