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Early Call 8:45am EDT: Corn up 3, soybeans up 3, wheat up 5. Grain markets are

higher at midweek led by Chicago wheat, which is up more than 1.0% as concerns

persist about acreage size and quality of conditions. If there is one class of wheat which

has the potential to post a tight balance sheet in 2019/20, it is definitely soft red.

Another day of higher equity prices appears on tap as does the fourth higher close in

crude oil in a row. Spot crude oil futures are now trading at their highest level since

November 7th (remember corn prices correlate more closely to crude oil than its own

stocks/use ratio) and firmly above their 200-day moving average. Crude oil is also

closing in on the 61.8% retracement of the entire October through December sell off as

the global supply situation tightens. Trade talks between China and the U.S. resume in

Washington later Wednesday.

Grains: Soybean contracts for May delivery rose 0.5% to $9.00 on the Chicago Board

of Trade on Tuesday. May soybeans broke through and closed above their 10- and 20-

day moving averages of $8.99 ½. Wheat contracts for May delivery rose 0.3% to $4.64,

while May corn contracts rose 0.1% to $3.61 ½. The looming threat of a Mexican

border closure capped trader optimism on Tuesday even as soybeans and wheat rose.

The soy complex has stabilized as trade starts to weigh on the possibility of fewer

planted acres this coming year This does not make the soy complex bullish, it simply

makes it less bearish. Traders believe that commodities futures across the board will

drop should President Trump move forward with closing the U.S.-Mexican border. If he

follows through with this plan it will disrupt trade with one of our biggest trade partners.

In a photo op this afternoon at the White House, Trump reiterated his resolve to close

the border as a tool to extract an immigration deal from Congress he is satisfied with,

stating that he was willing to damage the economy if it led to that result. "I'm totally

willing to do it," Trump said. Later the in the day, the President appeared to back off of

the threats, saying Mexico has made a big step on immigration over the past few days.

A new USDA study concludes that greenhouse gas emissions from corn-based ethanol

are 39% lower vs. regular gasoline. In addition, emissions from ethanol refined at

natural gas-powered refineries are 43% lower than gasoline, the USDA says.

Daily Grain / Hogs Marketing Outlook Written by: Jim Gerlach

4/3/2019

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Agriculture Secretary Sonny Perdue says that the study supports the Trump

Administrations' push to make E15 gasoline, which includes higher ethanol content,

available to consumers year-round. "I appreciate EPA Administrator Andrew Wheeler

moving expeditiously to finalize the E-15 rule before the start of summer driving

season," Perdue said. If demand for ethanol increases due to this rule change, then it

could increase the amount of corn consumed to make ethanol. For winter wheat, 91% of

crops were planted in either fair, good, or excellent conditions, up from 70% at this time

last year. Meanwhile, according to the report, planting of sorghum is 13% complete, up

from 8% last year, and oats are 25% planted, up from 21% last year. Chinese Vice

Premier Liu He and his delegation will begin further trade talks in D.C. on Wednesday.

This follows U.S. Trade Rep. Robert Lighthizer and Treasury Secretary Steven

Mnuchin's trip to Beijing last week. A NY Times article claims the talks are roughly

90% complete and both parties are just finalizing the language.

Showers yesterday were confined to the northern Midwest and were generally very light

(see left map). Showers scatter from NE/IA into the southern Great Lakes the next two

days, with a more notable system late in the weekend into the 11-15 day period. The

wettest and most frequent fieldwork delays occur in the 6-15 day period for the southern

Midwest and northern Delta (see 7-day NOAA forecast map right), with flooding risks

limited for corn/SRW. Morning GFS models are still calling for a fair amount of rain

the central and southern corn belt, which will keep planters at bay for at least another

week. Extended maps from NOAA have flipped temperature ideas back to below

normal for the 6-14 day period, and when combined with above normal precipitation,

could keep fieldwork delays alive and well. The northwest Midwest and northeast Plains

still see weekend showers, but a cooler/drier pattern next week shifts the storm track

south. The remaining snow in northern MN/eastern ND melts with the warm surge Fri-

Mon, but flooding slowly moderates with a lack of additional rain. Warming aids

Midwest soil temps only briefly and the Southeast is not as dry the next two weeks, with

GA missing out on rain. Scattered rains occur mainly in the central/southeast Plains the

next 10 days. A bigger surge in the 11-15 day period continues to support good wheat

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growth. In Monday’s first, national wheat rating, U.S. soft red winter wheat states

rivaled the poorest of the last decade, with OH at just 28% good/excellent.

