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Heartland Daily Newsletter - Grains and Cattle

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Grain futures put in a mixed review last week with soybeans sharply lower by $0.27, wheat off $0.11 in Chicago and Kansas, while corn did gain $0.15 on improving Eastern corn belt basis. Last Sunday night session went as we expected, and that is the announcement that China/ US would restart talks could only create a higher opening which was immediately sold. Its not anticipated anything will ever come of a Chinese trade deal before 2019 ends. The reality is now that we have some high watermarks set in corn, beans, and wheat almost three weeks ago that carry the likelihood of being the high of 2019. Six weeks ago, agriculture was pretty disappointing for pricing, before the miracle of delayed plantings, where ones mans poison is another mans gold created pricing opportunities.

Yes, we have a delayed crop were pollination is now pushed into August for a lot of the corn crop, and the soybeans are still made in August, and anything can go wrong. Then add to that the fear of an early freeze. But statistically, there is a 9/10 chance that everything will go right the rest of the year. The 100 year mean average for weather suggests a late spring typically comes with a late fall. This is especially reliable if the summer is not abnormally hot. Thats a reality. Price jumps can occur like corn did this past week, but can they have the excitement to rally to new highs and sustain that? Likely not.

First, this coming week on Thursday at 11 AM CT, the USDA will be coming out with another crop production/stocks report, and they are likely to lower exports on corn, beans, and wheat, and they are going be utilizing their June 28 acreage number to create stocks. Keep in mind that the large rally in corn price at the end of May-early June offered 4.50 corn that changed the perception of planting. Had 4.50 been offered back in March, its likely that corn base wouldve been in the 94-96 million acre mark. When the USDA took the survey and came up with 91 .7 million acres, that already included probably 3 million acres of preventive plant, while many farmers were switching bean acres to corn that could capture the prosperity that was offered.

Its likely another 4-5 million acres will be pulled off the current corn acreage number. This means when they get done with the surveys in July, and the USDA reports it in August, we're probably dealing with an 86-87 million acre crop. Add to that a likely improving yield to near 170 Bu/acre, we do not have a carry out that is racing for a billion bushels or less, but in fact, is going to be above 1.5 if not 1.6 billion bushels for new crop carry out. That does not create 5.00 corn, let alone sustain prices near the highs made on June 17.

Second, outside of the US borders, there is no shortage of corn, beans, or wheat. Inside the US borders, there is no shortage of beans or wheat, which will help accommodate tightening stocks later this year for corn. Presently the Eastern corn belt experienced a jump in basis to $0.40 over the board, as farmers are tightfisted with any of last years remaining stocks, not knowing where they stand this year. Thats normal but will not last. Eventually, sales will occur from old crop stocks, just like spring wheat found its way out of the bins in the drought of 2017.

Fifteen years ago, the US produced almost 2/3 of all the corn sold in the world. In the last decade alone, an explosion of corn production from Brazil, Argentina, and Ukraine, has occurred were now two-thirds of the corn supplies come from them, and one-third of supply of corn in the world is from the US. Dynamic movements cannot be compared to 10 or 20 years ago; we are actually in a new paradigm. Yes corn prices have elevated, yes stocks are going to tighten for corn, yes areas of United States have a late crop and are subject to late summer heat and/or freeze. But keep in mind, the worst of the fears probably occurred back on June 17 (when there was a fear that the new crop corn carryout was dropping under 1 billion bushels), and now the trend of least resistance is lower. That doesnt mean rallies cant occur; it just means they will not make new high water mark ground.

Central US weather continues to look favorable now into the latter half of July. Add to that US corn export demand remains disappointing, and it does not look to improve into the autumn harvest. South American basis is some 20-40 cents under US corn offered, so why would there be any pinch other than local domestic ethanol needs in the East, to support corn prices nationally from here forward?

Hedge alert: Sell remaining 2018 old crop corn stocks Monday on the opening, hopefully, we will capture the spot September price near 440. We had sold 75% of 2018 corn for 416 avg., if we can get a near 440 sale or within pennies of it, our average for 2018 on the board will be at 422. Its just a matter of your regional differences in basis.

