Daily Grain / Hogs Marketing Outlook Written By

Daily Grain / Hogs Marketing Outlook

Written by: Jim Gerlach 9/3/2020

Early Call 8:45am EDT: Corn down 1, beans up 4, wheat steady. Equity markets are mixed overnight, although European indices are posting solid gains, which aren't yet providing any lift to U.S. futures. Energy markets were lower overnight, following through on Wednesday's big losses with spot crude oil prices slipping below the 200- day moving averages for the first time since May. The U.S. Dollar Index is slightly higher overnight, attempting to make it three higher closes in a row, although still close to two-year lows. Precious metals are weaker overnight. Grain markets are mixed overnight with corn lower while the soy complex and Kansas City wheat are firmer.

Grains: Wheat for December delivery fell 1% to $5.58 ¼ on the Chicago Board of Trade on Wednesday, with grains traders selling off wheat after it rallied to a four- month high in the previous session. Corn for December delivery rose 0.2% to $3.58 ¾, while soybeans for November delivery rose 0.8% to $9.62. Wheat traders took profits after prices rallied for two days. Forecasts of a larger Russian crop also prompted selling. Wheat was down all day long on more increases in Russian crop estimates and profit taking, throw in some intermarket spreading for good measure. Rainfall is washing away recent strength in grains futures. The precipitation hit the southern Plains and the Midwest Wednesday. Additionally, a strong system will bring scattered showers and falling temperatures early-to-mid next week. While the rains are putting a damper on drought concerns, grains traders are questioning how beneficial these rains will actually be for the 2020 crop. September's WASDE report may prove to be bearish for CBOT grains futures as the market has priced in a good bit of yield loss in both corn and beans, but the USDA has a long track record of incrementally making production changes that may not ultimately show up until later in the year. We could see a bearish surprise against expectations in the Sept. 11 WASDE. Adverse weather conditions including a derecho in the Midwest and drought conditions in some areas are expected to impact these figures, albeit not as much as the market has priced in. Meanwhile, commodity brokerage Allendale Inc. forecast the 2020 US corn yield at 178.3bpa and soybean yields at 51.9bpa, a limited movement from the adverse weather. U.S. farm

incomes are expected to jump this year thanks to record payments pledged by the Trump administration to help farmers and ranchers cope with the fallout from the coronavirus pandemic. The USDA projects net farm income will surge 23% to $102.7 billion in 2020, as government payments rise 66% to $37.2 billion.

Rainfall yesterday was confined to the far southeastern Corn Belt and far northwestern Belt (see left map). Most of the Midwest stays dry through at least Monday except for a heavy storm cluster for eastern IA and northern IL Saturday night that could bring 0.50- 1.50” of rain. A large system likely generates rain in the Corn Belt and central/southern Plains Tue-Thu and bring similar amounts of 0.50-1.50”, but the exact setup is unclear (see 7-day NOAA forecast map right). Temperatures vary into next week before turning much cooler in at least the Plains, with frost possible in ND and far northern MN. An estimated 55% and 50% of U.S. soybean production was drier than normal the last 14 and 30 days, including 43% and 31% under 50% of normal. With the U.S. harvest season approaching, trade focus is starting to turn towards spring in South America. In Argentina, drought intensifies despite some rain in 10 to 14 days. 98% and 82% of expected Argentina wheat production was drier than normal last 30 and 60 days. A lack of rain in Brazil over the next two weeks is not unusual because rains do not normally start until late Sep and early Oct in the central and north.

Ukraine’s grain trader union UGA pegs the wheat crop at 26.6mmt vs. 26.8mmt last month (USDA 27.0mmt). They see wheat exports at 17.5mmt vs. 18.0mmt last month (USDA 18.0mmt). UGA sees Ukraine’s corn crop at 35.3mmt vs. 38.9mmt last month (USDA 39.5mmt). Corn exports are pegged at 29.0mmt vs. 33.0mmt last month (USDA 33.5mmt). Russia’s wheat harvest hit 73.6mmt as the spring harvest continued to make progress, picking up pace last week as favorable weather helped farmers as they near the final stages of this year’s campaign. The total wheat harvest progressed 8.3% to 73.6% of the projected area in the week to September 1, data from the agriculture ministry showed Wednesday. The pace of the harvest picked up over the week as rains in parts of the Urals and Siberia eased. Average yields continued to fall last week as the harvest

entered less productive regions in its closing stages, falling 4.5% week-on-week to 3.4mt/hectare. Russia farmers have harvested wheat from 21.7 million hectares or 73.6% from the projected area, with average yields dipping 4.5% week-on-week to 3.4 mt/hectare. The main wheat growing provinces of Argentina of Buenos Aires, Cordoba and Santa Fe have run 17% to 48% of normal precipitation over the last 30 days.