A report from Mike Tannura of www.tstorm.net suggests that the wet pattern we’ve

seen over the winter and early spring may continue for some time. Near-unprecedented

precipitation in the U.S. Corn Belt will need to be monitored over the next few weeks,

and history suggests in some fashion through July. The period of June-March in the

Corn Belt was the wettest in more than 125 years by a wide margin and included the

#20 wettest March of the period. More so, March marked the 8th consecutive month of

above-normal precipitation dating to last August and only June 1951-January 1952 was

also wet for 8 consecutive months. That said, July 2018 was only -0.01" from normal,

such that a fraction more rain last July would have made March the 10th consecutive

wet month because June 2018 was unusually wet. Only the June-March periods of

1993-94 and 2015-16 are comparably wet to 2018-19, but major differences exist with

rains over 2018-19 likely to have considerably more impact. 1993-94 wetness was

driven by heavy rains over June-September, but not thereafter. 2015-16 wetness was

driven by heavy rains over October-December, but not thereafter. 2018-19 has been

marked by persistent wetness over 9 of the last 10 months and is part of a persistent

pattern that is yet to break and has left the central U.S. saturated and rivers flooded. It

is why only near-normal rains are needed to induce or maintain wet and flooded

conditions as opposed to a normal spring where heavy rains would be needed and is

how a whopping 88% and 84% of the U.S. corn and soybean production regions were

wetter than normal over the last 180 days. Notably, prior to this year, only 5 had

January, February, and March all wetter than normal since 1895. 4 Aprils that followed

were wetter than normal, after which all 5 Mays were at least slightly drier than normal

but followed by 5 wet Junes and 4 wet Julys. As such, there is historical support for

rains to continue in some fashion through at least mid-summer. Temperatures did not

show clear deviations to the normal, cool, or warm side.

Brazil’s soybean harvest is 75% complete vs. 72% last year and 70% average. Their

first crop corn is 59% harvested vs. 60% last year, while the safrinha corn crop planting

is complete. FC Stone estimates the Brazilian corn crop at 94.39mmt (USDA 94.5mmt),

up 0.55mmt from their prior number. Estimates from FC Stone show the Brazilian

soybean crop at 115.7mmt, a 2.7mmt jump from last month’s estimate. A noted crop

scout pegged Brazil’s 2018-2019 corn crop to be 94.13mmt vs. 81.78mmt in the

previous season. Brazilian ag consultant Datagro pegged their soybean crop at 113mmt

vs. 112.1mmt previously. They see the corn crop at 94.1mmt. As of March 28th, the

Argentine corn crop was 16% harvested vs. 13% average and 22% last year. Around 2%

of the soybean crop has been harvested vs. the average of 6%. RJO’s weekly South

American crop roundup pegged the soybean crop at 115.5-116.0mmt vs. the USDA’s

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116.5mmt forecast. Privates are inching the soy crop estimate higher on good late yields

(RGDS soy crop could be 20mmt vs. the prior 18mmt estimate). They pegged the corn

crop estimate at 95mmt with an upward lean vs. the USDA’s 94.5mmt forecast.

Safrinha corn, which pollinates this month, has bumper potential. The real has limited

upside potential given the political turmoil (including pension reform) surrounding the

new administration. Brazil soybeans are $.30-$.35 below U.S. offerings to China.

Recent export sales have slowed, ditto for farm selling. Exporters are forced to pay

$.20-$.30 over FOB values to source farmer beans. There are no worries over Brazil

running short at year end on soy exports as crop estimates creep higher and the recent

export sales flurry slows. Crushers struggling to breakeven, with Brazil meal offerings

last week down $3-$4/mt as Argentina ramps up their meal export push. Argentina’s

corn crop estimate was pegged at 49-50mmt vs. the USDA’s 46mmt forecast. Corn

yields, with 12% harvested, are exceeding expectations. The soybean crop estimate was

pegged at 55mmt vs. the USDA’s 55mmt forecast. Soy harvest, which will peak mid-

May, is only 2% complete vs. corn at 12%. Crops (especially soy) need another 6 weeks

of frost-free growing weather to achieve maximum yield potential (recall more late

seeded crops this year than normal). Uncertainty over the fall election will keep the peso

under pressure. Farmer new crop soy sales are well behind average by at least by 2-

3mmt despite prospects for a 17mmt larger 2019 soy crop than 2018.

Regarding last Friday’s shocking corn stocks report, RJO’s Rich Feltes noted that in

similar years, it’s not uncommon to see June stocks offset a part of the bearish March

stocks but throw in September stocks and the overall change in stocks is still bearish.

