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Early Call 8:45am EDT: Corn unchanged, soybeans up 3, wheat up 2. Global markets

were mixed, spending the night trying to determine who won the U.S. Presidential

debate. Grains were mostly steady-higher, gaining back only a small part of what was

lost Monday. Crude oil and gold were both lower while the U.S. dollar index posted a

small gain.

Grains: Grain and soybean futures fell Monday as forecasts for good weather across

much of the U.S. Midwest promised to clear the way for farmers to harvest what are

expected to be record crops. Soybean prices dropped, weighed down by a view for drier

weather in the U.S. Farm Belt this week, which likely will help growers make progress

collecting massive crops. Last week, heavy rains drenched parts of the Midwest

including major farm states like Iowa and Minnesota, fueling concerns over yield loss in

some farmers' fields. However skies are expected to clear this week, allowing farmers to

resume fieldwork and easing worries over damage to crops. Meanwhile, federal data on

soybeans inspected for export last week fell short of analyst expectations, further

pressuring prices for the oilseeds as a swift export pace is needed to help soak up this

year's huge harvest. The USDA already is calling for a record soybean crop this year,

and strong yield reports have prompted speculation that the government could peg the

coming haul of soybeans even bigger in a report next month, adding urgency to the U.S.

export program. Soybean futures for November declined $.09 3/4 to $9.45 ¼. Corn

futures fell, buffeted by harvest progress in the Midwest. Analysts say farmers in central

Illinois are about half-done with the corn harvest, and a drier outlook elsewhere in the

Midwest this week is offering hope that combines will roll uninterrupted through U.S.

fields. While yields for corn have been more variable than for soybeans, this year's crop

still is expected to build U.S. corn stockpiles to a nearly 30-year high by next August.

December corn sank $.07 1/2 to $3.29. Wheat prices slid, dragged lower by falling corn

and soybean prices as well as ample U.S. and world supplies of the grain. CBOT

December wheat declined $.08 3/4 to $3.96.

Daily Grain / Hogs Marketing Outlook Written by: Jim Gerlach

9/27/2016

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Heavy weekend rains have slowed harvest in the Midwest this week, with 1-2” amounts

falling in much of the WCB. Rains yesterday shifted into the ECB, focusing on the OH

River Valley (see map left). The WCB looks mostly dry until next week, with the far

ECB still seeing some rain this week (see 7-day NOAA forecast map right). Rains

return in the 6-15 day period, slowing the WCB harvest in particular. The southern U.S.

looks mostly dry in the 6-15 day period, aiding harvest, although uncertainty in the

tropics could change this forecast. Favorable planting prospects for the Plains occur this

week, but 6-15 day showers could miss the drier areas of CO/southwestern KS.

Wheat/canola harvest in northern/western areas of the Canadian Prairie will slow

harvest late this week and in the 6-10 day period, with a break possible in the 11-15 day

period. Internationally, showers later this week should favor the driest ares of Argentina,

easing early season moisture stress. Weekend rains in Brazil should benefit the

northeastern ¼ of the belt, while the central belt should see rains return next week,

aiding seeding. Northeastern China’s corn/soy harvest is seeing more frequent rains

over the next 10 days.

The U.S. fall harvest is off to a slower-than-normal start this year as heavy rains

drenched parts of the Farm Belt and stalled fieldwork last week. According to the

USDA, 15% of the nation's corn crop had been harvested as of Sunday, compared to the

average pace of 19% for this same time period over the previous five years. Meanwhile

farmers had collected 10% of the U.S. soybean crop versus an average 13% from 2011

to 2015. Wet weather and flooding halted combines in parts of the Midwest last week,

with farmers behind schedule in states like Iowa, Minnesota and Wisconsin, where six

times the normal amount of precipitation fell over some fields last week. Corn ratings

were unchanged at 74% good/excellent vs. 68% last year, with 73% of the crop mature

vs. 64% last year. Soy ratings were unchanged at 73% good/excellent vs. 62% last year,

with 68% leaf drop vs. 64% average. Winter wheat planted was up 13% to 30% vs. 30%

average.