I’ve been walking corn fields since 1991 in order to get a preview of the upcoming harvest and I’ve always been surprised that most producers don’t both going out and doing their own yield checks. This year’s checks showed me a good but certainly not record crop as I believe early cold and heat during pollination sapped record potential. Other people out walking fields are largely seeing the same thing. “One thing that seems to surprise growers on farm visits is the actual ear count numbers we've coming up with,” says Farm Journal Field Agronomist Ken Ferrie. “Many fields we're putting 6,000 to 8,000 small ears together to make 3,000 to 4,000 actual ears. Do your kernel counts on the uniform ears and calculate that out against your adjusted ear plants that are broken off or small. I still see some good yields, but I’m not sure they’re as high as some of you think,” he adds. “When someone tells me the crop looks good but doesn’t know their ear count, it worries me. You might be in for an unexpected disappointment.” According to Ferrie, drought conditions could be one of the biggest yield-limiting factors across the Midwest, and late-planted corn and soybeans are at the greatest risk. “In dry areas, beans are getting dinged harder than corn,” Ferrie says. “Most April and May corn is far enough along that the daily water usage has dropped off, we might be taking the top out of some yield, but I predict it is still going to be some pretty decent yields.”

For soybeans, the August USDA crop report estimated that the U.S. soybean crop would reach record yields for soybeans of 53.3bpa. The analysis for this estimate was likely done in late July. Since then, the crop ratings have begun to take a nosedive and are expected to drop further as the season closes. It is hard to find a year where crop quality has changed in such a short amount of time. It seems the crop condition are changing so much that the crop reports cannot keep up. By the time they get the information out, it is already outdated. Much of Iowa has gone without rain in the second half of the summer, forcing crops to rely solely on subsoil moisture. Accelerated maturity is now being forced on it very prematurely. According to the latest U.S. drought monitor map, at least 90% of the state of Iowa is experiencing some form of abnormally dry weather. The epicenter of this drought has begun in the west central Iowa region. The drought radius expanded from there to where it now covers most of the state, reaching into eastern Nebraska and parts of South Dakota. Much of this deterioration seems to have happened in a matter of weeks and continues to happen. And this point, damage from the drought is irreversible and rainfall would not do much. The primary benefit of rainfall at this

point is to begin refilling subsoil reserves for next year which have surely been depleted. New crop soybean have rallied $1 since our summer lows and is currently trading above $9.50. November beans are going to encounter some pretty heavy resistance at the $9.75 area which will require some further confirmation of bullish news to break through. The market will need to see what USDA comes up with in their September report. This week was about the last chance to pull the soybean crop out of the fire. August was make-or- break for the soybean crop, and it was mostly break. If average soybean yields drop back to July estimates of 49.8bpa, ending stocks could be reduced by 290mb. This could provide the ammunition we need for the market to break above the $9.75 area and get us back to $10 beans.

The encouraging thing about corn's price action lately is with the exception of Monday, settlements have been high range and well-off session lows. A news narrative is forming in the corn market, suggesting that Chinese corn deficits are here to stay and could support global corn prices for the foreseeable future. A Reuters report overnight noted that soaring corn prices are stoking food security jitters in China, where food inflation has climbed to the highest in over a decade and President Xi Jinping made a recent high-profile plea for an end to wastage. The price surge in corn is the latest in a series of ructions that include a devastating pig disease, pandemic-driven upsets for international suppliers and warnings of a growing food supply gap. Prices have risen as the country heads for its first real corn shortfall in years in the upcoming 2020/21 season starting in October and could face a deficit of up to 30mmt, around 10% of its total crop, say analysts and traders. That would be a likely boon for major exporters but threatens to push up global prices and have a knock-on impact elsewhere as some corn users switch to other grains. “It is certain that there will be a corn shortage in the future, and we would need to import a lot next year,” said an executive with a state- owned trading firm, who declined to be identified as he was not authorized to talk to media. Maintaining food supplies is a major source of political legitimacy for the ruling Chinese Communist Party, but it has struggled to balance central planning with grain market forces. Struggling with bulging stockpiles, China four years ago abandoned a scheme that paid farmers above-market prices for corn and has since produced less of the grain than it consumes. The state stockpiles that supplemented supply are now nearly gone. Corn prices in Jiamusi at the heart of China's grain basket hit a five-year high at 2,050 yuan (224.2 pounds) a ton on Aug 26, up 27% since the start of the year, before edging down in recent few days. This has contributed to a broader rise in food prices, also driven by severe flooding in the south, pockets of drought in the northern grain belt, and a continuing pork shortage.

President Xi underscored concerns when he urged the nation to stop "shameful" food wastage, prompting many local governments to launch related campaigns. China

expects a bumper 2020/21 corn crop at around 266.5mmt but still not enough to meet demand, according to the agriculture ministry, which forecasts year-end stocks of minus 16.7mmt. That shortfall could be up to 30mmt, according to five analysts and traders surveyed by Reuters, far exceeding China's current import quota of 7mmt, a figure it has never filled. "If the government does not loosen regulations regarding the import quota, we will be facing a huge shortage," said a Shanghai-based domestic agriculture products trader. Still, the need for imports is likely to be limited by substitution, given China's ample supplies of other staple grains, as well as imports of other substitute grains like sorghum and barley. “Based on the aggressive new crop buying we're seeing for U.S. corn, it seems increasingly likely China will raise the quota or make some changes,” said Darin Friedrichs, senior analyst at StoneX in Shanghai. “But I don't anticipate (it) being too big. I think roughly about 10mmt seems reasonable, for next year.” Feed manufacturers that use nearly 200mmt of corn a year to fatten hogs and chickens are already turning to more plentiful wheat. Feed wheat use in the 2020/21 crop year could rise as high as 20mmt, up about 5mmt from previous years, and about 15% of output, said a government think-tank researcher who declined to be identified as he is not authorized to talk to media. China, meanwhile, has vowed to make record U.S. agricultural purchases this year as part of its phase one trade deal, and made its biggest purchase of U.S. corn in a month last week as it looks to boost supplies. "Corn on the international market is so cheap, why not?" said the trading firm executive.

