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Slightly at odds

Published on: 09:18AM Aug 20, 2019

It would seem a near foregone conclusion to say that grain/soy markets are desperately in need of some or any positive news at this time and we appear to have received a double dose of it since the close yesterday.  The first came via the weekly crop conditions report. While the changes were slight and realistically should have come as a surprise this time of year but the good/excellent rating for corn and beans were each lowered 1% to 54% and 53% respectively.  I had a minor chuckle when I read a comment by a foreign market analyst to stated that "the weekly crop progress report from the USDA was slightly at odds with the WASDE report released earlier last week." This would be akin to saying, the recent protests in Hong Kong would seem to be slightly at odds with the wishes of the Chinese authorities.  Regardless, the lower rating and reminder that crops remain well off the average developmental pace have helped provide a welcome overnight boost. Corn in the dough stage is at 55% versus an average 76% and beans setting pods at 68% compared with the average of 85%.  

The second supportive piece of news came from the early estimates on the ProFarmer crop tour.   Reports from Ohio gave us a corn yield of 154.4 bpa, compared with the USDA at 160 and bean pod counts of 764 compared with 1,248 from Uncle Sam.  The discrepancies were not quite a pronounced in South Dakota with a corn estimate of 154.1 versus 157 from the government and bean pods counts of 833 against 1,025.  Granted, two states are not necessarily representative of what they will uncover during the rest of the tour, but this news would not seem to be shocking for anyone who has been out walking fields this year. Some might even claim the figures were "slightly at odds" with the government estimate.  

Additional ag specific news appears to be rather sparse this morning, but there have been other interesting developments in the general economic realm. The financial world has been abuzz for weeks concerning inversed yield curves, negative government bonds, the possibility of currency wars via liberal monetary policies and of course, fear of a global recession.  Much of the discussion ultimately points back to the trade wars, tariffs, and counter-tariffs and the drag that has created.  Over the weekend, White House representatives did their best making the rounds on talks shows explaining why they have no concerns about the economy, while information seeping out from behind closed doors would suggest otherwise. We already know of the President's displeasure with the Fed and its chairman Jerome Powell for not being more aggressive in cutting interest rates, so evidently, the talk has turned to tax cuts and even the reduction of some of the tariffs on Chinese goods.  Chief economic advisor Larry Kudlow even lifted up an idea that was presented by Rick Scott from Florida, that the extra money that the U.S. is taking in via tariffs, should then be returned to the citizen via tax cuts.  At first blush you might think this sounds reasonable but when you consider that 1.) we have been repeatedly assured that U.S. citizens are not the ones paying for the tariffs through higher prices which is obviously not correct and 2.) this would require congressional approval so would not provide the desired quick fix either, and pretty soon you might be questioning the wisdom of using tariffs as a tool to negotiate trade deals, to begin with.  

Primarily mixed action in the macros this morning.  Energies are a touch weaker but metals higher.   Financial instruments are higher (lower rates) and equities a bit lower, but the arch-nemesis of commodity prices, the U.S. Dollar, is trying to climb higher yet again.