Corn stocks vs. trade expectations:

March 2010 +180mb June 2010 -300mb Sept 2010 +300mb Net +180mb

March 2013 +380mb June 2013 -85mb Sept 2013 +150mb Net +445mb

March 2015 +130mb June 2015 -100mb Sept 2015 -10mb Net +20mb

March 2018 +180mb June 2018 +40mb Sept 2018 +130 mb Net +350 mb

March 2019 +270mb June 2019 ??? Sept 2019 ??? Net ???

The bottom line—3 of the 4 years cited above with higher than expected March 1 U.S.

corns stocks carried those higher than expected corn stocks (vs. trade expectations) thru

the end of the marketing year. However, it’s noteworthy that in 2 of the 4 years cited,

June 1 corn stocks clocked in measurably below trade expectations. Suspect corn bears

will be reluctant to carry shorts into the upcoming June 28 quarterly stocks report. The

University of Illinois ag economist Scott Irwin cited 2 possibilities for higher than

expected March 1, 2019 corn stocks, “either Q2 feed demand tanked or the surprising

drop in 2018 U.S. corn yield on the Feb crop report was not correct. “We will never

really know.”

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The USDA's attache in China estimated China's soybean imports will increase 4% in

2019-20 to 91.5mmt. Part of the rationale for expecting higher soybean imports at a

time when African swine fever is reducing China's pork herd is that demand has

increased for chicken, beef and seafood. The USDA's attache also noted that as China

moves toward larger-scale pork production, they will require more commercial feed,

less prone to disease than current feed sources. Welcome to the party, USDA, as I’ve

been saying that since last August. Prior to ASF, the Chinese government had already

begun to move China’s pork industry up north, where their corn/soybean crops are

grown, which makes sense as why would you grow hogs in Texas if you grow

corn/soybeans in Iowa? You can say what you want about China, but they’re not stupid.

Once ASF hit, they government realized that they would never control it when 43% of

their production is grown by “mom and pop” operations that fed mostly table scraps and

refuse and hogs running around the back yard. The last time China had a major disease

outbreak in 2007 with “blue ear” (form of PRRS) doing substantial damage, the

government largely made these small producers whole. This time, the government has

announced that they will only subsidize large breeding farms and corporate/modern

farms, which almost exclusively feed corn/soybean meal. Thus, while the next 12-24

months will likely see Chinese corn/soybean meal demand lower than before ASF,

ultimately Chinese feed demand will likely be MUCH higher than before the disease

arrived.

While the exact date is impossible to predict, it is more likely than not that a major trade

deal will likely be signed between the U.S./China in the relatively near future. Since last

summer, I’ve never seen a period of apathy toward the grain/livestock markets like

we’ve just seen. Trade volume and interest fell to levels I’ve never seen before and I

began to think that maybe it was just us? After speaking with a plethora of grain traders

and brokers, I’ve been assured that they all experienced the same. Complacency can be

extremely dangerous, particularly if it comes just before a potentially game-changing

event (darkest before the dawn). Many of you recall that when the ethanol boom just got

underway, I went on record as saying I thought corn would trade to $6.99 (this when

corn just broached $4.00), with many of you probably thought I was nuts. It did even

more than that, culminating near $8.50 after the drought of 2012 (but trading above

$6.99 prior to the drought). After decades of watching corn trade between $2-$3, traders

simply couldn’t believe what the impact of increased 4 demand in the form of ethanol

could do to the market. Worse still, once the 2012 drought was over and the ethanol

expansion began winding down, they couldn’t believe that corn could trade back to $3.

This complacency cost grain producers and traders plenty of money, yet here we are

again after 6 years of low/static grain prices, 3 years of record corn yields (but demand

outpacing production each year), on the verge of a game-changing trade deal for

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agriculture with China, the most saturated soils in the central U.S. in 125 years and

managed money record short as the growing season approaches.

Hog traders have learned this painful lesson already with the market skyrocketing (up

39% in spot April in 11 sessions) after China started buying U.S. pork (despite a 62%

tariff). Two weeks ago, the USDA announced a 300,000mt sale of 2018/19 U.S. corn to

China (first time in many years) and corn opens just $.03 higher. While 300,000mt may

not sound like much, it is probably the tip of the iceberg as China was supposed to buy

7.2mmt of U.S. corn each year as a condition of entering the WTO back in 2001 and as

usual, didn’t live up to this commitment. Some believe (me included) that China will

buy this 7.2mmt as proof that they’re going to live up to future trade commitments and

to be quite honest, I was surprised they started before the ink was dry on a trade

agreement. Combined with another rumored 3mmt of ethanol imports once an

agreement is reached and not even mentioning the extra corn feed needed in major pork

exporting nations like the U.S., we’re talking about almost 600mb of NEW demand, not

regurgitated demand as is the case in soybeans. If you’re a corn buyer, I hope you

enjoyed the last 5-6 years of low prices because that’s over. If you’re a corn seller, I

hope you can change your thinking and adapt before giving your crops away as there’s a

new sheriff in town and his name in China. Once the algo trade (which is dominating

the markets) flips from bearish to bullish (like they did in hogs), look out!

