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AgriFinance Market Update 8/16/19

Today’s positive price action was a good way to end a rotten week.  Prices found strength on a technically oversold market and bottom picking.   Results of a digital crop survey and anticipation of the Pro Farmer tour also supported prices.  Nearby corn finished the day 10 cents higher.  Soybean futures closed 9 cents higher.  Chicago wheat settled 2 cents higher, and KC and MPLS futures finished up 3-4 cents.  The weekly scorecard wasn’t so pretty.   December corn lost 37 cents on the week. November soybean prices fell 12 cents for the week.   Livestock prices also took a beating.   We are glad to lay this week to rest.  Time to move forward.

The outside markets had a wild week between falling bond yields and concerns over the US-China trade war.     The DJIA closed up +306 points today, but is still lower on the week.  The dollar index was slightly higher.  Oil was up a few cents and trading just under $55/barrel.  The chart below shows the past year of trading for crude.  Prices came close to breaking the $50 barrel area this month.   This is important to note because oil prices do not stay under $50/barrel very long.

The market is still in shock over Monday’s report numbers.   The trade got a little dose of reality today.  Today’s results of a digital crop tour by Gro Intelligence does not support USDA’s robust projections.   The company is forecasting a national corn yield of 163.2 bpa, a whopping 6.3 bpa lower than the USDA printed on Monday.   The soybean yield is projected at 44.2 bpa, a difference of 4.3 bpa versus the current USDA August estimate.  In many people’s view, the  Gro Intelligence yields seem much more reasonable than the latest USDA’s yield estimates.  Time will tell though.  No one is really arguing about the condition and yield estimates for Iowa or Nebraska.  In general, both states have been blessed with good growing conditions,in addition to timely plantings.  There is a lot of disagreement over yield estimates in IL, IN, OH, MO and SD.  The Gro Intelligence survey pegged IL corn yield at 153 bpa, not even close to USDA’s 181 bpa.  IN was pegged at 138 vs 166.  OH corn yield at 136 versus 160.  The Iowa yield was estimated at 187 vs USDA’s 191.  NE came in at 182 versus 186.

Gro Intelligence found a vastly different soybean crop in IL versus the USDA, 46 bpa vs 55.   The Gro estimates for bean yields in KS, OH, MO and SD were at least 6 bushels lower than the current USDA estimates.  Something doesn’t add up.

Perhaps the Pro Farmer tour that starts Monday will answer some questions on yield.  Participants in the tour will sample roughly 3,000 corn and soybean fields.  The lateness of the crop and planting woes will be of particular interest this year.  Yield estimates between the Pro Farmer tour and USDA will not match up because of the sampling methods.  However, it will give the trade its first “on the ground” estimate this year.  You can follow results on twitter #PFTour19.

The ProFarmer tour will undoubtedly encounter some very late planted crops.  According to the latest 90 day forecast, we may be in luck and have an extended growing season.

Meanwhile, the ECB could use some immediate help in the rain department.   Some corn has fired up to the ear already.   There was a report of silage harvested in WC IN at 30 percent – the plant was dying and losing nutritional value rapidly.   There is huge variability in the crop and that does not equate to a good yield.

What does the price picture look like after the free-fall in prices this week?  December futures closed at $3.80 3/4.  Support lies at $3.70 and $3.63 3/4.    December will test resistance about a dime higher than tonight’s close and then again at $4.05 1/2.    If prices push beyond $4.05,  futures will need to poke through $4.20 to scare the Bears.    November soybeans held it together better than  corn futures this week.    November has support at $8.63 1/4 and $8.46.  The first test for November soybeans lie at $8.88 3/4 and then $9.10 3/4.

 

Crop Insurance Announcement:  RMA has decided to defer interest on crop insurance bills this year to provide some relief to farmers.  Typically crop insurance is billed August 15, and payable by Sep 30 with no interest attached.  For 2019 only, RMA will give you an extra 2 months to pay our bill without interest.  Billings will still go out in August, but you have until November 30 to pay with no interest.  Anything postmarked December 1 will have interest calculated from the date of the premium billing notice.

Have a good weekend.