For the first time in weeks, Dow Jones didn’t mention anything about Covid in schools as parents largely want their kids in schools and polling data shows it. The U.S. reported fewer than 40,000 new coronavirus cases as infections in some previously hard-hit states showed signs of easing, while the virus continued to spread in other parts of the world, including India. More than 39,600 cases were recorded in the U.S. on Wednesday, down by around 3,000 from the previous day’s total, according to data compiled by Johns Hopkins University. The nation’s total number of confirmed cases exceeds 6.1 million, nearly a quarter of the global tally. The U.S. death toll is approaching 186,000. The country’s seven-day average of new cases as of Sept. 1, was

more than 42,300, narrowly topping its 14-day average of about 42,175 new cases for the first time in over a month, according to a Wall Street Journal analysis of Johns Hopkins data. While the number of new U.S. virus cases in August was lower than in July, data from the Covid Tracking Project shows that the number of daily Covid-19 tests run in the U.S. fell in August to about 22 million, down from roughly 23 million in July. Testing has declined in part because cases are falling in many places. Public- health officials also say that in some places the decrease is the result of weaker demand for testing—even among those who might be infected—and restrictive testing criteria among health-care providers as they try to preserve supplies for the sickest patients. Meanwhile, a new analysis of several studies in which steroid drugs were used to treat severely ill Covid-19 patients found the drugs significantly helped reduce patient deaths. Scientists and physicians involved in the study said the results raise hope that cheap, widely available drugs may become standard treatments for severe cases of Covid-19. Steroids appear to be beneficial only in the very sickest hospitalized patients, said Dr. Derek C. Angus, a co-author of the study, or meta-analysis. So far, no drugs have proven effective in treating earlier stages of the disease. Separately, the Trump administration is asking states to speed up approval for vaccine distribution sites by Nov. 1, the latest sign the federal government is eager to get a vaccine out before the end of the year. A Food and Drug Administration vaccine advisory committee will meet Oct. 22 to discuss the development, authorization and licensing of vaccines to prevent Covid-19.

On the demand front, palm oil prices rose 2.8% overnight and reached an eight-month high, locking in five straight days of gains, supported by a lower production outlook and higher soybean oil prices on the Chicago Board of Trade and Dalian Commodity Exchange. Late afternoon talk yesterday was that Chinese firms were buying 8 cargoes U.S. beans. Brazilian grain exporter association Anec says Sep soybean exports will be 4.2mmt vs. 4.6mmt last year. Anec sees Sep corn exports at 4.8mmt vs. 6.4mmt last year. They see total soybean exports for the year at 82mmt and corn at 31-33mmt (USDA 84mmt and 38mmt). The price of Brazilian agricultural commodities such as soybeans, corn, coffee and rice has reached record levels as strong demand and a weak currency drove prices higher in local currency, according to data from Cepea, a research center linked to the São Paulo University. Brazil's soybean quotes are up by more than 50% in nominal terms compared to the same period last year. On Monday, Brazil's main export product hit 137.76 reais per 60 kg bag, less than 2 reais below an all-time high of 139 reais in 2012. Jan bean futures on the Chinese Dalian Exchange were priced at $17.65/bu. That compares to $13.65/bu. from the same day last year. Soaring corn prices are stoking food security jitters in China, where food inflation has climbed to the highest in over a decade and President Xi Jinping made a recent high-profile plea for an end to wastage, which some analysts believe is tacit recognition that food/grain prices

are out of control. However, China’s weekly corn auction sold just 34% of the offered stocks at lower prices. The slowing demand for corn at auction signifies that Chinese domestic corn values have reached a seasonal peak ahead of the harvest. Egypt's state import agency launched a tender late Wednesday to buy an unspecified amount of wheat for shipment between Nov 5-15. U.S. DDGS production from USDA’s July Grain Crush data was 1.864mmt, up 200,000mt on month but still below 2019’s 1.986mmt. Ukrainian corn export values continue to rise sharply following cuts to this year’s crop ideas, with prices up $8/mt in the last few days after a $7/mt increase last week, according to analytical firm APK-Inform. Prices are now $179-$185/mt for Oct-Nov vs. U.S. Gulf corn at $179/mt.

This morning’s weekly U.S. grain export sales were at the high end of expectations for wheat, corn, meal and soybeans but within expectations for soybean oil. Wheat sales of 585,400mt for 2020/2021 were down 23% from the previous week, but up 4% from the prior 4-week average. China bought 250,800mt. Corn sales of 95,800mt for 2019/2020 were down 65% from the previous week and 53% from the prior 4-week average. For 2020/2021, net sales of 2,389,100mt were primarily for China (1,155,000mt) and unknown destinations (569,000mt). Soybean sales of 88,100mt for 2019/2020 were up 75% from the previous week, but down 57% from the prior 4-week average. For 2020/2021, net sales of 1,762,800mt were primarily for China (1,010,000mt) and unknown destinations (526,000mt). Soybean meal sales of 113,700mt for 2019/2020 were up noticeably from the previous week and up 22% from the prior 4-week average. For 2020/2021, net sales of 228,800mt were reported. Soybean oil sales of 4,900mt for 2019/2020 were reported. For 2020/2021, total net sales of 3,000mt were reported.