On the demand front, Malaysian palm oil futures for June gained 1.2%, continuing to

find support in factors including firmer oil prices, a key influence on values of an ag

largely used in making biodiesel, and from data showing smaller-than-expected U.S.

stocks of soyoil. Brazil’s Trade Ministry pegged March corn exports at 891,945mt,

which was up 47.36% from the same time last year and 49.4% lower than February and

the 3rd highest on record for the month. The corn export line-up from Brazil’s Paranagua

port is very heavy over the coming months, with 800,000mt already set to be shipped

during Apr-May vs. zero last year. All of last year, Paranagua exported 1mmt of corn.

March soybean exports from Brazil were seen at 8.95mmt according to Trade Ministry

data. That was slightly larger than the same month in 2018 and 47% above February

shipments. Feb shipments were a record 6.1mmt for the month, shattering the previous

record of 3.5mmt in 2017. Brazilian ethanol exports are running at the strongest pace in

recent years, with Feb-Mar exports roughly double those of a year ago. Jan-Mar total

exports of 364 million liters (96 million gallons) are up nearly 47% from last year and

the highest in the last 3 years. Average Midwest ethanol basis hit new high for the year

(May -16). Cash traders say that China is inquiring about new crop U.S. soybeans after

buying 1.7mmt of old crop soybeans over the past week. While rail logistics are slowly

improving, barge logistics are as bad as ever with navigation above St. Louis closed and

tow sizes reduced below. South Korea purchased around 66,000mt of corn in a tender in

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a tender that closed Wednesday. This brings total South Korean purchases in the last 2

weeks to 600,000mt. India is set to allow 100,000mt of feed grade corn imports.

Hogs: Cash hogs are called steady. Despite the strong futures market rally, cash markets

are still expected to remain generally steady midweek. The focus on recent market

pressure is still causing some limited interest as packers are able to gain access to

needed market ready hogs without increasing spending. Wednesday slaughter is

expected at 477,000 head. Saturday runs are expected at 146,000 head. The national bid

lost $.14 yesterday to close at $75.14, while the IA/MN bid was unavailable due to

confidentiality issues. The CME Lean Hog Index was up another $1.93 from the

previous day at $75.80 on March 29th. The USDA pork carcass cutout value was $.44

lower at $81.71 on good movement of 355 loads. Estimated packer margins were

$4.11/head for non-integrators and $42.22/head for integrators vs. $6.00 and $40.86 the

previous day. Weekly kill is up 0.74% vs. a week ago. The African Swine Fever virus

has been detected in a contagious state on Japanese soil for the first time, discovered in

sausage brought into the country from China by an airline passenger, the government

said Tuesday according to Kyodo news service. The government has in the past detected

genes of the African Swine Fever virus in food brought from overseas, but never before

has the virus been confirmed as being at an infectious stage, Kyodo reported, noting

Japan’s Ministry of Agriculture, Forestry and Fisheries said the discovery of an

infectious form of the virus has prompted a decision to strengthen measures against

illegal imports of livestock products.

The market rally Tuesday increased interest in the entire hog complex. The limit gains

at closing bell Tuesday in May and June futures opened the door for expanded trading

limits through the entire session. This will allow additional market volatility as follow-

through support is likely based on expected short and long-term pork demand growth

through the end of the year. Trade interest continues to be linked to expectations of

potential trade deals with China and their need to replace production lost because of

African swine fever. But as strong as expectations are that this demand will develop, it

is hard to pinpoint just how much and how soon there will be active sales. This could

add increased market swings to the entire complex. Lean hog futures rose sharply

Tuesday with limit gains seen in May and June contracts. Because of this, expanded

trade limits will be in place Wednesday, allowing for potential additional support. Lean

hog futures rose $1.55 to $3.00 higher. Strong buyer interest moved back into the

complex as traders feel that at some point, a trade deal will get signed between the U.S.

and China and that losses due to African swine fever will stimulate more buying in the

long term. May and June contracts posted triple-digit gains, which was enough to

expand trading limits Wednesday. Pork cutout prices slipped as overall softness early in

the week had an impact on most primal cuts. Hog futures nearly made a 50% correction

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of the current rally before rallying yesterday, which likely relieved the overbought

nature of the market. Fears that President Trump could close the border with Mexico

seems to be an unlikely event, with the President saying late yesterday that Mexico has

started to take steps on detaining central American immigrants in Mexico. China’s

national spot pig price on April 2nd was down 0.19%. For the week, prices are down

0.13%, up 25.2% for the month of March and up 51.5% for the year.