 

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AgriFinance Market Update 7-12-19

Is the party just warming up or is it about over?  No one can give a correct answer at this point because there are too many variables to play out.   But, someone is nervous because December corn is less than 14 cents from contract highs.  November soybean futures are roughly 40 cents away from contract highs.  If there is a flip-flop in the weather forecasts over the weekend, expect strong downside pressure on prices as early as Sunday night.

Corn futures put in a spectacular day and week despite the bearish report yesterday.   Corn closed a dime higher, with futures up 15-17 cents on the week.  Soybean futures put in an impressive week technically.  Soybeans finished up 14 cents today, with a 34-37 cent weekly gain.   Wheat also had a great week despite harvest pressure.   Not a lot of action today with Chicago and MPLS futures finishing a penny higher and KC up a nickle.  KC added 22 cents on prices this week, followed by a 17 cent gain in Chicago futures.  MPLS futures struggled to add a couple cents to this week’s price.

The S&P 500, Dow and Nasdaq closed at record levels again.  Everyone is banking on an interest rate cut.  The DJIA finished +243 points higher at 27,332.   Gold was up $9.70/oz.  Oil was steady, and closed over $60/barrel.  The dollar fell -.230 points.

It is not a July 4 weekend, but weather forecasts matter Sunday night.  As of this afternoon,  the forecasts are threatening dry and extreme heat across the Midwest the next two weeks.  The forecasters are in agreement this time around – which is very concerning. It usually means they are wrong!   The big question mark is the path Tropical Storm Barry takes after it hits Louisiana tonight or Saturday.  Experts are predicting a 3-4 foot rise in the Mississippi River at New Orleans.   Some areas may see 12-25 inches of rain.  Serious flooding is expected in the Delta.  If  TS Barry fails to send rain into the cornbelt, futures will continue their march higher.

 

Funny to read commentary that traders are just now figuring out that there may be some issues with this crop.  Ya think?  The big “unknown” is exactly how much yield has been dinged from late plantings.  We have never planted so much of the crop  this late, so we will see have to see how everything shakes out.  It is difficult to estimate the crop because some areas look crazy good and other areas look crazy ugly.   For the first time ever, the USDA will not have objective field data to use in the August report.  The USDA will use a farmer survey, satellite data and models based on crop ratings to come up with their yield estimate.  The USDA will roam the fields for the September report.  The USDA will also have a chance to revise acreage in August. Unfortunately, the FSA will release their first set of data from farm certifications the same day as  the USDA report is released.  How much of the info will the USDA use???

Meanwhile, take a look at this vegetative map comparison from last year to this year.  You can draw your own conclusions.  Hot and dry conditions will not help the next couple of weeks.

It is easy to get wrapped up in a market rally, and then end up being disappointed.   We can not lie, the charts look really good tonight.  But, it seems every time we get close to a run-away market – something interrupts the process (like a govt announcement, change in forecast, etc).   IF, by chance the trade gets really nervous next week…the  first target September corn will shoot for is $4.68.  If December corn punches through $4.73, the sights will be set on $5.00.   August soybeans need to find a way to push through $9.25 3/4 to find their way to the target of $9.44 1/2.   The goal for November soybeans is $9.42.   All these levels are within reach.

What if timely rains fall and sellers crash the party?  September futures will seek out $4.25 and the one month low of $4.13.  December futures will likely fall back to the $4.20-4.30 area.  August soybeans may slide to $8.71. November soybean may slip under $9.  Be prepared.   The good thing is that a set back in prices may not put a fork in the rally.   The market will still have to deal with acreage adjustments, yield estimates and other weather concerns until this crop is in the bin (which might be December for some).   Happy trading.

Have a nice weekend.

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AgriFinance Market Update 6-28-19

The USDA threw the market for a loop today.   It didn’t end well for corn and wheat futures.  Some would describe the report as fake news, and that is being “nice”.   Real nice. The USDA released a negative corn acreage figure and friendly soybean number.  Wheat acreage was neutral.   Stocks came in under the trade guess,  but didn’t mean much given the bearishness of the corn acreage estimate. The market reaction was wild.  High frequency trading pushed corn prices up double digits and then down double digits in a blink of an eye.   We couldn’t pull the report up fast enough to see if it was bullish or bearish.  For a second, it was both!  We will give the Bears this inning, but the game is far from over.

