Heartland Daily Newsletter - Grains and Cattle
Eugene Graner, Cta of Heartland Investor Services - InsideFutures.com - Mon Oct 21, 9:30AM CDT


In the review of last week, the corn and beans did peak Sunday night on the opening on the Chinese trade Phase 1 deal, as it was the lack of Chinese acknowledgment and immediate purchases that were not present. After five trading days, corn closed lower on the week by seven cents, and beans were down two cents. Only Chicago and Kansas City wheat showed strong gains on the week of $0.22 for Chicago and $0.12 for Kansas City, but Minneapolis lost $.06 on the week, as Chicago wheat is the only wheat in the US that is considered to have lower supplies than last year. World wheat values rose and helped hold wheat together.

Its likely that we did experience a high on October 14 on the corn and beans and those two markets will continue to drift into the end the month. The only new exciting story for grains would be the upcoming November 8 crop production report. With current harvesting yields that have been reported, the USDA appears to be on track for their crop guess, but the next four weeks will reveal the later planted crops and if they will be under performing more than is typical from the early planted crop. September and early October weather for the Midwest were conducive for yields to maintain or increase.

Statistically, it appears now it will be hard for the USDA togive a surprising drop in corn and bean yields by more than 3 BPA on corn and 1 bushel on beans. Of course, 1993, which is the year similar to 2019, but was much worse, found a massive yield drop in November that caused a 60 day rally back to new highs in grains. This is a wildcard that would occur for pricing, but the upcoming yield data for the next three weeks will be extremely scrutinized by the private trade to even hint that it could happen.

Corn export sales this week again where low, at 14.5 Mil Bu., Up 3 million from last week, but still at the low end of the spectrum. With US corn still trading $0.60 a bushel above South American corn as of Fridays close, weve got a big problem here. Because to meet the USDAs projected export target of 1.9 billion bushels, we need to be exporting almost twice that amount a week. With this kind of activity, the USDA is going to lower our export number by 50 million bushels in the next report. Again, removing corn loss in production with loss of sales to keep the new crop carry out in a non-threatening range.

Soybeans held together a little better on the week, only losing two cents, thats not exciting, because the current elevated price move has occurred in part by Chinese buying, but that buying is pretty much been known and done. This market is in immediate need of Chinese sales announcements and/or confirmation of it, or harvest pressure will erode this market soon. Bean prices are not suffering disparity in price like corn, as were almost on par with South American prices. The problem is, it was rumored last week that China was seeking South American beans when they should have likely been looking at US beans. Thats not good and could imply that until we get closer to the expected Phase 1 approval in another five weeks, bean prices will drift due to again contracting sales weekly. Lower yields will also helpful in getting soybeans back to the best prices of the calendar year, but even at 460 million bushel carry out, we have to be selling beans to maintain these prices. Soybeans never really get excited until the carry out falls under 300 million bushels, and rains look to become more regular for Brazil.

The Brazilian forecast is consistent with rains of .5-2.50" forecast for the dry regions of Mato Grosso and Parana from this weekend into midweek next week. The Brazilian rains have already started to fall and will persist on a near daily basis for the next 2 weeks. The wet season has arrived just in time for the Brazilian soybean seeding to accelerate.

Central US Forecast is for Below Normal Temps From Late October into November. The forecast calls for a zonal flow of the jet stream as several cold fronts pull across the Midwest. Rains of .5-1.5 inches on 70% coverage are forecast Sun-Tuesday of next week with the forecast then turning dry into the end of the month. A tropical storm is forecast to come ashore in the Florida Panhandle and bring drought relief to the SE US with rains of 1.00-4.00". The low pressure will pull cooler Canadian air southward into the Midwest later next week with temps below freezing in much of the WCB. Little snow is foreseen, while a secondary cold front is expected to bring the end of the growing season in the ECB at the end of the month. Cold and dry appears to be the pattern for the W and N Midwest into November.

Wheat was able to extend its rally this past week, as world prices continue to elevate. French milling wheat along with Russian wheat prices have gained $0.45 since the early September low, and Kansas wheat is on par with those gains with Chicago exceeding that greatly. Spring wheat is suffering its early run to a high three weeks ago, and is retreating as spreads are favoring Chicago wheat, where some are talking it may for the first time in multiple decades may trade above spring wheat. Chicago wheat is not a major factor in US valuations, as its the least amount grown, but its the one supply of stocks in wheat that is lower year-over-year.

Youre going to start hearing stories about how Winter wheat planting is again going to see lower acreage than the previous year and hit a 111-year low. It sounds exciting, but the problem is trend line yields or better yields on a good growing season next year would eliminate any major worries in the drop of acreage. Kansas continues to expand its corn and sorghum acreage and is joining the ranks as a Midwest row crop producer and cotton is starting to creep into the southwestern portion of the state. The Texas Panhandle, which 10 years ago was still a predominantly winter wheat growing area has almost been completely overcome with cotton. That cotton production is migrating its way up into Southwest Kansas.

Grain futures have a habit of making price turns at the end of the month/1st the month, with another minor change of course also at the midpoint of the month. Its a mid-point one that usually is not as strong as the end of the month but still carries some weight. It appears that corn and beans did do that mid-point high and are in retreat into the end of the month, with wheat choosing to go a different direction and press into our next major cycle turn for a high in wheat, and that is the 60-day cycle that hits Monday, November 4.

There is no harvest pressure from wheat anymore, its corn and beans that will deal with harvest pressure on a weekly basis in the coming weeks, as prices are not at calendar year lows and reflect a rally in price. Its likely we will see corn and bean prices close lower again next week (without any surprise Chinese announcements which seem less likely with every passing day) and wheat maintaining or adding to their gains.

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Corn futures had spiked the 38% retracement line on the daily December corn chart and spent less than two hours Sunday night above that price. What's concerning is that the December corn two hour chart, shown below, is attacking the purple line again after successfully slicing it and holding it on the USDA crop report. But it was courtesy of the Chinese Phase 1 deal that helps become exploding back.

Closing under 387.4, last week's low will be the straw that breaks the camel's back here, and likely find corn challenging the September price highs in the 372-374 range.

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The 60-day wheat cycle is in complete control, as I've shown it regularly either on French milling wheat or on Chicago and Kansas City wheat and and it works beautifully within a one-week time. The current rally has the ability to extend into November 4, where several days either side of it, we will look for bullish news to create a spike that will get sold.

Upside potential on Chicago wheat finds that contract right into immediate resistance. Major resistance comes in at the 440-450 range. Most of this current buying is on the backs of short covering in the Chicago wheat, where index funds likely have got themselves to a neutral position as of Friday's close.

With the price rally in Russian wheat this past week, Kansas wheat is trading $0.12 higher in price and still has a higher freight cost. US wheat sales continue to struggle, as the price rise on the board constantly keeps us in the storage position for wheat supplies. This is why we continue to have a billion plus bushel carry out.

The present rally in wheat needs to be sold if you have any old crop supplies of winter wheat that were not priced earlier this year. Wheat seasonally runs out of gas for seasonal upside momentum by early November.

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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%.

Hedge update: Made a 25% Spring wheat sale at 557 for Dec Minn wheat per weekend and Tuesday recommendations. Sale was made on the board if basis is weak or you have exceptional wheat that could receive price improvement into the fall.


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.

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