In the last full week of the 2019/20 U.S. corn marketing year, ethanol production slipped to 922k barrels/day (271 million gallons/week) from 931k bpd (274 mil gal/week) the week prior and was 9.0% below last year's same-week production of 1.013 million bpd (298 mil gal/week), holding steady with the year-over-year declines of 7-12% over the last six weeks. During the period, U.S. ethanol production averaged 9.7% below last year. Based on recent ethanol/corn yields and the unusually high portion of corn accounting for total feedstocks, we estimate roughly 94mb of corn was used for ethanol production in the week, 6.8% below last year's 101mb, putting estimated corn usage for the month through August 28 at 377mb. If next week's ethanol production is similar to this week's, total monthly corn usage would be implied around 417mb and would put 2019/20 total marketing year usage at 4.851 billion bushels, exactly in line with the USDA's current 4.850 billion bushel projection. U.S. gasoline demand declined last week to 8.786 mbpd from 9.161 mbpd the previous week, but was right in line with the average demand over the last six weeks of 8.775 mbpd as there has been a clear stabilization since the post-COVID shock recovery from mid-April through

mid-June. U.S. ethanol stocks last week posted a solid increase to 877 million gallons (20.882 million barrels) from 857 mil gallons (20.409 mil barrels) the week prior, but are still 12.3% (123 million gallons) below year ago end August stocks of 1.000 billion gallons. Nonetheless, this week's increase pushed stocks to a 10-week high.

Livestock: Cash hogs are called $1 lower to $1 higher, with most bids expected steady to $.50 higher. Slaughter Thursday is expected at 485,000 head. Saturday runs are expected at 108,000 head. Packers are obviously interested in the hog market as their aggressive buying this week has been vastly welcomed from producers. If the week can close with even steady prices, producers will be happy. The national bid gained $1.22 yesterday to close at $44.25, while the IA/MN bid gained $2.28 to settle at 44.87. The CME Lean Hog Index for 8/31 was $.20 higher to $56.80. USDA’s USDA’s National Pork Carcass Cutout value was $73.51 in the PM report, down $1.03 on good movement of 357 loads. Loins were the largest mover, dropping $10.36. to $64.16. Weekly IA/MN hog weights came in at 276.3 lbs. vs. 279.0 lbs. last week and 278.3 lbs. last year, adding credence to reports I’ve heard of producers having difficulties getting hogs up to weight due to the lack of Paylean as well as moving hogs off of lower protein diets and the hogs not responding well. Estimated packer margins were $54.87/head for non- integrators vs. $29.71/head for integrators vs. $60.95 and $30.72 the previous day. Weekly kill is down 0.28% vs. last week, with no comparison to last year due to holiday week differences. Weekly egg/chick sets were both down 1% vs. last year. Weekly pork export sales of 53,600mt were up 36% from the previous week and up noticeably from the prior 4-week average. Increases primarily for China (28,700mt), Mexico (14,700mt), Japan (2,900mt), Canada (2,000mt) and Chile (1,400mt). Export shipments of 32,500mt were unchanged from the previous week, but down 3% from the prior 4-week average. The destinations were primarily to China (9,700mt), Mexico (9,400mt), Japan (4,200mt), Canada (3,000mt) and South Korea (1,700mt).

Hog futures continue to be the bright spot in the livestock markets as aggressive nearby gains quickly broke through resistance levels Wednesday, setting seasonal highs in nearby and deferred contracts. October futures posted the most aggressive gains Wednesday, closing at $56.40 after as $1.37 rally. This renewed support in the complex has now accounted for unchecked $3 rally going into the long holiday weekend. With two days yet to trade, there is a lot that can change in price direction before the weekend, but technical buyer support continues in all contract months. A question about pork cutout values being able to maintain current price ranges through the month of September continues to be one of the major uncertainties limiting further gains in the hog complex. Through Wednesday's morning hours it wasn't unclear whether the lean hog complex was going to commit to trading about the $55.00 resistance level or if the complex was going to submissively drop to trading lower, once again. But as the day

developed and trader support grew, the market closed substantially higher and blew the spot October contract well above the $55.00 threshold. October lean hog contracts closed $1.37 higher at $56.40, December lean hogs closed $0.72 higher at $56.50 and February lean hogs closed $0.30 higher at $62.37. It's the highest that hog futures have finished since June 2nd and is the third straight session that hog futures have finished higher. They've risen 5.7% this week alone. With the market's robust close and hefty support through the cash hog market, Thursday may be able to make another run at higher trade. October hogs gapped opened higher, closed the gap and drifted for the middle part of the session before surging after noon, making a new high at the end of the session at $56.92 and settling at $56.40. This continues the short-term uptrend and if price can overtake resistance at $57.02, it has a chance to challenge resistance at the declining 200-day moving average at $59.40. The past few attempts at trading beyond the 200-day failed and led to lower prices. Resistance is at $57.02, $58.25, while support is at $56.10, $55.62 and then $54.77. Hogs are in a long-term downtrend but is building upon a short-term up-trend. China's piglet prices hit another new high and are up 127% on year, says Darin Friedrichs, senior Asia commodity analyst at StoneX. Piglet prices remain elevated due to demand, as farms try to restock following a huge cull in pigs due to the African swine fever outbreak in China. Friedrichs adds that live hog prices in China have slowly trended lower since July, but prices are still elevated and only down about 3.9% from the high in mid-July.

