Written Commentary
CLOSING COMMENTS
Macroeconomics:
The Fed cut -25 basis points as expected. The biggest take-away was Jerome’s expectations changed from 4 cuts next year to only 2 cuts. The Dow Jones posts the first 10-day losing streak since 1974, down -1123 points today. The Se&P 500 dropped 2.95% to 5,872 and the Nasdaq down 3.56% to 19,392. The equity market did not have a strong close. If the Federal reserve’s objective was to pull the market back closer to the chest with news of the possibility of fewer cuts, they accomplished their mission. The US dollar index rose to 109.00 following Powell’s comments on a strong economy and stable labor market.
Ag Fundamentals:
Fresh new lows in the soybean market with support for nearby and March beans falling to 935’0-945’0. Parts of Argentina may have the beginnings of a potential drought, but otherwise weather in SA is perfect for growing a bin buster. Congress left out support for new biodiesel policies in the US. They are allowing for year-round E15 sales which will add to corn demand. The US dollar strength is putting more and more pressure on commodity prices as well. Looking around the world there is one clear answer to “Which county is the safest bet, best place to put my money, and has the most future potential to thrive?” the USA. China’s economy has not shown any signs of major recovery or strength. Japan’s central bank will announce their plans on interest rates this evening. Don’t forget about their “carry trade” unrevealing in July that seems like it happened ages ago (That happened after they unexpectedly hiked rates). Brazil’s currency is in the tubes along with their political uncertainty. Mexico and Canada are at the mercy of Trump’s threats. Europe is still feeling the effects of the conflicts in the middle East and the dollar strength doesn’t help that either. Ethanol data can be seen below..
EIA WEEKLY PRODUCTION
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EIA WEEKLY ETHANOL STOCKS
Ethanol Stocks were basically unchanged at 22.64 million barrels. This was below expectations. Seems ethanol production is not phased by tighter margins.
EIA WEEKLY ETHANOL STOCKS
Corn Usage was up last week by 2.52 million bushels from the week prior. Still below the record highs in December of 2017.
*Corn usage estimate subtracts sorghum used for ethanol based on USDA monthly grain crush report. Bushel to gallon conversion is based on implied yield: EIA monthly ethanol production divided by net (corn and sorghum) bushels crushed from USDA month report.
Calendar Spreads
Spread | Last | Chg | Full | % of FC |
CH25/CK25 | -6 1/2 | 0 | -20 3/4 | 31% |
SF25/SH25 | -1 1/2 | +1/2 | -25 1/2 | 6% |
SH25/SK25 | -8 1/4 | +1/4 | -26 1/4 | 31% |
SF24/SN25 | -19 3/4 | +1 | -78 | 25% |
MWH25/MWK25 | -7 1/4 | +1/4 | -20 1/2 | 35% |
WH25/WK25 | -10 1/2 | -1 | -16 | 66% |
KWH25/KWK25 | -8 | – 1/4 | -16 | 50% |
Cost of Carry
No new data.
Daily Trading Limits: Corn $0.30 (expanded $0.45); Soybeans $0.85 (expanded $1.30); Minneapolis Wheat $0.60 (expanded $0.90); KC Wheat $0.40 (expanded $0.60); Chicago Wheat $0.40 (expanded $0.60)
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