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The RJO weekly crop roundup highlights included very good soy yields on early

harvest, a likely downward revision in USDA Oct corn yields in most states, a sizeable

breaking of spot soy basis, excess water induced loss of harvested acres in a portion of

NE IA/SE MN and more evidence of corn diplodia trimming test weight and quality,

especially IL eastward. Row crop harvest is expected to resume this week before

accelerating substantially next week, especially in the eastern Midwest given the dry

forecast for the 1st week of Oct. Long lines at soy processors affirm expectations that

farmers will be moving beans at harvest. IA commentator notes “lots of beans ready”,

with harvest expected to accelerate rapidly after fields dry enough to support combines.

MN soil moisture profiles “full,” thus no more moisture niseeded, especially with no

further water uptake by crops. Get ready for photos of combines bogged down in the

mud across portions of MN. Early Dakota soy yield is excellent while corn yields are

variable across SD. The USDA will likely increase ND yields of both corn and soy. NE

harvest is just getting started, with corn diseases above normal although considered

more of a nuisance” than a game changer on final yields. Delta commentator mirrors

Midwest colleagues with expectations for the USDA to up soy yields while trimming

corn yields. Southern Delta harvest is virtually over while northeast AR corn yields are

characterized as “variable”.

Brazilian analytical firm Safras called soybean planting 0.9% completed as of Friday

versus 0.8% last year and 1.2% on average. Parana soybeans were 3.5% planted. The

first crop corn in Brazil was reported as 16.1% planted versus 10% done last week and

20.8% last year. Rio Grande do Sol is now just 37% planted and had been 51% planted

on this date last year. MARS, the European Union's crop monitoring agency, cut its

grain harvest forecast after dry weather damaged yields. Grain yields are expected at

5.16mt/hectare in 2016, below the five-year average of 5.32mt/hectare, MARS said. In

its July report it had forecast yields of 5.36mt/ hectare. "Hot and dry conditions in

eastern Romania, Bulgaria and southern Ukraine as well as in southern France and

western Italy partially affected water supply and shortened the duration of grain filling

in maize and sunflower crops, thus reducing yield expectations," MARS said. The

forecast for corn yields was reduced to 6.84mt/hectare from 7.233mt/hectare. The soft

wheat yield forecast was reduced to 5.4mt/hectare from 5.63mt/ hectare. While

Ukrainian grain sowing pace is behind its 5-year average, it’s ahead of last year, market

researcher UkrAgroConsult said. Expectations of rain caused farmers to increase the

sowing pace as dry weather in Aug/Sep has been a risk to successful sowing and early

plant development. By Sep 23, grain crops were sowed on 24% of intended area while

rapeseed was 93% planted. Optimal sowing conditions for winter grains have begun and

extensive areas of winter crops will be planted outside optimal conditions. Heading out

to 2020, expected lower fertilizer subsidies and the eventual reform of wheat stockpiling

policy will likely weigh on wheat yields in China, says BMI Research. "This will

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prevent the country from repeating its performance between 2010 and 2015, when it

added on average around 2mmt per year to global output." Furthermore, it adds that

output growth in wheat yields will be significantly lower throughout 2016-20 compared

with the previous five years.

Most of the talk in the ag pits continues to focus on massive soybean yields, which

appear on track to get even bigger in next month’s S&D report. The USDA has upped

old crop soy production by 18-70mb in 3 of last 4 years. For new crop, since 1979 there

have been 7 years when the USDA forecast record soybean high yields in September,

with 5 of the subsequent October reports higher and just 2 lower. In all years in which

the yield grew in October, the final yield was even higher. Additionally, the FSA has

reported a significant reduction in prevent plant acres this year and the USDA normally

adjusts this data in the October crop report, with traders looking for an increase around

300,000 acres. For corn, there is a mounting concern that the USDA will trim 2015/16