We are 65% sold on new crop corn and 50% on new crop beans and are nervous thats not enough. Yes were holding on thoughts of maybe August weather troubles, and maybe a freeze, but those maybes are remote, and we probably should have been in the 75% category on this price rise. Without weather problems in August or September, spot beans can easily be at 8.00 and new crop corn in the 380 range. We have poor exports (US Dollar still holding up), and the world is still awash with grain. One mans poison was another mans gold, and June 17 was gold that needed to be taken. Be a seller on any rallies that are offered. Corn looks to be capped near 450 with beans capped at 920 without adverse weather.

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Hedge alert: Sell remaining 2018 old crop corn stocks Monday on the opening.

Corn did challenge the 420 range Monday-Tuesday which was the gap on the charts at the end of May, and held. The tightening of basis in the Eastern corn belt created a flurry of short covering activity that essentially lasted for two days with the bulk of the upward movement in by Thursday's close.

The intra-day chart shown below, was featured in Tuesday's video when I suggested corn could rally back to 440 if it was successful in holding the gap. The 443 range is actual resistance at Friday's high near 443.4 with the purple line being touched. Without any upward movement Monday, look for corn again to retreat on optimum weather and fears that the USDA will not have any positive data to add to the mix of current production ideas.

Corn looks to be trapped in a trading range now that can be bound by the 450 value, but support on further weakness should be maintained near 420. Breaking that sets corn back to the breakout value that occurred at 406-410.

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Any hope of further bean rally from last Friday's report was dashed Sunday night, when no respect was given to the Chinese/US trade talks resuming. Beans were sold immediately on the opening and lost ground every day this past week except for a light bounce on Thursday.

Beans are now back under the 100 day moving average, with 905-915 being the range of resistance with slippage on any bounces will be difficult for beans to get back above.

Expectations are that bean acreage is actually a million acres or more higher than what the USDA reported on June 28. Yield potential is considered stable and growing with improving crop condition scores being expected this Monday afternoon.

Downside objectives for beans show supportive 876-880 to be challenged where bounces could occur. But aggressive resistance is now reflected by the blue line on the intraday chart below.

Sell beans on rallies, now it appears 905-915 is the resistance point that is going to struggle to get through technically without something adverse.

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Wheat found stability on corn for a one-day bounce essentially. Talk of heat in Europe on the wheat crop is mostly irrelevant as the crop is beyond the reproductive stage.

Russia looks to get aggressive with a wheat crop of 77-81 MMTs, and they will again set the pace for sales. This past week Romania captured a Egyptian wheat sale and the US was left in the dust.

Our winter wheat sales occurred on the challenges of the numbers reflected back in early June in the 490-500 range. Opportunities were brief, but we have been saying make sales.

Spring wheat is in the doldrums, as rallies never get beyond the 480 range for new crop September which is currently on the continuation chart. wheat is a grass, and North Dakota is providing the perfect weather to grow a large wheat crop. Canada is also coming around on strong acres. Make additional wheat sales on any 10-$0.20 bounce that can occur from Friday's close. That rally looks doubtful, but keep in mind if they occur you have to act.

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Cattle continue to confirm that the worst downside potential occurred on the charts at 102, inside of expected ranges were we lift hedges below 104. Cash cattle trading at 108 and as high as 111 in the North helped prompt a strong Friday rally.

Steer carcass weights increase seasonally 5 pounds from the prior week to 854 pounds, but are still 4 pounds below year ago and 6 pounds below the five-year average. The fed kill though for the week ending June 22 was 537K head, larger than expected. it's expected now this past week will likely see it recorded kill number of 540K or more.

Hogs continued to decline, as the focus on an over abundant hog supply for the domestic market, with China not budging on any purchases of pork. It's unlikely they can hold off beyond October-November to buy pork, as right now farmers in China are rushing lighter, younger hogs to market to fill needs. They fear their hogs will be destroyed if anything is seen in their herds.

The lack of rising pork prices keeps a glass ceiling on spot cattle prices trading above 109-111. December cattle prices we are optimistic to eventually trade north of 115 and see the prospects of 120 before we start making hedge recommendations.

Feeder cattle prices are fast approaching major resistance at 141.00-143.00. we look for the market the stall out there , as represents a horizontal resistance at 141.00 and the declining purple line at 143.00. hedgers that lifted put options near one 30.00 can look to reestablish protection if those ranges are challenged in the coming week.

We turned neutral cattle futures when spot was trading under 104.00 for live cattle and near 129.00-131.00 on feeder cattle.

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2019 Hedge Recommendations

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


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%

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

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 2018production.

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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