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Heartland Daily Newsletter - Grains and Cattle

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The USDA never fails to surprise the tradewith their data, as they reported a 91.7 mill corn acreage intentions report, 5 million acres higher than the average trade guess. The sent corn limit down 30 minutes after the release the report before recovering a bit off limit, when the USDA then issued its follow-up notes. When the survey was taken in early June, the intentions at the time still had 15 million acres plus yet to be planted. So there is a preventive plant number yet to be applied. The snafu is that some of those preventive plant acres are already captured into that 91.7 million acre number, as 4.50 corn caused growers in areas that could, to abandon soybean acres and move to more corn.

So now we still have some confusion until the resurvey at the end of July which we wont see data until August. But the market is working with a total beginning number that is much higher than what was probably offered in late March because of 4.50 corn. This is why corn at the end of the day still hovered at $0.19 lower on the session at 4.32 for December. The running thought now is that even with abandon acreage, from a much higher total starting number, we probably have about 86-87 million acres in the ground. Now its a question of what the yield going to be with growing conditions to finish out the summer. Without adverse weather, corn is now caught in a 410-460 trading range, focusing now on growing conditions and yield prospects on what is in the ground.

June 1st US corn stocks totaled 5,202 Mil Bu. This was 100 Mil Bu below last year and 100 Mil Bu below trade expectations. Mar-May feed/residual use was a sizable 1,111 Mil Bu, up 168 Mil from last year and the highest since 2014. WASDE in its July report will raise its annual feed/residual estimate slightly. However, WASDE is also likely to lower exports 100 Mil Bu amid a very weak pace of sales and shipments in the last three weeks. The net result will be a modest boost in old crop US corn end stocks.

The US Gulf market corn price is currently from 32-$0.56/bushel above all other corn origins in the world and also is at a hefty premium to feed wheat and barley. This caps corn at the June 17 high price of 473 without adverse weather affecting pollination which now is pushed into August. The data from todays USDA numbers suggest corn carryout is not threatened to go below 1 billion bushels on new crop. Putting the 450-470 range as a high watermark.

Based on the June acreage survey, NASS reported US soybean planted acres at 80.04 Mil acres, down 4.6 Mil acres from the March intentions, 9.156 Mil acres less than a year ago, and 5 Mil acres less than expectations. If realized it would also be the lowest US soybean acreage planted since 2013. Its anticipated that the bean acreage number will rise anywhere from 1-1.5 Mil acres when resurveyed while the corn acres will be lowered.

Final US wheat ending stocks totaled 1,072 Mil Bu, vs. 1,099 Mil a year ago. Higher than expected Mar-May feed use was found, but otherwise, the wheat data was uneventful. NASS pegged new crop total wheat area at 45.6 Mil Acres, vs. 45.8 Mil in March. Winter wheat acres were 31.8 Mil, vs. 31.5 in March. Spring wheat acres were 12.4 Mil vs. 12.8 Mil in March. ARC has adjusted total US wheat production to 1,885 Mil, vs. USDAs 1,903 Mil forecast.

It was announced late Friday that Pres. Trump has made some concessions with China that would help get the talks started again after the impasse since May. It was also stated from the USDA Ag department that China would be buying Ag products, but theres been no announcement from China that thats agreed upon nor quantities totaled. The news is helpful to the tone, but will not create any sharp upward prices on Monday because of it. Monday's focus will be again crop condition ratings showing improvement, and the prospects of future weather promoting yields better than what is now calculated at 166/Bu on corn production and soybeans which are presently thought to be around 49/Bu per acre.

In the grand scheme of things grain prices rallied into June 17 and peeked, when subsequent rallies occur into July, a challenge of the June 17 prices would be the best to expect without adverse weather. There is so much moisture in the Midwest that long periods of hot, and dry temperatures are hard to come by, it would have to take until August to get threatening weather. August is the month for beans, and now pollination for a lot of corn across the Midwest will be pushed into early August. Initially, grains will struggle on price recoveries, and rallies will now continue to get sold.

Took new crop 2019 corn sales to 65% by purchasing the September 460 short-dated corn put on 25% production for 30 cents.