The sharp pullback in all cattle trade Wednesday seemed to be a little overkill given the limited trade interest in the market. But feeder cattle futures led the complex lower with strong triple-digit losses in nearby contracts. October futures moved below $140 once again, recording the first close below this level since the middle of July. By breaking through this support level, the fact that seasonal highs are in the rearview mirror is creating uncertainty as to how markets will react after the Labor Day break. October live cattle futures led the complex lower, as uncertainty of how demand through retail and foodservice industries will hold going into the fall months. Trade is expected to once again remain mixed, although the volatility this week may not quickly evaporate. This could leave prices mixed in a moderate-to-wide range through the rest of the week. The live cattle complex didn't endure losses as steep as the feeder cattle market yesterday, but cash cattle prices were lower again, which will surely pressure Thursday's market. October live cattle closed $1.00 lower at $104.47, December live cattle closed $0.70 lower at $108.45 and February live cattle closed $0.70 lower at $112.05. Overall, the day's losses weren't astronomical in any sector, but added up all together, the live cattle market had a brutal day with the board closing lower; both choice and select cuts rounding out the day lower and cash cattle prices being weaker as well. There was a light trade of cash cattle reported in the North for $163, $4.00 lower than last week's weighted average. And there was another round of trade in the South for mostly $103,

$2.00 lower than last week's weighted average. Wednesday's slaughter is estimated at 117,000 head, 1,000 head less than a week ago and steady with a year ago. Boxed beef prices closed lower, with choice down $0.76 ($227.58) and select down $0.93 ($213.82) with a movement of 114 loads. Cash is called steady. It's been a rough week for feedlots as packers have whittled the market $2.00 to $4.00 lower depending on the region. With there being a good test on the market, the week's trade will most likely stay at these levels but could soft even more. The feeder cattle complex struggled throughout the day. September feeder cattle closed $1.42 lower at $138.70, October feeder cattle closed $1.20 lower at $139.45 and November feeder cattle closed $1.17 lower at $140.35. The market's pressure largely stemmed from traders allowing the market to fall lower as they fear this downward cycle could be strung out for the next three to four weeks. And adding to the pressure, the live cattle market's lower cash cattle trade and fully lower boxed beef close didn't offer any positive encouragement whatsoever.

Hog producers continue to work through post-pandemic events primarily the backlog of hogs in the supply chain resulting from plant closures in late April and early May. Following the second quarter interruptions, hog slaughter has been tracking above the prior year’s levels for most weeks averaging almost 6% higher over the last three months, an indication that the industry is working through the backlog of hogs. The number of hogs still backed up in the supply chain is debatable, but the September 1 Hogs & Pigs report, which will be released later this month, will give more insights on the supply situation. Peak slaughter typically occurs during the fourth quarter and this year is shaping up to have a familiar pattern. The December hog futures contract is worth looking at as it will have implications as the fourth quarter approaches. In early April, the contract bottomed at $48.75 then about a month later rallied to $58.80 in the wake of the pandemic. Since then the contract retreated trading in the low $50 range but has seen improvement since the start of August. The contract started August at $50.08 and as of this writing the most recent closing price was $56.07 on September 2nd a nearly $6 (12%) increase in just over a month. The gain is notable given the backlog of hogs and potential number of hogs to be slaughtered in the fourth quarter. The pork cutout value has followed a similar pattern as the December contract with a drop in early April then spiking as plant disruptions occurred. The cutout value quickly dropped below prior-year levels, a trend that has continued since early June potentially giving pork a competitive edge on price in the meat case. The lower pork cutout value is due to both belly and ham primal composite values only reaching prior-year levels in recent weeks. The loin, butt, and picnic are struggling to find traction and reach year ago levels. Surprisingly, ribs have been above last year’s price every week except five which were during the pandemic.

Weather: There is a ridge in the Southeast, a strong trough over central Canada and the

northern U.S., and another ridge over the West. The trough will be briefly lift northward this weekend but another strong trough will move back into the central U.S. early-to- mid next week. The U.S. and European models have general agreement in the overall pattern, but show inconsistency with the system next week. Both models have changed considerably over the last several runs and this will likely be an evolving forecast going forward. For the outlook period, temperatures on Tuesday will be above normal in the West and East and falling well below normal in the Central, especially through the Plains. Temperatures will continue to fall over the Plains early in the period as the trough pushes southward with an overall moderating of temperatures late in the period. A strong cold front is expected to push south through the country east of the Rockies early next week with scattered showers. A piece of the front may hang up in the central and southern Plains and move back northward through the Plains and western Midwest late in the week with moderate showers.

