FCStone Grain Recap July 9, 2015

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1 CORN: Values higher throughout the day on heavy volume as traders anticipate USDA s Friday S&D update and speculate on US crop problems. Weekly export sales of 535,000 tons vs 363,000 tons of old crop sold last year. 149,000 tons of new crop sales vs 382,000 last year. Cumulative sales down 3% and loadings down 5.2% from a year ago, largely in line with USDA s annual export forecast down 5%. No weekly milo sales reported. Total sales at 330 million bushels vs USDA s 350 annual export estimate. Trade continues to ponder an extremely wide range of new crop production ideas. Two analysts estimating US yield potential near 165 last week. One analyst lowering yield potential to 163 this week. Rains expected to continue with a focus in the wet eastern belt into the weekend. Some reporting Ohio and Indiana conditions the worst in decades. Trade debating possible Monday night crop rating changes. Crops however improving in the western belt with generally favorable conditions over Minnesota, Nebraska and Iowa. A conservative estimate of production potential in some key states could suggest a yield potential below 160. Corn Yield View Est IL IN OH MO IA MN NATL Any type of a yield like this would find US stocks plunging with a carryout to use ratio supporting futures well above the $5.00 level. US Corn Planted 88.9 Harvested 81.1 Yield 159 Carryin 1876 Production This material should be construed as market commentary, merely observing economic, political and/or market conditions, and not intended to refer to any particular trading strategy, promotional element or quality of service provided by FCStone, LLC. FCStone, LLC is not responsible for any redistribution of this material by third parties, or any trading decisions taken by persons not intended to view this material. Information contained herein was obtained from sources believed to be reliable, but is not guaranteed as to its accuracy. Contact FCStone designated personnel for specific trading advice to meet your trading preferences. These materials represent the opinions and viewpoints of the author, and do not necessarily reflect the viewpoints and trading strategies employed by FCStone, LLC.

2 Available USDA Use Carryout 1036 Trade debating if USDA will alter the yield estimate from the June report in tomorrow s update. Trade guessing carryout in Friday s report at 1811 vs 1876 estimate in June with slightly larger feed and ethanol usage. Any larger feed use however would imply the trade is expecting a record fourth quarter feed disappearance which may be overly aggressive resulting in USDA not changing the annual feed use in tomorrow s report. Trade guessing new crop corn yield at in Friday s report. Funds long 59,000 contracts of corn futures. 982 contracts of July corn delivered with July expiring the 14 th. Increased farmer corn selling again encountered today as futures reached recent highs. Wetness concerns likely to continue in far eastern areas. Trade of course is cognizant that the infamous 1993 summer flood year saw Iowa corn yields drop 40% or 52 bu/acre from the then trend. This year s situation is certainly far different than the 93 experience but those type of sharp yield declines prompted by excessively wet conditions continues to haunt trader yield ideas. Trade will react to details of USDA s report tomorrow. SOYBEANS: Values exploding higher under the dual influence of world financial markets stabilizing and increasing trade anxiety ahead of USDA s Friday S&D updates. Weekly export sales of 41,000 tons vs 56,000 tons last year. New crop sales of 201,000 vs 526,000 last year. Meal sales at 101,000 vs 48,000 last year oil sold vs 12,800 last year. Total US soybean sales 47 million bushels above current USDA annual forecast vs sales 28 million above final loadings last year. US needs to load 52 million beans the remainder of the year vs 74 million last year. Total soybean meal sales can lag last year s pace modestly to reach USDA annual forecast. Total sales unshipped however at 2.2 mmt are nearly 700,000 tons above the year ago level. Trade continues to watch for cancelations of US sales with sharply discounted South American offerings. Trade now debating the possibility of substantially lower US final planted acreage and debating the imponderable of what eastern corn belt yields could be in current saturated conditions. A two million acres loss (3.3 million unplanted last week nationally) combined with some reduction in yield could find US stocks dropping sharply next year. US Soy Planted 83.1 (-2.0) Harvested 82.3 Yield Carryin Production Available USDA Use Carryout Page 2

3 Alternate Use Planted 83.1 Harvested 82.3 Yield Carryin Production Available Total Use Carryout Us Model Nov in: July Nov Hemisphere Model Nov Next March Even with possible smaller usage with larger South American stocks, US ending inventories next year would drop to levels that would historically be associated with values sharply above current prices. This true whether we look at a US price model or even a hemispheric price projection. Trade continues to be unduly influenced with last year s reported record 47.8 national yield. Stocks data would suggest this crop was overestimated. Interesting to consider the extreme yield variability in key states in just the last three years. Soy Yield Variability View 2012 LY Pct Change IL IN OH MO MI Trade continues to ponder US production potential as we view the portion of the US crop produced in both wet and better than last year regions. Page 3

4 Soybean Condition View Pct of Pct Rating National G/E Below Wet Areas Crop Year Ago IN OH IL MO MI Subtotal 36.6 Better Than Last Year IA AR MN WI Subtotal 29.6 One private analyst now lowering US yield potential to 43.5 bushels. Trade will carefully monitor Monday night crop ratings for an expected small improvement with better western conditions. Overall however the trade may be psychologically overestimating US production potential facing the possibility of a significant recalculation of US supply demand situation as we move into later summer. USDA will issue a resurvey of acres in the August production estimate. Rains expected to maintain wet weather concerns in eastern crop areas into next week. Inadequate monsoon reported in parts of India. Some heavy overnight rains thwarting last minute eastern belt soy planting. Funds long 35,000 soybeans, 37,000 meal and 21,000 oil. 717 contracts of oil delivered. Trade guessing new crop soy yield at 45 vs the 46 estimate in June in Friday s S&D update. Trade guessing a 287 US carryout in Friday s report. With no change in exports, this assumes a record fourth quarter find back of 143 million bushels vs a 97 million bushel find back last year and the previous record of 137 million in If USDA realistically addresses the significant loss of stocks in the June report, they could project an even smaller US carryout than the trade guess tomorrow. Trade debating eastern belt crop prospects recognizing that the infamous flood year of 1993 saw Iowa yields down 10.8 bushels or 26% from then trend. That year however saw persistent record rainfall throughout the summer. Current longer term maps project a more normal US situation. Trade will be debating how much early season crop damage from excessive moisture has occurred this year already all the way into the October crop report. Page 4

5 WHEAT: Values lagging row crop strength. Weekly export sales at 346,000 vs 338,000 last year. Early season sales 24% below last year s anemic pace. Negative hard red winter wheat sales reported. Funds now estimated being even Chicago wheat. Nine contracts of Kansas City July and 232 Chicago July wheat delivered. Trade attempting to buy recently delivered Toledo receipts. Trade guessing US winter wheat production in Friday report at 1480 vs 1505 estimate in June. Hard red winter production seen at 885, SRW at 400 and all wheat production at 2148 vs the 2121 estimate in June. ECBOT HIGH LOW CLOSE CHANGE July Corn Dec Corn /4 July Beans /2 Nov Beans July wheat Page 5

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