Took new crop 2019 bean sales to 50% with the purchase of the 940 September short-dated bean puts on 25% production for $0.45.

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This past week spot corn fell back under the weekly breakout zone of 440, hampering the accelerating trend it could have continued. With more corn being pursued to plant because of its profitability at 450 at the beginning of June in areas that could get a planted, even with preventive plant acres subtracted for much higher corn number, we probably have about 8060-88 million acres planted. This effectively prices in the corn high at 473.

December corn broke its uptrend line, and Friday's massive outside day bar, but held the early June corrective lows because of limit down status before bouncing the close. A close under 422 sets corn up for a challenge of 400. This would require substantial improvements in corn condition reports, raising the prospects that yields can be over 170 Bu/acre. Hard to imagine with how much of the crop is delayed, but it's amazing how fast warmth can heal ugly looking crops within three weeks.

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On the flip-side of corn, beans actually continue to look better. The price of spot beans are now trading above the downtrend line created from last year's highs in March-June, and even held the hundred day moving average represented by the purple line in the continuation chart.

New crop beans also held support where they needed to just under 910, and could be set to re-challenge its highs near 948. Friday's positive news on trade talks being thought out with China, could create little excitement to least see that area re-challenged.

The large old crop carry out is a buffer for the reduced bean acreage number, along with African Swine Fever which is collapsing demand for soybeans in China and the Pacific Rim countries. Sunday night's reaction to the restart of trade talks will likely be muted for price. 948-965 is major resistance and is an area to add sales if it can be achieved.

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Without corn, wheat has no rocket fuel to rise on its own, as the friendly Chicago wheat contract probably made its high on Thursday, or trading days ahead of the 60-day cycle change.

Wheat is notorious for respecting the turn of the 60-day cycle, since September, cycle lows have been met with moderate rallies, but cycle highs have been brutal. The last cycle high for a 60 day cycle was in the spring of 2018 in both the March and May cycle highs saw large declines.

It's hard to think prevailing prices are worthy of selling, but there is no rationing needed for wheat that can cause a meaningful rally at this time. Any bounce that is seen in the coming weeks should be seen as an opportunity to increase sales. Otherwise you will be owning wheat into the winter again.

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A week ago Friday, the June cattle on feed report confirmed record large June 1 feedlot inventory and Summer cattle slaughter rates. And we still held the projected top side of our 101-102 range for August cattle before a strong recovery occurred to end the week. Feeder cattle enjoyed an even stronger recovery because of the confirmation that corn is going to be a struggle to get to $5.00.

Live cattle are carving out summer seasonal low now, but rallies are not necessarily going to be encouraging with an uptrend. Its can it take some time to work through the supplies, with worst-case scenario prices likely scored on the charts. This is why we were lifting hedges on challenges of the lows.

Hog futures also confirmed large supplies with Thursdays Hog and Pigs report. December hogs still are carrying a $20 plus premium to last years cash lows. What is needed is confirmation that pork exports are going to pick up because of the known ASF. China did not confirm what the USDA announced on Friday, and that is it would be buying agricultural products. The one thing that would be a number one purchase on their list would be pork! If large-scale buying of pork did get underway, this would be a catalyst for meat prices to elevate from lows made this past week.

Early week trading will help tip the hand of what is actually taking place with China. We have the confirmed supplies of beef and pork, new demand inputs would be China buying and the game changer for the current trends.

We are neutral cattle and feeder cattle prices at price lows made early last week.

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2019 Hedge Recommendations

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Took new crop 2019 corn sales to 65% by purchasing the September 460 short-dated corn put on 25% production for 30 cents.

Took new crop 2019 bean sales to 50% with the purchase of the 940 September short-dated bean puts on 25% production for $0.45.


Sold 25% of 2018 corn stocks at 429.2, 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.


New crop sales on Minneapolis wheat were started at 571 September or 581 December for 20%.


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

Old crop 2018 bean sales were completed at 920 average this spring, and we added 1.14 gains from our put options in the summer of 2018 along with the 2018 market facilitation payment of $0.83 a bushel. That put our total sales value at above 11.00 on 2018 production.

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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