U.S. corn feed use on Friday (recall June 1 U.S. corn stocks exceeded the average trade

guess by 194mb). Sept 1 U.S. corn stocks have exceeded the average trade guess in 6 of

the last 9 years by 50-300mb. Contrary to soybeans, corn yields are likely to be trimmed

in October. Since 1979, there have been 9 years when the USDA forecast record yields

for both Aug/Sep. In 5 years, the October estimate was above September, 3 years were

below and 1 year was unchanged. In 3 of the 9 years, the final yield was above

September and 6 years it was below. More importantly, in the 4 years where September

yield was below August, but like this year still a record, in all 4 years the October yield

was equal to below September. In 2000 and 2010, it was signficantly below September.

However, like soybeans, traders are expecting a 500,000 acreage increase due to low

prevent plant acreage, which should largely mitigate minor changes in yield.

CBOT prices are chopping in a sideways pattern, but a test of the recent contract lows

can’t be ruled out as harvest pressure mounts. While the present fund length in soybeans

is significantly less that where it stood earlier in the summer, it also leaves the soy

complex vulnerable if the USDA ups the bean crop again in the Oct crop report. Market

action is clearly within bounds of testing a string of recent lows in the $9.37-$9.43

range. Penetration below those figures leaves little technical support on the chart all the

way back down to the spring lows ranging in the $8.50-$8.75 window. That would

obviously put the recent sideways/consolidation trend in jeopardy following a long

down trend from the summer highs. Dec corn is also within range of testing recent lows

near $3.27, but so far maintain a premium of $.15 off of its Aug contract low at $3.15.

Again, the nothing here to say we can’t test or take out those lows, but as the attached

chart details, recent history with large/record U.S. corn crops shows a strong tendency

for price lows associated with such to occur in Sep (2009 in red, 2014 in blue and 2016

in black). With the funds already substantially short near 170,000 contracts as compared

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to record shorts near 240,000

and a max short earlier this year

of around 220,000, they may not

have much appetite to add to

those holdings considering

seasonal tendencies and the

addition of South American

weather coming in to play

shortly.

On the demand front, even

though soybean shipments have

slowed the past two weeks, the

U.S. is still well ahead of a year

ago and sales of beans have picked up over the past week. The inverse in the front end

of the barge market has disappeared. Oct barges were bid 63 over with offers at 71 over

and Nov was 70 on 75. Dec was 65 on 70 over the Jan and Jan was 63 on 68 over. Bids

along the IL River have fallen to 15 to 20 under for Sep arrival and 24 to 26 under for

Oct. Decatur, IL and Delphos, OH were posting spot bids of option price, Decatur, IN

was bidding 5 under, Claypool, IN and Sidney, OH were at 10 under. Most were paying

20 to 25 under for October. Mankato, MN was at 20 to 25 under for beans and most

others in the west were bidding 30 to 40 under. Corn exports for the marketing year

totaled 4.3mmt compared to 2.8mmt, but the strong export sales haven’t translated into

much interest in the barge market. Sep barges were offered at 47 over the Dec, Nov and

Dec had buyers at 57 over and Jan-Mar was bid 52 over. Bids for corn at elevators along

the IL River were 22 to 24 under the Dec. Bids at the OH River were 25 to 30 under.

Chicago rail bids were 5 to 8 over for Sep/Oct arrival. Bluffton, IN was bidding option

price for this week and 5 under for Oct. Decatur, IL was bidding 1 under, Fort

Recovery, OH was at 5 under and Portland, IN was at 7 under. Clinton and Cedar

Rapids, IA were the best bids in the west at 12 under. The spot soymeal market in the

east reportedly traded as firm as $20 over again, but values for new crop and last half

Oct to Dec were quoted at even money to $2 under Oct. Out west, there is still a bit of a

spot premium, but soymeal offers were seen at $33 to $35 under. Barge meal is cracking

and said to trade for oct at $14 over, with bids now down to just $11 over. FOB markets

as a result were offered openly at $23-$24 over and continue to sag trying to find some

export demand. The over Chicago rail market was offered at $4 under for new crop.