By the closing bell, the damage was done.  Corn futures finished the day 20 cents lower, but off session lows by 4-5 cents.  (July futures have no limits during delivery period.).  Charts look awful; daily, weekly and monthly.   Soybeans closed 11 cents higher, but well off session highs.   Although wheat numbers were neutral, prices followed corn lower.  Both Chicago and KC wheat futures were 20 cents lower.  MPLS prices fell 7 cents.   Up until 11 am, prices were looking pretty decent for the week.   Today’s post 11 a.m. move sent corn futures 22 cents in the red for the week,  but allowed a 4 cent gain on the week for soybean futures.  Wheat was a mixed bag.  Chicago and KC fell 3-6 cents, and MPLS futures were higher.

The Dow closed up +73 points at 26,599.  The Dow has rung up the best return for the month of June since 1938.  Very impressive and very scary, at the same time.  Oil prices sank over $1 lower today.  Oil is trading around $58/barrel.   The dollar index was slightly lower.

Tonight is the big meeting between President Trump and China’s President Xi Jinping at the G-20 meeting in Japan.  In the past 24 hours, China has bought 20 mln bushels of US soybeans.  There is little indication that China really needs these soybeans for their reserve or immediate needs.  The sale is a gesture of good will or “carrot” before tonight’s meeting. Beans will likely be rolled forward to the next marketing year or cancelled.

Let’s get to the reports.

The Stocks report was actually friendly as all numbers came below the trade guess.   The numbers weren’t wildly bullish, but depending on how the USDA vets demand prospects – old crop carryout numbers should decline in the July report.  Lower corn stocks suggest feed usage this year is greater than last year.  But, again that would be a logical thought process given RECORD animal numbers this year.   USDA does not always use logic unfortunately.

Here is what caused all the pain today. . .

Notice how the USDA actual numbers weren’t even in the trade’s range of estimates.  What today’s report showed was the producer’s intentions plus his PP acres on the first of June. Any intention shifts, PP acres or additions after the survey were NOT included.  What we have is an incomplete report and the USDA knows it.   The USDA will do the largest resurvey on record – 14 states and 4 major crops.  The kicker is that the results will not be released until the August report.  Between now and then, the USDA can elect to use today’s acreage estimates or use their own for the July report.  They went “rogue” a couple of weeks ago by  shocking the trade and reducing corn acreage over 3 mln.  Will they do rogue 2.0?  The USDA will incorporate the FSA certification numbers at the end of  July and each month thereafter.   The FSA and USDA numbers do not have to match, and they usually don’t.  What a great system.

Clearly something is wrong with the maps below.  Granted,  USDA likely picked up corn acreage issues in the Dakotas (earlier Final plant date).   But, WCB acres were down 1.1 mln from March and ECB acres were down 700k.   Midsouth acres were up 450k.   The majority of the bean acreage decline came in the WCB at -2.95 mln.  The ECB bean acres were down 1.050 mln.    The top map is corn changes from March, and the bottom is soybean changes.

Soybean changes.

 

 

The USDA corn estimate was 5 million acres higher than the trade’s guess.  The USDA soybean acreage was 4 million BELOW the trade guess.  Bottom line; the trade believed the numbers today as evidenced by price reaction.  Do we believe it? No, there will be changes in the future.  Meanwhile, today’s fiasco has taken the wind out of the Bull’s sail.  As we have mentioned before – it is tough to kill the crop in July without a drought.  The trade has a hard time trading too much water or maturity of the crop.  We will need to exercise patience and take the long view in the next few weeks.

 

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AgriFinance Market Update 6-27-19

Farmer selling and fund liquidation ahead of potential fireworks were the features in the marketplace today.  FC Stone reported fund selling at 70 million bushels of corn, 40 million bushels of beans and 15 million bushels of wheat on the day.  Of course, the 4th of July is a week away, but tomorrow’s USDA reports and this weekend’s US/China trade talks should provide for a very interesting couple of days of trade activity!