Limited activity is expected in cattle early Wednesday, with traders focusing on the lack

of late-day support in feeder cattle on Tuesday. Live cattle trade was mixed Tuesday

following weakness in feeder cattle. Futures closed $0.87 lower to $0.17 higher. Firm

support early Tuesday quickly eroded as deferred contracts quickly followed feeder

cattle contracts lower. Narrow gains remained in spring and summer contracts as traders

continued to focus on firming demand expectations and the potential to rekindle buyer

activity through the next several weeks. But a strong pullback in feeder cattle trade late

Tuesday pulled most early buyers away from the complex. Limited volume was seen in

deferred late-2019 contract months, but the weaker market tone could limit late-week

support. Beef cutouts were lower, down $0.84 (select $218.49) to down $1.11 (choice

$225.73) with moderate demand and light offerings. Cash cattle are called basically

steady as bids and asking prices remain quiet and will likely stay that way early

Wednesday. Some interest is expected to develop midweek, but most trade may not

develop until Thursday or Friday. Losses quickly developed Tuesday in the feeder cattle

market and futures settled $0.60 to $1.45 lower. Despite early mixed trade on spillover

support from the hog trade early in the session, the feeder cattle market took on a

weaker tone at midday. This sparked additional selling pressure in all contracts as most

futures traded $1 to $1.45 lower based on limited interest and firming feed prices.

Nearby contracts still remain within the wide trading range that developed in March.

This could allow wide market shifts without any significant technical signals developing

over the next couple of weeks.

In last week’s H&P report, sows farrowed during the December 2018-February 2019

quarter were pegged at 3.084 million. Three months earlier, hog producers were queried

on their expectations for farrowings during the upcoming quarter, which USDA-NASS

reported to be 3.110 million sows, so actual farrowings came in 26,000 head below

expectations of three months earlier. This was the biggest downward adjustment for any

quarter since 2016, but it is also consistent with profitability trends for hog producers

during the second half of 2018, based on data from Iowa State University that shows a

positive relationship between hog production profitability and farrowings in a quarter

relative to stated intentions three months earlier. In the just completed December-

February 2019 quarter, actual farrowings came up short of intentions on December 1 by

26,000 head. Average profitability during the July-September 2019 quarter, based on

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Iowa State University data showed a loss of slightly more than $15 per head.

Conversely, farrowings in March-May 2018 surpassed producer stated farrowing

intentions on March 1, 2018 by 43,000 sows which followed January-March 2018 hog

production profitability that was a positive $6.59 per head. During the first two months

of 2019, profitability averaged about $8 per head loss. The rally in hog prices during

March likely moved hog producers back into profitability, but the quarterly average was

still slightly negative. This would suggest that actual farrowings in the March-May

quarter could be within 10,000 sows of the stated intentions on March 1, with a bias

leaning towards the positive side given the positioning of the trend line. The March 1

farrowing intentions were 3.119 million sows. Adding another 10,000 head gives a

projection of 3.129 million head which compares with 3.100 million sows farrowed in

March-May 2018.

Weather: The U.S. and European models are in fair to good agreement in a general

sense during the outlook period. There are some differences on the details, with a slight

bias towards the European model. The mean maps at 8-10 days feature a split jet stream

pattern. The northern branch of the jet stream features upper level ridging over Alaska

and western Canada with a trough in the east. This suggests somewhat colder

temperatures for central Canada that may also include the north-central U.S. region. The

southern branch of the jet stream features a trough just off the west coast and a second

trough just east of the Miss river. The storm track runs from the base of the east Pacific

trough to the base of the eastern trough before turning northward in the eastern U.S. The

models both show a low forming over the southern Plains and tracking east-northeast

through the southern and eastern Midwest and over the northeast U.S. later in the

outlook period. The low on the European model is much deeper than the one on the U.S.

model. In either case, rain is likely to occur from the north and east areas of the

central/south Plains region to the south and east Midwest and northern Delta areas. In

the case of the European model, this would be heavy rain. Also of note, the cooler

weather that arrives over the north-central U.S. midway through the outlook period

could come further south behind the departing low later in the period, first into the

southern Plains and then the southern Midwest and Delta.