In export-related news, the USDA announced a 120,000mt sale of 2016/17 soybeans to

China via their daily reporting system. Year to date U.S. corn export sales total

17.9mmt. vs. 9.7mmt last year. Corn sales are up 84% vs. the USDA’s 13.6% gain.

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Soybean sales total 24.4mmt vs. 18.1mmt year. Soy sales are are up 33.5% vs. the

USDA’s 2.3% gain. Wheat sales are up 23% vs. the USDA’s 22.6% gain. Meal sales are

down 29% vs. the USDA’s 4.2% gain. Chinese spot soy import crush margins are

reportedly the best since Oct 2014. China sold 7.5% of 1.02mmt of corn reserves

offered today. The corn was stored in 2014. Iran has made a proposal to export 3mmt of

Durum wheat. Indian importers in past days purchased around 25,000mt of Australian-

origin wheat for December as India increases its wheat imports after a reduction in the

country's import duties. India's wheat imports are likely to climb to 2mmt this year

helped by the reduction in import tax that would help boost local supplies and rein in

prices. Millers have already imported nearly 600,000mt of wheat from Australia,

Ukraine, France and Russia while contracts for another 500,000mt have been signed.

India, the world's second-biggest producer of wheat, has large stockpiles of the grain,

but not all of it is of high quality. Russian wheat export prices rose last week for the first

time since mid-August, buoyed by demand from Egypt after it dropped its policy of not

importing wheat containing the ergot fungus, agricultural consultancy IKAR said. Palm

oil shipments from Malaysia fell more than 15% compared with the same duration last

month, data from two private cargo surveyors showed.

Hogs: Cash hogs are called mostly steady-weaker after a major uptick in pork

production last week. Peoria is called steady-weak after losing $1 yesterday to $31.00.

The national bid lost $.50 to close at $50.38 while the IA/MN bid lost $.81 to close at

$50.93. Monday’s kill was up 3.04% over a year ago. Last week, an estimated 512.6

million pounds of pork were produced, up 7% from the same period in 2015, and to-

date, U.S. output is up 0.2% from this point last year. A USDA report Friday showed

supplies of pork ribs in cold storage warehouses in August were the biggest ever, but

supplies of most other products were down from last year's record large volumes. Still,

cutout values rose yesterday to $78.61, up $1.69 on average movement of 290 loads.

Estimated packer margins were $52.87/head for non-integrators and $26.32/head for

integrators vs. $48.70 and $23.08 the previous day. December lean hogs closed slightly

lower Monday as the market continues to coil sideways in a tight range. The primary

trend is bearish, but short-term trading action has turned consolidative and corrective.

On the downside, strong short-term support and a minor daily base has formed at

$47.62. On the upside, strong initial resistance lies at $50.45-$50.75. The lean hog

contract could be forming a type of bear pennant, with the sharp sell-off from the Sept.

12 high standing as the flagpole, but that has not been confirmed. A strong downside

breakout would be needed below $47.62 to confirm a bear pennant pattern. The primary

trend remains bearish.

Hog futures continued to fall Monday amid weakness across the meat markets. October

futures dropped 0.95 cent to 53.05 cents a pound, the lowest settlement in nearly 11

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months. December hog futures slid 0.3 cent to 48.60 cents a pound. February hogs are

holding an $8 discount to the cash market vs. the 5-year average for this time of year of

$3.50. Weak underlying lean hog fundamentals continue to lead the market lower as

traders focus on front-month October contracts, which posted new contract lows

Monday. The rest of the nearby contracts have started to establish a trading range within

the defined narrow range above contract lows, but well below resistance levels. This

could allowprices to shift back and forth within these narrow ranges over the next

couple of days unless an outside market factor pulls markets outside out of the ranges.