July wheat was up more than a dime at the high today.  A brutal heat wave sweeping across Europe (including Russia) right now is impacting their crops.  Temperatures in the 90s and 100s are prevalent across the area.  Much of their wheat is in the heading stages and vulnerable.  The EU is expected to produce 5.65 billion bushels of wheat this year (about 3 times what we grow).  Throw in the Russian crop estimated at 2.9 billion and it’s a big deal if drought conditions continue.  Their corn crop is also at risk with some of it at or near pollination.  The EU is expected to grow 2.5 billion bushels of corn this year.  Trim it just 10% and it’s a big deal!

Weekly export sales reported by USDA this morning were pitiful for corn and soybeans.  The meal number was shockingly small, too.  The bright spot for this week was wheat.  You can see the 22.5 million bushels exceeded all estimates.  We also got a huge new crop sales volume reported at 28.7 million bushels.  The combined total is more wheat than we’ve sold the past five weeks combined!

USDA report day is upon us.  We’ll get Planted Acreage and Quarterly Stocks numbers tomorrow at 11 am CT.  The range of trade guesses across all categories is huge.  There’s bound to be some “shock and awe” somewhere in the avalanche of figures.  For your reference, the average trade guess is for corn acres to drop 6.1 million from March Intentions, soybean acres to drop 262,000 and wheat to drop 100,000 acres.

And if you missed this from earlier in the week……..this report has a history of generating significant price moves. We’ve seen 20-30 cent corn rallies the day of the report in 2010, 2012, and 2015.  Prices have also gone sharply lower, like the 69 cent loss in 2011 (no price limits on the July contract in delivery), a 29 cent loss in 2009, and 30 cent move lower in 2008.

For soybeans, the bullish reports in 2015, 2016, and 2017 saw rallies of 26 to 53 cents. For bearish reports, we had 28 cents lower in 2011, and 31 cents lower in 2014.

Regarding the much-anticipated RE-START of the US/China trade talks at the G20 Summit in Japan this weekend……President Trump and President Xi are scheduled to sit down for dinner on Saturday evening.  Osaka is 10 hours ahead of us.  So, 7 pm Saturday evening is 9 am in Chicago.  News about the meeting should be out before noon.

 

 

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AgriFinance Market Update 6-20-19

Corn Hits A Five-Year High Before Slight Dip, Soybean Numbers At Concerning Level

Planting season is off to an interesting start. Excessive rain this spring has lead to lower than average planting numbers, especially for soybeans. While corn yield expectations continue to fall by the week the market pushes toward $5 corn, hitting a five-year high this week.

Planting Progress Remains Well Below Average

Earlier this week, the USDA released their planting progress numbers for corn. There is still an unprecedented number of acres that remain unplanted – 7.4 million acres in mid-June. In South Dakota alone, it is likely that up to 1.3 million acres will not get planted this season.

Soybean numbers are alarming too. A completion rate of 77% means that 19.5 million acres are yet to be planted. Based on price action, it seems the trade has turned their attention to soybean acres. Producers in IA, southern WI, northern IL and MI could start turning in Prevented Planting claims on Saturday, June 22. Producers in down-state IL, IN and OH can start as early as the 20th. Perhaps higher prices are in the works to convince farmers to keep trying to plant soybeans?!

On the other end of the spectrum, traders are finally getting nervous about the last 23% of the crop to get planted. The 77% planted on soybeans is not the slowest planting pace on record, but it is the slowest since 1996. With 1 billion bushel carryouts feared by the trade for months, Mother Nature is quickly taking that carryout away by the day. There are 19 million soybean acres remaining to be planted as of June 16.

Volatility In The Grain Markets

Volatility has arrived in the grain markets, after a relatively long stretch of sideways movement. Higher prices are welcomed, but unfortunately the prices are coming as a result of severe production issues due to historical weather.

It’s been and up and down week for corn, soybeans and wheat.

The recent corn rally from May 13th’s low of $3.43 to June 18th’s high of $4.64 has been an impressive $1.21 per bushel. This marked the highest levels for nearby corn since June 2014. Traders began watching for a breakout to early 2014 highs of $5.19 as a possible next objective for corn. If that area can be reached, then the levels from the 2012/2013 bull market would become the next target.

However, as of Wednesday, corn has dropped 23 cents off Monday’s highs. Soybean futures have dropped 18-19 cents and Chicago wheat has plunged 27 cents lower. We will see how futures play out in the coming weeks.

