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Morning Highlights
11/10/2017 7:19:09 AM
By John Tjornehoj

Highlights

In their winter weather outlook, NOAA showed a strong probability of La Nina conditions through the
winter months ahead, with a 65% to 75% chance. La Nina winters tend to produce below average
temperatures and above average precipitation across the northern Corn Belt, however no single La
Nina produces the same outcome.
U.S. equities along with the dollar index have traded lower late this week on uncertainty surrounding
tax reform. U.S. Senate Republicans revealed their tax plan on Thursday and it showed discrepancies
from that of the House of Representatives.
The next NAFTA meeting will take place in Mexico City on November 15-21.
Midwest benchmark propane prices are only $0.02375/gallon from notching a fresh 3-year high of
$0.93375. The reason for the strength has been a record export pace, which have driven inventories
down 22% year over year.
Corn

Front month corn broke out of its seven-week, 15 cent trading range yesterday by drifting lower post-
USDA report and registering a fresh December contract low of $3406 within five minutes of the
settlement. An overnight low was registered at $341.
A surprise 3.6 bpa increase in corn yield from Octobers official USDA estimate drove U.S.
aggregated corn yield to a new record high of 175.4 bpa, now above last years previous record of
174.6 bpa. This 2.1% boost to corn yield was the largest October to November adjustment since
1996. The top two corn producing states of Iowa and Illinois both saw their respective states average
corn yield up 6 bpa.
The corn yield has been adjusted higher by 5.9 bpa since Augusts estimate of 169.5 bpa.
One supportive update to the corn market was yesterdays combined old crop and new crop export
sales of 2.939 mmt, a 5 year high.
Spreads: Z/H 13 cent carry, H/K 8 cent carry, Z/N 29 cent carry.
Outlook: Weaker trade and fresh contract lows can be expected in the short term.

Oilseeds

Front month soybeans traded a relatively wide report-day range of $0.2050 before ultimately settling
down 2% yesterday. The reason for the weakness was likely a result of the national average U.S.
soybean yield left unchanged by the USDA at 49.5 bpa, whereas estimates were calling for a reduction
to the yield for the second straight month.
With a record harvested area of 89.5 million acres, U.S. soybean production is slated to rise 3% year
over year to a record 4.425 billion bushels.
Chinese soybean imports were adjusted 2 mmt higher to 97 mmt, a new record.
A Reuters article has been floating around, suggesting stricter import standards on GMO soybeans
into China. There has been recent delays in providing safety certificates (import permits) to a handful
of inbound cargoes which could be a new headwind to import demand. China currently buys 60% of
global soybean imports, primarily purchasing from Brazil and the U.S. It is interesting to note that as
a result of the import uncertainty, Chinese importers are focusing on Gulf origin cargoes (55 days)
over PNW cargos (17 days) in order to buy some time in obtaining certificates.
As a result of this Chinese import issue, two major soybean crushers suspended operations today after
failing to obtain import certificates.
Moore Research allows us to share two seasonal trades each month. Buying July soybeans on
November 16th and unwinding this long position on December 28th is a winner in 15 of the past 15
years, yielding an average profit of $2,148.
Spreads: X/F 9 cent carry, F/H 11 cent carry, F/N 28 cent carry.
Outlook: Fundamentally driven, negative price direction, with the potential for continued
technical weakness if nearby support levels fail to hold.

Wheat

Wheat markets are trading slightly lower after this weeks relatively strong performance.
Nearby Minneapolis wheat is leading the charge this week, up $0.2325 so far and registering an 11-
week high of $658 yesterday.
The biggest takeaway from yesterdays USDA report was U.S. all-wheat ending stocks tightening by
25 million bushels to 935 million bushels, the tightest stocks level in 3-years.
Despite the tighter U.S. supply, world wheat 2017/18 ending stocks were larger than expected at 267.5
mmt, up 4% year over year and if realized would be considered a new record. It is worth noting that
world wheat ending stocks have registered annual records for four straight years.
The USDA raised Russias wheat production estimate by 1 mmt to a record 82 mmt, up from 72.53
mmt last year. The export estimate was also increased, by 500,000 mt to a record 33 mmt. Russia is
the worlds largest wheat exporter. To provide perspective, the EU exports 28.5 mmt, followed by the
U.S. at 27 mmt and then Canada at 21 mmt.
Z/H Spreads: Chicago 16 cent carry, KC 16 cent carry, Mpls 9 cent carry.

Outlook: Weakness in the corn and soy markets will likely spill over into the wheat varieties.
 The right decisions for the right reasons.
CHS Hedging 2017 A subsidiary of CHS Inc. (http://www.chsinc.com)