Chinese hog imports for August were up 198% vs. last year and this demand doesn’t

appear to be going away anytime soon. China will extend anti-dumping duties on U.S.

chicken products for 5 years starting Sept. 27, according to statement on the Ministry of

Commerce’s website. Anti-dumping duty rates are set at 46.6-73.8%. China started to

adopt anti-dumping measures on such imports from 2010.

Cattle futures bounced off session lows to end the trading day Monday narrowly lower,

after a federal inventory report showed larger-than-expected supplies of feeder-cattle

entered the nation's feedlots last month. October cattle futures dropped 0.45 cent to

$1.06825 a pound after a 0.6% decline last week. December live cattle futures declined

0.725 cent to $1.06125 a pound. September feeder cattle futures declined 0.775 cent to

$1.3605 a pound after picking up 1% in the past week. The USDA’s cattle-on-feed

report released Friday afternoon showed around 1.879 million cattle entered U.S. lots

through Sept. 1, up 15% compared with this time in 2015, which was interpreted by

traders as a sign of growing beef production ahead. Analysts expected a 12.9% rise from

year-ago levels, thinking that feedyards would be less willing to quickly restock pens

due to recent volatility in prices. The light volume of cash cattle sales across the major

cattle feeding regions Friday also weighed on the futures market Monday. Most

producers opted to withhold from selling last week, in hopes of higher prices ahead,

contributing to a larger supply of cattle on this week's showlists of available livestock.

Hog slaughter numbers last week were truly shocking and the fear is that hog supplies

on the ground are larger than what packers are able to process during a regular work

week. The last time “normal” processing capacity was exceeded was in the fall of 1998,

when hog prices briefly dropped in the single digits. At 2.466 million head, weekly hog

slaughter last week was 8% larger than a year ago and far bigger than one would expect

based on the June ‘Hogs and Pigs’ report. That report pegged the pig crop for Mar‐May

(which corresponds to slaughter in Sep‐Nov) at +2.5% higher than the previous year.

Last week’s numbers represented the largest weekly slaughter for this time of year and

the third largest ever. Dr. Steve Meyer has been tracking packing capacity for a long

time and in 2015 he pegged weekly capacity (based on a 5.4 day week) at 2.442 million

head. There were a couple of smaller operations that were supposed to come online this

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fall, which would add about 35,000 head per week to that total, but overall weekly

capacity still is under 2.5 million head. At this point, futures have not priced the

potential for a complete collapse in hog price similar to what we saw in 1998, but

December hog futures so far have tracked almost exactly the trajectory of the December

futures contract in 1998. However, there have been other years which have seen a

similar decline in futures values between June and September, but only in 1998 did we

see December hog futures post a 60% decline from June levels. Some may view the

most recent spike in slaughter as evidence of producers pulling hogs forward, especially

with wet weather last week. However, so far there has been no sign that weights are

coming down or at least moving sideways.

Strong second-half U.S. pork production, coupled with increases in beef and poultry

supplies, is expected to result in lower hog prices, pressuring producer margins despite

lower feed costs. While lower hog prices tend to favor processor margins, added

competition from beef and poultry could constrain those as well, the USDA warned in

its latest Livestock, Dairy and Poultry Outlook report. Third-quarter commercial pork

production is expected to be 6.1 billion pounds, 1.9% above third-quarter 2015, and 6.6

billion pounds in the fourth quarter, 2.6% over a year ago. Prices of live equivalent 51-

52% lean hogs are expected to average $49-$50 in the third quarter, more than 9%

below a year ago. Fourth-quarter prices are expected to average $39-$41, about 10%

lower than a year earlier. However, Chinese imports and a weakening dollar are keeping

pork exports afloat. U.S pork exports in July were 403 million pounds, almost 2% above

July 2015. Positive year-over-year exports were made possible largely through

shipments to China/Hong Kong, which helped offset lower shipments to Japan and

Mexico. More than two-thirds of China’s imports come from the European Union.