Corn Yield Estimates

The USDA won’t release a corn yield estimate next Friday, however, they will make an attempt in July. This won’t stop analysts from predicting yield before July. The market was somewhat caught off guard on a yield “estimate” from Iowa State on June 18.

The Devil Is In The Details. 

USDA experts were comparing yield impact to planting progress using the slow planting years of 1983, 1993 and 1995. They observed that yields were 10% below trend in 1993 and 1995 and 20% below in 1983. Based on an estimated relationship, the 2019 planting progress of 50% would suggest a 21% decline in yield.

If you take the simple linear trend yield for 2019 at 173 bpa and multiply by 21%, the national yield could fall in the 135 bpa range. This would be similar to the yield loss in the drought of 2012. Whoa, Nellie! The market isn’t trading a number reflective of 135 bpa. And, it shouldn’t be right now. There is a lot of time between now and September.

We have found out that corn genetics and cool temps can trump a dry year. What we don’t know is how corn genetics handle too much water, but we will find out in a few months. The biggest problem is that we can’t undo a poor start – the difference between this year and the most recent years.

Looking Forward 

A silver lining in the midst of the weather and market movement is that the news from the Fed regarding interest rates.

Interest Rates

On June 19, the Fed announced that interest rates would hold steady. There are no planned interest rate cuts in 2019, but they will remain flexible depending on the economy.

Weather Conditions 

The 8-14 day forecast is shifting to drier conditions.The hope is that Mother Nature will not follow one extreme with another, like in 1995.

USDA Reports 

The USDA will release the Quarterly Stocks report along with the Acreage Report next week on the 28th. On top of all that, the G-20 meetings will take place at the end of next week. Volatility will be the rule, not the exception in the next week and a half.

Stand Firm In A Volatile Market 

A week of ups and downs can be stressful and leave you feeling unsure about your financial future and the sustainability of your farm. AgriFinance has a team of financial advisors with farming backgrounds. Schedule a free consultation today to see how we can help you meet your financial goals.

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What’s Your Target?

What’s Your Target?

When was the last time you played darts? OK, when was the last time you played darts blindfolded? The second game is a little more challenging because you may have no idea where your target is. But it’s a lot like the game some farmers play of trying to sell their crops into a market rally without knowing where profit resides for their operation. It’s difficult to know when to pull the trigger during the growing season if you don’t know where you will be able to profit.

I’ve heard some bankers say 80% of the farmers they work with don’t have a solid cost of production or a marketing plan. So if you’re ready to go with that, you’re in the minority.

In a recent webinar offered by Penton Agriculture, Purdue University Professor of Agricultural Economics, Michael Boehlje asked attendees about their cost of production for the upcoming growing season. Here’s how they answered. This time more farmers knew. They may have been ball-parking it.

If you’re serious about marketing and profiting in a season that’s going to bring narrow opportunities for this, it’s important to know. And when we talk about breakeven, it’s not just seed plus herbicide plus hired labor and fuel. You should be including land costs, equipment costs (depreciation) and family living expense. The reason family living is included is that it’s essentially the salary you’re paying yourself from the business. Once you roll that all up, then you know your target.

We’ve developed a financial tool that helps farmers do this. It allows you to input costs and market strategies/positions, along with crop insurance. Then when those market opportunities come along in profit territory, you’re notified, so you can quickly act. Essentially, we help you find the target and the program tells you when to pull the trigger according to your plan.

If you’d like to see how the software works, sign up for a free trial at www.agwizard.com

 

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Profit Watch Commentary – January 3, 2014