Some light rains and snows brought totals of generally less than .25” to MN, eastern IA

and most of WI and MI, with things mainly dry in the rest of the Midwest yesterday.

Temps were in 40’s and 50’s for highs in most cases, with lows in the 20’s and 30’s. A

pair of low-pressure systems will bring fairly healthy rains to most of the region the rest

of this week and weekend. Things then look to be fairly quiet for the first part of next

week, with another low-pressure system indicated to bring fairly soaking rains to most

MO, IL, IN, MI and OH, with little in the way of precip in the rest of the region. The

rains will keep fields too wet for fieldwork in most of the region in the next 10 days.

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Temps will be running near average for the rest of this week and weekend and then cool

to below average for most of next week. No cold air threats seen, but the cooler temps

will inhibit soil warming/drying.

Light snow brought an inch or two to ND, with some light rains bringing totals of

generally less .25” to western NE. Things were dry in the rest of the Plains yesterday.

Temps were in the 50’s and 60’s for highs in the southern Plains, with 30’s and 40’s in

the Dakotas. Lows in the Plains were in the 20’s and 30’s in most cases. A pair of low-

pressure systems will bring rains to all but the far western sections of KS, OK and TX in

the next 5 days. The rains will be beneficial for crops in the southern Plains but keep

things too wet for fieldwork in the north. The forecast for next week seen an area of low

pressure to develop rains in most of NE and KS by the middle of the week. Things look

to be mainly dry in the rest of the Plains for next week. Temps will run close to average

in most of the Plains for the next 5 days and then cool to below average for most of next

week. No cold air threats are seen, but the below average temps will inhibit soil

warming/drying in the north.

North American Weather Highlights: There is at least a slight chance of rain up to 0.50

inch occurring in the northwest Minnesota area this weekend. This along with projected

warmer temperatures may lead to increased melting of the snow cover and some

flooding along the red river. Except for this system, the drier weather pattern will

continue during the 10 day period. Rainfall at near to above normal both in the 5 day

period and the 6-10 day period is expected to maintain conditions too wet for early

spring field work in the Midwest. As mentioned above, this might include a heavy rain

threat during the 6-10 day period if today's European model turns out to be correct. This

threatens more flooding along the rivers of the Midwest. Favorable soil moisture

conditions are expected to continue for the developing winter wheat crop in southern

Plains. Warmer temperatures during the next 5-7 days will promote more rapid

development. A turn to cooler weather after that might slow growth rates, somewhat.

Global Weather Highlights: Rain, showers and thundershowers develop through the

southern crop belt of Brazil during the Thursday-Friday time frame, followed by cooler

temperatures. This will be somewhat unfavorable for the maturing soybean crop and it

will likely slow harvest progress somewhat. Rain into Parana favors development of

second crop corn at the end of this week. Thunderstorms in MGDS yesterday will

slowly work northward into Mato Grosso during the next several days. This will cool

the current hot temperatures and favor development of second crop corn. Drier, hotter

weather occurred in central Argentina yesterday. The forecast suggests generally below

normal rainfall during the next 10 days, with variable temperatures favoring maturing

crops and harvesting. Soil moisture in winter wheat areas that will be planted beginning

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next month will be diminishing. Showers and thundershowers in South Africa, along

with cooler temperatures, have occurred during the past couple of days. Rainfall favors

late filling corn and late developing sugarcane but may be somewhat unfavorable for

early maturing crops and any early harvesting. Winter wheat is breaking dormancy and

greening up in the western FSU. The forecasts suggest that the recent drying trend over

eastern Ukraine will continue during the next 10 days. There is only one system that

may bring significant rains to the region during that period and this system is highly

uncertain. Increasing stress to development of winter wheat in the area. Mainly dry

weather is expected to continue across the North China Plain during the next 6 to 10

days. Temperatures vary somewhat during this period. Rainfall will be needed to

support increasing development of winter wheat, especially through climatologically

drier north and west areas. Soil moisture and irrigation should be adequate to surplus in

winter rapeseed areas of the Yangtze river valley area at this time due to above normal

fall and winter precipitation. This area may see periodic rainy weather during the next

10 days. This may be unfavorable for maturing rapeseed and will likely delay the

harvest. Moderate to heavy rain and thunderstorms occurred through New South Wales

and southern Queensland, Australia during the weekend period, with rainfall of 0.50-

2.00 inches and locally heavier. This provides a much-needed boost to soil moisture

ahead of winter wheat planting. Wheat planting can begin in Queensland during April

but normally holds off in New South Wales until May. The area has been under severe

drought conditions for a while. The forecast suggests that the region might see near to

above normal temperatures and below normal rainfall during the next 10 days. More

rain will be needed to continue to ease drought conditions.