European pork products have an advantage over U.S. pork due to the depreciated value

of the euro and to the generally low level of pork prices in Europe since the imposition

of the Russian ban on European pork products in January 2014. However, due largely to

strong exports, European pork prices have tightened, creating opportunity for U.S. pork

products in Asian markets in particular, the USDA noted. Attractive late third-quarter

and fourth-quarter pork prices, together with an improved exchange rate, should support

pork export volumes, the USDA predicted. Pork exports in the third quarter are

expected to be 1.3 billion pounds, almost 7% higher than a year ago. Fourth quarter

exports are expected to be 1.4 billion pounds, almost 10% above fourth quarter 2015.

Weather: The U.S. and European models are in fair to good agreement as it concerns

the general features of the 6-10 day period. However, there continues to be a major

disagreement between the models as to where to put an expected tropical system and a

slight difference on the position of the trough over western North America late in the

outlook period. Today's European model is favored as it concerns the tropical forecast

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and a blend between the models as it concerns the trough. Today's U.S. model continues

to feature a very strong surface low moving just off the New England coast at the end of

this period. The European model shows this low near Cuba and south Florida. The

European model is preferred. The general upper level flow pattern at days 8-10 features

a mean trough over the Canadian Prairies, the northern Rockies and the northern Plains.

We note mean ridging over eastern Canada extending into the Great Lakes region and to

the north over western and northern Alaska extending into the Arctic circle. The trough

west, ridge east, over the U.S. suggests warmer than normal temperatures from the

eastern Plains to the east coast, with somewhat cooler than normal likely west of the

Rockies and possible into the western portion of the northern Plains. Rainfall chances

outside of any potential tropical systems would be highest near and east of the mean

trough. This puts the northern Plains, eastern Canadian Prairies and possibly the

northwest Midwest and the Ontario area of Canada under the risk of above normal rains,

with elsewhere otherwise drier. The risk for rains associated with tropical activity would

be highest over or near Florida, but anywhere along the east coast has at least some

chance for rainfall due to tropical activity during this period.

Rains of generally less than .50” fell across most of MI, IN and OH, with things quiet

elsewhere. Highs were 70’s in most cases, with some 60’s in the north. The weather will

be supportive of ripening and harvest of summer crops in the NW 2/3rds of the

Midwest, with some showers to linger in the SE Midwest the rest this week, bringing

moderate totals to most of MI, IN and OH as well as eastern WI/IL. All areas look dry

for the weekend, with some light to moderate rains to impact the northwest ½ by early

next week. Temps will run average to below average for the next 5-7 days, with no cold

air threats seen before warming to above average for later in the weekend and early next

week. Dry weather dominated the central/southern Plains area yesterday. Highs were in

the 70’s and 80’s in the southern Plains. Things will be dry across the southern Plains

for the week, allowing for decent planting weather. By later in the weekend and early

next week, rains of .30-1”, isolated to 1”+ look to fall in most of KS, OK and eastern

CO. Temps will run average to below for the next 5 days and then look to warm to

above average by the weekend and into early next week. A NW flow aloft in the 11-15

day period looks to bring the threat for some freezing temps in most areas north of I-80

by October 8th. The upper air flow then looks to turn west to east (zonal) and allow

temps to warm to average. Things look to be dry in the Plains and Midwest early and

then moderate rains are seen for both areas for the second half of the period. In South

America, rains of .20-.75” fell across Minas Gerais in the NE Brazilian growing regions,

with dry weather in the rest of the Brazilian and all of the Argentine growing regions

yesterday. Things look to be mainly dry in most of the South American growing regions

for the week ahead, with rains of .50-1” falling in the northern ½ of Mato Grosso,

Goias, Minas Gerais and into most of Bahia. The 6-10 day forecast sees rains of .50-1”

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to fall in the western 2/3rds of the Argentine growing regions, as well as into most of

the Brazilian growing regions.