We will finish the first week of 2014 with a double whammy – a plunge in prices and a plunge in temperatures. Records are expected to fall across the country as frigid temperatures move in from Canada. Northern Minnesota may see wind chills of -75 degrees on Sunday morning. Wind chills colder than 50 below can cause exposed flesh to freeze in only 5-10 minutes. This weekend is expected to be the longest sub-zero period in 18 years. Bundle up!
The snowstorm in Chicago and out East coupled with the holidays have affected trading volume this week. Hopefully next week everyone will be back to work.
Believe it or not, the big January Crop report is only one week away. Early next week, the trade will be releasing private trade guesses on production and carryout. Informa got ahead of the game, and released their best guess today. As per usual, their production numbers increased. Below is a recap.
Informa Current USDA est
Corn 14.160 bln 13.989 bln – 161.6 bpa 160.4 bpa
Soybeans 3.329 bln 3.258 bln – 44.0 bpa 43.0 bpa
The higher corn production estimate was due to a combination of an increase in yield and harvested acres. The bump in soybean production was the result of higher yields. Interesting to find that the highest trade estimate in the November crop report was 43.3 bpa. Informa’s yield estimate of 44 bpa matches the record US yield in 2009.
Despite Informa’s bearish projections, both corn and soybean prices ended the day on a positive note. Wheat actually led the rally and closed up nearly 9 cents after making new contract lows early in the day. Unfortunately, the weekly change in prices was not so positive. Corn and wheat lost 3-6 cents on the week, with soybeans taking the biggest hit. March soybeans fell 42.5 cents with November soybeans down nearly 25 cents.
March corn made a new contract low today, but finished the day up 3 cents. The higher close is a small victory. The corn market has been hit with everything from all sides lately. The US hog herd is shrinking due to disease. The weekly ethanol production was down from 926,000 barrels last week to 913,000 this week. (Bright spot: pace is still ahead of last year.) DDG prices are down $100/ton and cutting into ethanol margins. China may not unload DDGs if tested positive to MIR162. And to top it all off, export sales today were lousy. A marketing year low. Only 6.1 million bushels were sold this past week of old corn and .8 mln new. There was no Chinese business.
When it rains, it pours. But, perhaps the market is getting a little ahead of itself. A lot of negative news is in the market, and everyone pretty well expects a bigger USDA number next Friday. There is a chance that the DDG situation may be worked out with the Chinese as early as next week. The Funds are holding onto a RECORD short position. And, finally, the index funds are slated to buy over 90,000 contracts of corn starting next week.
If the Bears get their way, March corn will likely sink to $4.17, 4.10 and ultimately $4. If the Bulls can get a little relief, prices will target $4.25, 4.33, 4.40, and $4.495.
Soybean prices got ripped this week due to good rains in South America last weekend and the DDG situation. Harvest has started in a small area of Brazil and conditions are mostly favorable. 70% of Argentina also got good rains, leaving the majority of the country in pretty good shape. South America has a big crop coming and traders know it.
In the past, poor SA logistics have played a key role in the US securing unexpected export sales. We can’t imagine why that won’t happen again this year at some point.
To date we have more export sales on the books versus the current USDA projection. Today’s strong export sales of 34.7 mln bushels put the number over the top. We have 1.493 bln bushels of soybeans sold with a USDA projection of 1.475 bln. We don’t have all those bushels shipped, so there is the possibility of China cancelling sales in favor of cheaper beans from SA down the road.
The bean Bears were definitely cheering this week. Their next target for March soybeans is $12.625, 12.5625 and $12.3325. The Bulls will look to regroup with March targets of $12.75, 12.92, 13.00 and the December high of $13.3925.
Have a great weekend.

Futures trading may not be suitable for all investors. The trading of futures/options involves substantial risk of loss and you should fully understand those risks prior to trading. This material should be construed as the solicitation of an offer to sell or the solicitation of an offer to buy the derivative(s) noted in any jurisdiction where such an offer or solicitation would be legal. These materials have been created for a select group of individuals, and are intended to be presented with the proper context and guidance. Information contained herein was obtained from sources believed to be reliable, but is not guaranteed as to its accuracy. These materials represent the opinions and viewpoints of the author, and do not necessarily reflect the viewpoints and trading strategies employed by AgriSource, Inc.
AgriSource, Inc. 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. It does not constitute an individualized recommendation, or take into account the particular trading objectives, financial situations, or needs of individual customers. Contact AgriSource, Inc. designated personnel for specific trading advice to meet your trading preferences or goals.

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Profit Watch Commentary – Dec. 13, 2013

TGIF.  The rally we had going to start the week got side-tracked.  March corn futures faded about 14 cents from yesterday’s high.  From Monday’s high to today’s low, March beans dropped 36 cents.  Old crop soybeans still managed small net gains on the week.  All corn and wheat contracts lost ground on the week.