Rains of .20-.80” fell across the OH River Valley yesterday, with things mainly dry elsewhere across the region. Things look to be mainly dry in most of the region today through Saturday, with a front by Sunday to bring rains of .50-1”+ to the southern 1/3rd of MN, the northeast ½ of IA, into the southwest corner of WI, the northern ½ of IL and into central IN. This is a wetter forecast for central IL and IN. Totals elsewhere with that activity look to be under .25” with spotty coverage. The 6-10 day forecast has mixed ideas. Both rains to fall across the region Tuesday and Wednesday, the GFS even keeps some rain falling across the eastern Midwest into Thursday. Each model has its own idea with the details. The GFS sees totals of 1-2”+ to fall across the eastern 2/3rd of IA, into the northern ½ of IL/IN and much of lower MI, with a band of 4”+ rains from around Champaign IL to Chicago. Totals across the rest of the region would be in the .50-1.5” range. The European sees rains of .50-1.5”+ to fall in areas west of a line from Kansas City to Green Bay, with totals less than .35” elsewhere. At this point, I have more faith in the idea from the European, as is consistent with previous ideas and the GFS is vastly different from yesterday and appears to be struggling. The 11-16 day outlook sees average to above average temps and below average precip across the Midwest. No cold air threats are seen. Temps will run average to below in most of the region for the rest of this week and weekend and then look to fall to below average next week. Both models are now onto the idea of a cold air threat for the northwest Midwest by the morning of the 9th. The GFS is the most aggressive with the cold and indicates temps of 34-36 across all of MN, with 36-39 degree temps in the northwest 1/3rd of IA. The European sees temps of 36-39 degrees across most of MN and the northwest 1/3rd of IA. I have a bit more faith in the European’s idea, but will add it is way too far out in the forecast to be putting a lot of faith in the exact details to the low temps.

Rains of .25-.75” fell across the western 1/3rd of OK and into the eastern TX panhandle,

with things mainly dry elsewhere. The forecast for this time frame sees little to no rains to fall across most of the region. The 6-10 day forecast has mixed ideas, with the GFS seeing limited rains for the southwest 1/3rd of KS and western ½ of OK and TX. It does indicate totals of .30-1” in the eastern sections of these states. The European sees totals of .50-1.5” to fall in all areas. At this point, I have more faith in the European. Temps will run average to below this week, with most areas to run below average in the 6-10 day period. Rains of .40-1” fell in most of AR, with thing mainly dry in the rest of the Delta yesterday. Rains of generally less than .50” look to fall across around 75% of the region in the next 5 days. The 6-10 day forecast has differences, with the GFS indicating totals of .40-1” to fall in most areas. The European sees things to be mainly dry. At this point, I think a blend of the two is the best fit, with rains of .25-.75”, isolated to 1” to fall with coverage of around 75-80%.

North American Weather Highlights: Most areas of the northern Plains have enough soil moisture for filling corn and the dryness will favor spring wheat harvest. A strong storm is expected to move through the region early next week with moderate showers and falling temperatures. There may be some frost potential a couple of nights next week. Scattered showers in the central/southern Plains have fallen in some portions of the area, benefiting filling corn where they have occurred, but dryness remains a concern particularly across Kansas and Nebraska. Periods of scattered showers will continue over the south through Friday where it will be most welcome in advance of winter wheat planting. A strong system will bring scattered showers and falling temperatures early-to-mid next week. Scattered showers fell across drier sections of the western Midwest on Tuesday, benefiting filling crops in eastern Iowa, northern Illinois, and southern Wisconsin with up to one inch of rain through central Illinois. Showers will be less intense over the rest of the Midwest Thursday. A strong system will bring scattered showers and falling temperatures early-to-mid next week. Heavy precipitation in the Delta from last week and scattered showers since have benefited filling soybeans and cotton especially in the drier sections of northeast Arkansas and Tennessee. Already mature cotton likely did not encounter much degradation except for maybe in that wetter section. Scattered showers are expected through Friday, especially in the north, helping remaining filling cotton and soybeans. A strong system may bring scattered showers and falling temperatures in the middle of next week, but trends are to keep it north and west. Scattered showers in the Southeast have become isolated in the region and will continue to be that way over the next week. Open boll cotton will find mostly favorable conditions. Scattered showers and breezy winds in the Canadian Prairies have been noted the last several days, which may have lodged stands. A strong system with cold air trailing behind it will move through this weekend. Some breezy winds will occur with potential for some snow as well, most likely in the foothills of the Rockies. Temperatures may fall below freezing for some areas, particularly in Alberta, causing

remaining filling crops to die.