North American Crop Highlights: A drier trend over the western Midwest lasting 5-6

days should help improve conditions for mature crops and harvesting. Somewhat damp,

wet weather in the eastern most areas due to an upper level low may cause minor

problems for harvest activity later this week. Recent rains in the northern Plains have

been somewhat unfavorable for maturing crops and harvesting. However, a drier period

is expected to improve conditions during this week. Favorable soil moisture continues

for winter wheat planting, which is increasing in the southern Plains. Mostly favorable

conditions continue for filling and maturing soybeans in the southern Plains. Rain late

last week and during the weekend in the Canadian Prairie will likely mean harvest

delays for spring wheat and canola early this week. However, drier weather this week

should help improve conditions for the delayed harvests. The Delta will see generally

favorable conditions for harvesting soybeans and cotton. Late filling double cropped

soybeans in the northern Delta might still benefit from rainfall.

Global Weather Highlights: Drier weather in the FSU during this week will favor

maturing summer crops, harvesting and planting winter crops. However, western winter

grains areas remain unfavorably dry and could use more rain, with little projected in the

area during the next 10 days. Widespread rain and thunderstorms occurred through east-

central and southeast Europe last week. This will provide a needed boost to soil

moisture and improve the outlook for winter grains. Rain likely means delays to

seasonal fieldwork, including harvesting of summer crops and planting of winter grains.

However, the weather during this week will be drier and warmer. Widespread shower

and thunderstorm activity in France earlier this month may have caused some delay to

seasonal fieldwork, but winter grains and oilseeds will benefit from the moisture

following prior hot and drier conditions. Heavier rains at this time favor the eastern and

south-central areas of the north India region and the northern areas of the south India

region. Key growing areas of Maharashtra will continue to benefit from late season

rains. Key soybean areas may benefit from the drier conditions, although some of the

soybean belt is still under the risk of rain. Groundnut and cotton areas of Gujarat had

some favorable rains this month, but now look to be drier.

Macros: The macro markets were modestly weak as of 8:45am EDT, with Dow futures

down 0.1%, the U.S. dollar index is up 0.3%. crude oil is down 2.6% and gold is down

0.6%. The S&P 500 on Monday closed 0.86% lower, the DJIA lost 0.91%, and the

Nasdaq lost 0.86%. Bearish factors included negative carryover from a slide in

European bank stocks after Deutsche Bank, Germany's largest bank, slumped by more

than 7% to a record low on concern that mounting legal exposure will force it to raise

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more capital, and weakness in U.S. bank stocks on profit concerns after Fed Governor

Tarullo said that a Fed plan to merge bank stress tests with related capital rules "would

generally result in a significant increase in capital requirements." The market is

expecting today's Sep U.S. consumer confidence index from the Conference Board to

show a 2.1 point decline to 99.0, giving back about one-half of Aug's 4.4 point increase

to an 11-month high of 101.1. The Conference Board's index has recently been much

stronger than the University of Michigan's consumer sentiment index, which has fallen

by 4.9 points in the past four reporting months to an 11-month low of 89.8 in Aug-Sep.

The market is expecting today's July S&P CoreLogic Composite-20 U.S. home price

index to be unchanged following June's report of -0.07%. On a year-on-year basis, the

market is expecting the index to be unchanged at 5.1%. The market is expecting today's

Sep Markit U.S. services PMI to show a small 0.2 point increase to 51.2, recovering half

of Aug's 0.4 point decline to 51.0. The services PMI has been weak in the past four

reporting months with an overall decline of 1.9 points to Aug's 4-month low of 51.0.

Overnight, Bloomberg News reported that European stocks fell for a third day as losses

among carmakers, energy producers and banks damped a global rally fueled by Hillary

Clinton’s performance in the first American presidential debate. The MSCI All-Country

World Index of shares erased an advance, weighed down by the prospect of U.S. fines

for Volkswagen AG and Deutsche Bank AG. Crude oil declined after Iran ruled out an

immediate agreement on an output freeze, while Saudi Arabian stocks slumped on

concern austerity will lower consumer spending. German bunds led gains in European

government bonds and Finland’s 10-year yield dropped below zero for the Even

Mexico’s peso pared gains, after earlier surging as investors concluded Clinton had

won the first presidential debate. An election victory for Republican candidate Donald

Trump may hurt bonds in emerging markets such as China and Mexico by weighing on

global trade. The Stoxx Europe 600 Index slid 0.5 percent at 10:59 a.m. in London,

after earlier advancing as much as 0.7 percent. The benchmark tumbled the most since

July on Monday amid concern about the strength of Deutsche Bank’s capital buffers.