Soybeans managed a respectable comeback into the closing bell today led by meal.  The spot basis levels for outbound meal have been rising rather significantly in recent weeks.  Slow farmer movement of beans into processors along with an anticipated uptick in demand were the bullish features in the soya complex this week.  Potential trouble ahead for DDG exports has the soybean trade thinking more meal may have to get into that pipeline.

Of course, the trouble we’re referring to is China having issues with a particular unapproved GMO trait showing up in boats at their ports. The issue with boatloads of corn is old news.  A rumor that 50 containers of U.S. origin DDGs with the GMO trait have been rejected is the new wrinkle.  Could be that China is simply playing games and they’ll take the “tainted corn” after all.  Nearly every other country in the world does NOT have a problem with this particular trait.  But, the implications of less corn & DDG exports has the trade nervous.  China has bought approximately 150 million bushels of U.S. corn so far this crop year.  Over 100 million bushels of this amount has not yet shipped!

On top of the trouble with China, we’ve got the “stupid” proposal from a group of U.S. Senators called the “Corn Ethanol Mandate Elimination Act”.  Bob Dinneen, President and CEO of the Renewable Fuels Association (RFA), was recently quoted saying, “This is monumentally stupid. This legislation ought to be entitled ‘The Oil Monopoly Protection Act of 2013.’ This bill would deprive Americans of cost-saving, renewable fuel choice. It would set this country back in its quest to gain energy independence and further damage the environment by increasing the need for fracking, tar sands, and off-shore drilling.”

According to a recent report by the World Energy Outlook (an authoritative source of energy market analysis and projections) fossil fuel global consumption subsidies totaled nearly $650 billion in 2012! Ethanol subsidies are miniscule in comparison. The relentless attacks on corn-based ethanol are tiring.  However, if you are a corn producer you should probably do your part to keep the industry moving along.

For starters, if one of the following sponsors and co-sponsors of the new proposal are from your state….you should reach out to your Senator and try to educate them!

Dianne Feinsten (CA-D)

Tom Coburn (OK-R)

Kay Hagan (NC-D)

Richard Burr (NC-R)

Susan Collins (MA-R)

Pat Toomey (PA-R)

Jeff Flake (AZ-R)

Bob Corker (TN-R)

Jim Risch (ID-R)

Joe Manchin (WV-D)

You could also reach out to EPA or the White House or at least sign a petition. Here’s one place to start > http://www.fuelsamerica.org/

To read more about the ethanol industry’s response to the Feinsten-Coburn proposal, click on the link below.

http://domesticfuel.com/2013/12/12/anti-corn-ethanol-legislation-sparks-outrage/

That’s all for now. Let’s hope corn futures can get a correction rally going the start of next week.  For now, have a good weekend!

Futures trading may not be suitable for all investors. The trading offutures/options involves substantial risk of loss and you should fully understand those risks prior to trading. This material should be construed as the solicitation of an offer to sell or the solicitation of an offer to buy the derivative(s) noted in any jurisdiction where such an offer or solicitation would be legal. These materials have been created for a select group of individuals, and are intended to be presented with the proper context and guidance.  Information contained herein was obtained from sources believed to be reliable, but is not guaranteed as to its accuracy. These materials represent the opinions and viewpoints of the author, and do not necessarily reflect the viewpoints and trading strategies employed by AgriSource, Inc.

AgriSource, Inc. 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. It does not constitute an individualized recommendation, or take into account the particular trading objectives, financial situations, or needs of individual customers. Contact AgriSource, Inc. designated personnel for specific trading advice to meet your trading preferences or goals.

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Profit Watch Commentary – Nov. 22, 2013

The soybean market caught on fire today. January soybeans closed up 28 cents at $13.195, matching the previous high this month. New crop was up nearly 8 cents at $11.67. Unfortunately, corn and wheat failed to show up to the party. December corn settled slightly lower at $4.22. New crop corn was unchanged at $4.5775. December wheat closed slightly higher at $6.495. July wheat (vs Chicago) closed up 3 cents at $6.59.

Something really strange happened in the grain market this week – grain prices didn’t get beat up! Perhaps we have put in the seasonal low? Soybeans put in the best performance of the week with January futures gaining 39 cents. Wheat got in on the action, but with much smaller gains of a nickel. December corn futures were sharply unchanged.