Global Weather Highlights: Scattered showers in Brazil have fallen over Rio Grande do Sul for the past several days with dry weather elsewhere. This was beneficial for the remaining cotton and corn harvest. Full-season corn is being planted in the south. Soil moisture is looking good for germination, but limited shower activity is expected over the next week for most areas with showers for just Rio Grande do Sul as a front lingers in the area. Models suggest the wet season may be late this spring, delaying soybean planting. Scattered showers fell over northern areas of Argentina over the past several days, boosting soil moisture. Temperatures well below normal and nights falling below freezing are happening again across the north and nearing it over the central with some risks of stress for developing wheat continuing. Some wheat that became dormant may have to wait for another week for further development. Showers look to remain limited to mostly northern areas for the next several days. Conditions are favorable for filling crops in most areas of Europe. A zone of isolated to scattered showers will continue across the north through the weekend. Crops in the south waiting to be harvested should find better conditions while filling crops in the north will benefit from more moisture. Mostly dry conditions have continued across the eastern half of the Black Sea region. A system bringing showers to western Ukraine will move southeast into southern Russia this weekend but diminish as it does so. Heat will stick around until this system moves into the area, stressing filling crops. Harvest activities will benefit from the heat and overall dryness, however. In Australia, Queensland is falling short on rainfall to start the spring and could use more. However, very little rain is forecast across the country over the next week, with better chances over the south as systems just scrape by. Other areas are generally favorable for development. Overall favorable conditions in China are found in the northeast for reproductive to filling corn and soybeans and in the south for rice and sugarcane. Typhoon Maysak will move through the northeast with renewed flooding and wind damage threats a week after Bavi moved through. Typhoon Haishen may follow a similar path early next week. Monsoon moisture is becoming fragmented in India as the monsoon will withdraw from northwest to southeast over the next 6 weeks. Still, the showers can be counted on for late-season fill. The outbreak of locusts has started to become contained as swarms migrate westward and control measures are reported to be working. Extensive damage has still been reported for all crops in the region, however.

Macros: The macro markets are mixed as of 8:30am EDT, with Dow futures up 0.1%, the U.S. dollar index is steady, crude oil is down 2.0% and gold is down 0.2%. The S&P 500 on Wednesday rallied to a new all-time high and closed 1.54% higher. The DJIA gained 1.59% while the Nasdaq 100 gained 1.04%. Bullish factors included the 6.4% increase in U.S. July factory orders, stronger than expectations of 6.1% and comments

by New York Fed President Williams who said lower trend inflation is seen across advanced economies and even the topic of raising interest rates is far off in the future. The consensus is for today's Aug ISM services index to show a 1.1 point decline to 57.0, more than giving back July's 1.0 point increase to a 1 ½ year high of 58.1. Meanwhile, today's final-Aug Markit U.S. services PMI is expected to be revised slightly lower by 0.1 to 54.7 after the sharp 4.8 point gain to 54.8 seen in the preliminary-Aug report. The 1 ½ year high in the July ISM services index illustrates that business confidence is returning in sectors of the economy that have been able to mostly return to normal after the pandemic shutdowns this past spring. The housing industry, in particular, is very strong due to low mortgage rates and the surge of people buying new homes to get more room or escape from urban areas and multi-family housing. On the labor front, the markets are mainly looking ahead to Friday's Aug unemployment report. The consensus is for Friday's Aug payroll report to show an increase of 1.400 million, adding to July's increase of +1.763 million. Payrolls in May-July rose by a total of 9.3 million jobs, but that recovered only 42% of the 22.2 million job plunge seen in March-April. Payrolls would need to rise by another 12.9 million in order to get the record-high job level of 152.5 million seen in February before the pandemic emerged. It will likely take at least several years for the U.S. to get back to that job peak. After the Great Recession, it took six years for the job level to recover to its previous peak. This time, the recovery should be much quicker if there is an effective and widely-available vaccine that becomes available next year. The consensus is for Friday's Aug unemployment rate to fall by 0.4 points to 9.8%, adding to July's 0.9 decline to 10.2%. However, even if Friday's unemployment rate falls to 9.8% as expected, the rate will remain near the peak of 10.0% seen during the Great Recession. The current unemployment rate is roughly triple the full-employment rate of 3.5% seen in February before the pandemic battered the U.S. economy.

Most major stock markets and U.S. futures rose Thursday after Wall Street surged to its biggest daily gain since July despite uncertainty about the global outlook. London, Frankfurt and Tokyo advanced while Shanghai declined. Investors have been encouraged by central bank infusions of credit into struggling economies and hopes for a vaccine to end the coronavirus pandemic that has plunged the world into its deepest slump since the 1930s. Forecasters warn the stock market recovery might be running too far ahead of economic activity as the United States and some other countries reimpose anti-virus controls that hamper business. In early trading, the FTSE 100 in London gained 0.7% to 5,981.93 and the DAX in Frankfurt added 1.4% to 13,428.33. The CAC 40 in France added 1.6% to 5,112.38. On Wall Street, the future for the benchmark S&P 500 index was up less than 0.1% while that for the Dow Jones Industrial Average gained 0.2%. On Thursday, the S&P 500 rose 1.5%. The index is up 10.8% this year following a five-month streak of gains. The Dow Jones Industrial Average gained 1.6%.

The Nasdaq composite added 1% to 12,056.44. The tech-heavy Nasdaq is up 34.4%, driven by gains for Apple and other technology giants that investors believe are safe bets as the public spends more time on internet-connected devices. In Asia, the Shanghai Composite Index opened higher but retreated to close down 0.6% at 3,384.98. The Nikke 225 in Tokyo gained 0.9% to 23,465.53. The Hang Seng in Hong Kong lost o.5% to 25,001.30. The Kospi in Seoul advanced 1.3% to 2,395.90 and Sydney's S&P- ASX 200 was up 0.8% at 6,112.60. India's Sensex was unchanged at 39,092.05. New Zealand and Bangkok gained while Singapore and Jakarta retreated.