Macros: The macro markets were supportive as of 8:30am EDT, with Dow futures up

0.5%, the U.S. dollar index is down 0.3%, crude oil is steady and gold is up 0.2%. The

S&P 500 on Tuesday fell back from a fresh 5 ¾ month high and closed unchanged. The

DJIA lost 0.30% and the Nasdaq 100 gained 0.28%. Bearish factors included the 0.1%

decline in U.S. Feb capital goods new orders, slightly weaker than expectations of

+0.1%, and weakness in consumer staples stocks. Bullish factors included strength in

technology stocks and a rally in energy stocks after crude oil rose 1.61% to a 4 ¾ month

high. Chinese Vice Premier Liu is in Washington today for another round of trade talks

with Lighthizer/Mnuchin, following up on last week's talks in China. There are market

hopes that the two sides are getting close to a final agreement since reports say the two

sides are now focused on ironing out the differences between the U.S./Chinese

translations in the 120-page draft agreement. President Trump may be closer to

imposing auto tariffs if EU ambassadors today do not deliver a mandate for U.S./EU

trade talks. EU ambassadors will meet in Brussels today to decide whether to give EU

Trade Commissioner Malmstrom the mandate she needs to begin the formal U.S./EU

trade talks that Trump-Juncker agreed to last July. There is concern that President

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Trump may go ahead with auto tariffs if the EU does not begin trade talks with the U.S.

very soon. Mr. Trump is already upset that the talks have taken this long to get going

and also that the EU is refusing to include agriculture in the talks. Ms. Malmstrom has

long been promising Mr. Trump that her trade-talk mandate will come soon. However,

that mandate is not a done deal since Bloomberg reported on Monday that France is

arguing that the EU should not hold trade talks with countries that are not part of the

Paris Climate agreement, a pointed reference to the U.S. President Trump could

announce tariffs on imported autos at any time if he wishes. The Commerce

Department's recommendation on whether President Trump should impose tariffs on

imported autos based on national security grounds has not yet been made public.

However, there is virtually no doubt that the recommendation is that the tariffs should

be imposed, in line with Mr. Trump's guidance. The global stock markets would

undoubtedly react very negatively if President Trump announces tariffs on imported

autos, which would draw retaliatory tariffs very quickly. The U.S./Chinese tariffs have

already put a chill into global trade and the global economy. The impact of tariffs on

autos would be larger than that of the U.S./Chinese tariffs, according to WTO Chief

Economist, who points out that U.S./Chinese trade accounts for only 3% of global trade

whereas global automobile trade accounts for 8% of world trade.

Shares rose in Asia on Wednesday ahead of the resumption of trade talks between the

U.S. and China in Washington. Japan's Nikkei 225 index advanced 1 percent to

21,713.21 and South Korea's Kospi added 1.2 percent to 2,203.27. The Shanghai

Composite index rose 0.6 percent to 3,195.61. Hong Kong's Hang Seng rebounded 0.9

percent to 29,893.95. The S&P ASX 200 in Australia gained 0.7 percent to 6,285.00.

Shares were higher in Taiwan and throughout Southeast Asia. Trade negotiations

between the U.S. and China are due to restart later Wednesday in Washington.

Negotiators from the world's two biggest economies are aiming to put to rest a dispute

over technology and other issues. They met in Beijing last week. Both sides have said

they were making progress toward a deal, but how close they are getting is unclear.

Traders also cheered a private survey released Wednesday showing that China's services

sector expanded in March. China's Caixin Services PMI, a survey of service industry

purchasing managers, had a reading of 54.4 in March. This is markedly better than

February's reading of 51.1 and the sharpest improvement since January 2018. The index

is on a 100-point scale, with 50 separating contraction from growth. This added to

optimism after China released encouraging manufacturing data over the weekend. On

Wall Street, a listless trading day resulted in an uneven finish for stock indexes. Gains

by big technology companies were offset by losses in other sectors. The broad S&P 500

index was almost flat, finishing at 2,867.24 on Tuesday. The Dow Jones Industrial

Average shed 0.3 percent to 26,179.13 while the Nasdaq composite was 0.3 percent

higher at 7,848.69. The Russell 2000 index of smaller company stocks gave up 0.2

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percent to 1,553.32. Benchmark U.S. crude picked up 27 cents to $62.85 per barrel in

electronic trading on the New York Mercantile Exchange. The contract added 99 cents

to $62.58 per barrel on Tuesday. Brent crude, used to price international oils, gained 45

cents to at $69.82 per barrel. It closed 36 cents higher at $69.37 per barrel in London.

