The Allendale Wake-Up Call

US China Trade War Intensifies As Harvest Advances

Good Morning! From Allendale, Inc. with the early morning commentary for September 19, 2018.

Grain markets continue to see corn and soybeans find pressure due to new tariff threats from the US and China. Furthermore, producers continue to get ready for harvest and make sales to free up bin space. December corn fell through key support levels closing down 5.25 cents at $3.42¾, with the next level of support at $3.37.  November beans have psychological support at $8.00, while wheat's next level of resistance is at $5.16 then $5.21.

Soybean Futures hit 10-year lows on Tuesday as the harvest of a record U.S. crop advanced rapidly on top of the continuing U.S.-China trade war darkening U.S. export outlooks.

NAFTA Talks continue as Canadian Foreign Minister Chrystia Freeland will hold fresh talks on renewing NAFTA with U.S. Trade Representative Robert Lighthizer in Washington today. Washington wants the text of a deal by Oct. 1 so the pact can be signed in time by the outgoing Mexican administration.

U.S. President Donald Trump escalated his trade war with China on Monday, imposing 10 percent tariffs on about $200 billion worth of Chinese imports to pressure China to make sweeping changes to its trade, technology transfer and high-tech industrial subsidy policies. As promised, China retaliated by levying tariffs on about $60 billion worth of U.S. goods.

Informa Economics estimates 2019 US corn acreage will rise by more than 4% to 93.044 million acres. Using a yield of 178.0 bpa, they estimate 2019 production at 15.256 billion bushels. Soybean acres are seen falling to 82.270 million, while soybean production is estimated at 4.161 billion bushels.

Managed money funds were estimated sellers of 17,000 corn contracts, 6,000 soybeans, 3,000 soymeal, and 3,000 soyoil in yesterday's trade. They were buyers of 4,500 wheat. The managed money position as of yesterday's close will be reported on this Friday's Commitments of Traders report.

Crude Oil prices rose Tuesday, boosted by heightened geopolitical tension after Russia blamed Israel for the loss of one of its reconnaissance planes shot down overnight by Syrian defense systems.

Cattle on Feed & Cold Storage Report will be released on Friday at 2 p.m. CST.  Allendale estimates total cattle on feed for September 1^stat 105.7 (5.7% over last year at 11.098 million head), placements at 106.7 (6.7% over last year at 2.057 million head) and marketings at 101.0 (1% over last year for a total of 1.999 million).  Allendale projects a 556 million lb. total pork stock level for the end of August. The five-year average is 586 million lbs. This estimate represents an increase of 8 million lbs. from last month. The five-year average month to month change for August is a 14 million lb. increase.  Allendale estimates beef stocks at 481 million lbs., over the five-year average of 440. This estimate represents a decrease of 4 million lbs. from last month. The five-year average for this month is a 2 million lb. increase.

December Live Cattle futures traded in a tight range on Tuesday closing at 118 (down 10 cents).  Strong resistance still remains at the 119 level with key support at 116. Deferred contracts also finished slightly lower during Tuesday’s trading session.

December Lean Hog futures traded sharply higher on Tuesday closing above resistance levels of 57.60.  Traders are still waiting to hear how bad plants were flooded and how long processing will be delayed.  African Swine Fever is still continuing to spread across Asia as well as a few cases found in Europe.

Dressed Beef values were lower with choice down 0.75 and select down 1.91. The CME Feeder Index is 158.17. Pork cutout value was up 1.55.