S&P 500 Index futures were 0.2 percent higher, paring a gain of as much as 0.7

percent.

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Summary: A sharply lower day

occurred across the grain sector

yesterday, with all closing within a

penny or two of the lows of the day.

Soybeans lost the most ground and the

corn market never made it into positive

territory, being the biggest percentage

loser. Friday will bring us the quarterly

stocks report, with the trade expecting

both higher corn and soybean stocks

adjustments vs. current ending stocks

figures of 1.716 billion bushels for corn

and 195mb for soybeans. A fresh

export announcement of 240,000mt of

soybeans to unknown gave the bean

market a small pop on the opening of

the day session, but there wasn’t any

positive news to sustain it. Temperatures are forecast to be well above normal, which

should allow for an aggressive harvest this week, pressuring prices as volumes increase.

The 8-14 day forecast has a system moving into the western part of the belt, which

could bring back some harvest delays. There has been a lot of talk about the El Nino

pattern that ended this spring transitioning into a La Nina pattern. Some indications of

atmospheric coupling have emerged in recent weeks and August was the first month to

show persistent below average cloud around the Date Line, which is typical of La Nina,

the Australian Bureau of Meteorology said. Likewise, the Southern Oscillation Index

has exceeded La Nina thresholds for the past two weeks, hence the ENSO Outlook

remains at La Nina watch. However, in order to receive an official classification, the

monthly data must be over the threshold of -.5 degrees for 5 consecutive overlapping

sessions. Through August, we haven’t crossed the threshold yet, and the attached

graphic with multiple models indicates a slim possibility of that happening.

November soybeans slipped lower Monday amid follow-through selling from Friday.

The bean contract dropped toward the bottom of its recent two-month trading range,

with key nearby support at $9.43-$9.37 region. The bean market is approaching a

critical technical test this week. Soybean bears tested the $9.43-$9.37 support zone three

times recently on Aug. 2, Sept. 1 and Sept. 14. If soybean bears succeed in taking out

that floor this week with a sustained sell-off and close under $9.37, it would trigger a

resumption of the selling wave off the mid-June peak at $11.86 1/4. The 14-day relative

strength index points lower at 41% on Monday, favoring the bears. If the bears generate

a strong downside breakout below $9.37 this week it could unleash a strong selling

13

wave. On the downside, bearish chart targets lie at $9.26 1/2, the Dec. 15, 2015 high

and then $9.10, the March 31, 2015 low. On the upside, the 10-day moving average is

initial resistance at $9.61 3/4. The recent swing high at $9.94 is next resistance and the

two-month range top lies at $10.20. December corn succumbed to heavy selling

pressure on Monday, cracking support at the 10-day and 20-day moving averages. The

short-term trend bias is weakening within a larger two-month neutral trading range. On

the downside, the bears are taking aim at a test of support at $3.26 1/2, the Sept. 14

swing low. If support at $3.26 1/2 gives way this week it would open the door for corn

bears to probe toward the range bottom and major support at $3.14 3/4. Since early

August, December corn has consolidated below major resistance at $3.44 1/4 and major

support at $3.14 3/4. Corn has marked out a potential bottoming pattern on the daily

chart, but the recent weakness underscores the lack of bullish interest right now. Daily

momentum is picking up steam on the downside, as the 14-day relative strength index

fell to 43% on Monday from a recent high at 54% on Sept. 20. Action around the $3.26

1/2 support floor will act as a toggle point this week. Sustained declines below $3.26 1/2

would be a short-term bearish signal, conversely if that floor holds, corn bulls could

take another shot at the recent range top.

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