U.S. stocks have gained despite lack of agreement in Congress on a new economic aid package with additional unemployment benefits to support consumer spending. A report by payroll processor ADP, widely watched as a forerunner of government employment data due out Friday, showed the private sector added 428,000 jobs in August, less than half the 1 million expected by forecasters. Analysts said that could be a warning sign the job market is cooling after some U.S. states reimposed anti-virus controls and the expiration of supplemental unemployment benefits cut into consumer spending. Also Wednesday, the U.S. Federal Reserve said its August survey of businesses found enduring uncertainty over the pandemic and the harm it causes to consumer and business activity. Health care and communications stocks also helped to drive Wednesday's rally. Benchmark U.S. crude oil for October delivery lost 36 cents to $41.15 per barrel in electronic trading on the New York Mercantile Exchange. The contract slid $1.25 on Wednesday. Brent crude, the basis for pricing international oils, declined 48 cents to $43.95 per barrel in London. It dropped $1.15 the previous session to $44.43 a barrel. The dollar rose to 106.24 yen from 106.16 yen on Wednesday. The euro declined to $1.1816 from $1.1855.

Summary: December corn ended up ¾ cent at $3.58 ¾ Wednesday, surviving fresh bearish pressure from a wetter forecast. Wednesday's weather map shows rain in the southern U.S. Plains with a risk of flooding in Oklahoma and Arkansas. The seven-day forecast expects more rain for the Southern Plains plus moderate to heavy amounts in the central and Eastern Corn Belt. Temperatures are expected to dip lower early next week and parts of the northern U.S. Plains are at risk of temporarily falling below freezing. Overall, however, increased chances for rain the next 10 days are seen as slightly helpful for corn crops at this late stage. Earlier Wednesday, the U.S. Energy Department said last week's ethanol production totaled 922,000 barrels per day (bpd), down from 931,000 bpd the previous week and also down 9% from a year ago. Ethanol inventory increased from 20.4 million barrels to 20.9 million barrels, a sign of slightly slower demand with prices near the high of 2020. U.S. gasoline demand remains a limiting factor for ethanol and was down 7% last week from a year ago. From a fundamental view, bearish pressures on corn eased in August, but a heavy surplus is still

likely in 2020-21. All eyes will be on USDA's next WASDE report, due out Sept. 11. Technically, cash corn prices are in an uptrend with weather risk still at play and resistance looming at the July high of $3.63.

November soybeans closed up $.07 ¼ at $9.62 Wednesday, holding firm in the face of increased rain chances. Soybean crops saw beneficial rains in Illinois Monday and more amounts are expected in the central and eastern Midwest the next 10 days. The western Midwest remains drier with crop ratings taking a hit, especially the past two weeks. USDA's next WASDE report will get plenty of attention on Sept. 11 and some private crop estimates are already coming in a little below USDA's August soybean crop estimate of 4.425 billion bushels. The trick will be USDA's September estimate is the first to include data from the field, so there is potential for a surprise. Soybean prices are also being supported by strength in soybean oil. December soybean oil closed up 0.65 cent Wednesday at 33.53 cents, helped by a new six-month high in palm oil. There were no export sale announcements from USDA Wednesday, but with Brazil's FOB prices $.70 above those at the U.S. Gulf, there will likely be more ahead. So far, 880mb of new-crop soybean sales have been signed, 41% of USDA's export estimate for 2020-21 as China appears to be in a bind when it comes to trying to keep domestic food prices down. Fundamentally, it is difficult to know how much China will need to buy from the U.S. this season, but this could easily become the best year for soybean exports since the trade dispute began. Technically, soybean prices are actively trending higher with the 2020 high of $9.82 ¾ offering the next level of resistance.

After posting a new two-month high Tuesday, December KC wheat fell back $.06 ¼ to $4.79 ¼ Wednesday, pressured by mostly beneficial rains in the southern U.S. Plains and chances for more in the seven-day forecast. The caveats are that there is a risk of flooding with this week's rains in Oklahoma and Arkansas. Also, the forecast remains dry for the western edge of the southwestern Plains, and for Nebraska and South Dakota as well. SRW wheat areas are expecting more rain in the seven-day forecast, considered mostly beneficial for the planting season that is about to begin. December Minneapolis wheat ended up $.01 ¼ at $5.47 ½ as harvest continues across the northwestern Plains. There is a chance for freezing temperatures in the northern Plains on Wednesday, Sept. 9, but this should not be a serious production threat. The forecast does remind us however that production in the Northern Hemisphere is slowly drawing to a close in 2020. Fundamentally, USDA's WASDE report on Sept. 11 will likely remind us record world ending wheat stocks are expected in 2020-21, a bearish weight on prices. Seasonally, demand should get more attention later this fall, helping to support prices at current levels. From a technical view, KC wheat prices broke out of the bearish corrective pattern that dominated 2020, and prices are now trending higher, confirmed by a bullish change in the weekly stochastic.

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