The dollar strengthened to 111.55 yen from 111.32 yen late Tuesday. The euro jumped

to $1.1224 from $1.1205.

Summary: May corn ended down a quarter cent at $3.61 ½ Tuesday on light trading

volume, still adjusting to Friday's new estimates from USDA and the uncertainty of a

new planting season ahead. Late Monday, NASS's Southern Plains Regional Field

Office said 51% of corn was planted in Texas and 25% of the crop was emerged. The

USDA will have a national planting progress estimate next Monday afternoon, but it is

still early with midday soil temperatures in the 30s and 40s across much of the Corn

Belt. In South America, conditions remain favorable with more rain expected in Brazil

this week, while Argentina adds to last week's corn harvest progress of 12%.

Fundamentally, ending U.S. corn stocks for 2018-19 could be closer to 2 billion bushels

than previously expected, but the overall price outlook is still neutral, similar to the low

ranges the past four years. Technically, Friday's sell-off turned the trend of corn prices

down, but further downside potential is apt to be limited. For now, May futures appear

to have found support near the 2018 low and cash corn prices bounced up from a four-

month low. May soybeans held Monday's gain and added another $.04 ½ finishing at

$9.00 on Tuesday, a quieter day of trading. Soybean prices have been in a stalemate

ever since the U.S. and China declared a truce on new tariffs and went instead to month-

by-month negotiations. This week's talks pick up again in Washington D.C., but there is

no sign yet of any significant breakthrough on the issue of safeguarding intellectual

property, the original dispute that fueled last year's higher tariffs. Here in the U.S., some

soybean planting has begun in the South, but it will be a few weeks before the USDA

reports on planting nationally. As mentioned above for corn, most Midwestern soils are

still too cold and some too wet for planting yet. On a more bullish note, the USDA's

attache in China estimated China's soybean imports will increase 4% in 2019-20 to

91.5mmt. Fundamentally, the bearish concerns for soybeans still outweigh the bullish

factors, while trade with China remains uncertain. Technically however, May soybean

futures are staying supported in the middle of a wide, sideways range that spans from

$8.50 to $9.50. May K.C. wheat ended down $.01 ¼ Tuesday to $4.33 ¼ after the

USDA said 56% of the winter wheat crop was rated either good or excellent, the highest

in three years. Poor-to-very poor ratings were low at 9%, but Ohio and Michigan

showed bigger problems with ratings of 26% and 30%, respectively. Kansas, the

number one winter wheat state, showed 55% of crops rated either good or excellent. The

seven-day forecast expects moderate-to-heavy rain amounts east of central Kansas, all

the way to the Atlantic Coast. Moderate-to-locally heavy amounts are also expected in

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the Pacific Northwest where winter wheat crops also rated well in Monday's report.

Outside the U.S., some dryness is reported in the Canadian Prairies, Australia, eastern

Ukraine, and the North China Plain, but there is no serious threat to world production

yet. May Minneapolis wheat continued its bearish slide for the fourth consecutive

session, falling $.11 ¼ to a new contract low of $5.41 ¾. The selling is unexpected,

happening while the Dakotas are dealing with flooding issues. Fundamentally, plentiful

U.S. supplies continue to keep wheat prices under bearish pressure. Technically, the

trends in cash HRW and SRW wheat remain down, while cash HRS wheat is holding

sideways, above $5.00.

May corn closed marginally lower Tuesday after a consolidative session. The May corn

contract stabilized above support at $3.56, Friday's low, following last week's swift sell-

off. For now, a minor daily May corn low is forming at $3.56 as the market digests the

recent declines. The near-term May corn trend remains bearish. On the upside,

resistance lies at $3.65 and $3.67 ½, the 50% and 61.8% Fibonacci retracements of the

March 29 price plunge. On the downside, below last week's May corn low at $3.56, the

weekly continuation chart reveals potential support and a bearish target at $3.52 ½. May

soybeans closed higher for the second session in a row on Tuesday. The bean contract

closed just above the 10-day moving average, which is a minor bullish signal. For now,

the near-term May soybean trend remains bearish and the gains can be considered

corrective. Looking ahead, the burden lies on May bean bulls to support continued

strength toward $9.12, the most recent swing high scored March 21, to improve the

near-term trend. Last week's low at $8.83 is swing low support for May beans.

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