Wall Street didn’t have a problem with gains this week, or for the past seven straight weeks if you care to count. Both the DJIA and S&P closed at record highs. The DJIA settled 55 points higher at 16,065. The S&P was up 9 at 1,805. 20,000 – here we come? Who would have ever thought that the Dow would be sitting at record highs with high unemployment, an out of control deficit and record entitlements? I guess when the government messes with the market (as in QE forever), all of the old rules and “logic” fall to the wayside.

Fresh news was noticeably absent this week. Next week will probably be worse with the holiday shortened week. We expect trading volume to be light, which could be a good thing (or not). We have our eye on additional soybean sales. But, we don’t have a specific target price for you tonight. At the very least, today’s rally is a great opportunity to catch-up on old crop soybeans.

Basis is starting to narrow as farmers remain tight holders of both corn and soybeans. The fact is that exporting companies HAVE to get their hands on beans to ship to China with their aggressive sales program. To date, we have already booked 90% of the USDA annual soybean export projections with 42 weeks left in the marketing year. The average for this time of year is 62 percent. Kicking butt, is putting it mildly.

The USDA announced an additional soybean sale this morning to China for 4.2 million bushels. The other day the market was nervous that China was nearly finished buying soybeans and may even cancel some cargos. Chatter today was the complete opposite! Now, the talk is that China will pay up for US beans to ensure timely delivery. Evidently there were 60 day loading delays in South America last year. China doesn’t want a repeat. Bottom line: China is going to do what is best for China and they aren’t going to advertise their plans. This is why the market is going to be on pins and needles the closer we get to the harvest in South America.

The corn market doesn’t rely on exports as much as the soybean market. It is important, but we have other uses for corn like feed and ethanol. Exports were pretty pathetic last year. We expected a better program this year, and so far we are not disappointed. To date, we have 69% of the USDA corn export projections on the books. The average for this time of the year is 49 percent. Our competition is the Black Sea and South America. They typically undercut us on price. We haven’t noticed the competition in the last few years due to the increase in ethanol production. However, with increasing acreage, bigger carryouts and the anti-ethanol sentiment, we need to beef up our export share.

Futures trading may not be suitable for all investors. The trading of futures/options involves substantial risk of loss and you should fully understand those risks prior to trading. This material should be construed as the solicitation of an offer to sell or the solicitation of an offer to buy the derivative(s) noted in any jurisdiction where such an offer or solicitation would be legal. These materials have been created for a select group of individuals, and are intended to be presented with the proper context and guidance. Information contained herein was obtained from sources believed to be reliable, but is not guaranteed as to its accuracy. These materials represent the opinions and viewpoints of the author, and do not necessarily reflect the viewpoints and trading strategies employed by AgriSource, Inc.

AgriSource, Inc. 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. It does not constitute an individualized recommendation, or take into account the particular trading objectives, financial situations, or needs of individual customers. Contact AgriSource, Inc. designated personnel for specific trading advice to meet your trading preferences or goals.

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Profit Watch Commentary – Nov. 15, 2013

Ouch!  Soybeans got smacked today.  A disappointing weekly sales figure from USDA for soybeans and soybean oil greeted the trade first thing this morning.  Then, Informa reminded the world that U.S. producers are likely to plant a record number of soybean acres next year.  Finally, the EPA rolled out some negative news late in the session.  A proposed cut in the RFS mandate for bio-diesel hit the soybean market hard in the closing minutes.  The January bean contract was down more than 35 cents at the low of the day.  March corn was down 6 1/2 cents at the low as the news was bearish for ethanol as well.

Rumors have been swirling for at least a week that the EPA was going to make a major announcement about the Renewable Fuels Standard.  They did in fact roll out a proposal about 15 minutes before the session ended that (if approved) will slash 2014 biofuel requirements by 16%.  Big Oil got what they wanted in the proposal. It’s the same proposal that was leaked last month that also spooked the marketplace.  They say it’s all about the “blend wall”.  In effect, the refiners are saying that the RFS requirement will require the use of more ethanol than can be blended into gasoline at the 10% level.  And, that if it’s left in place it will force refiners to export more fuel or produce less gasoline, leading to shortages and higher prices at the pump.  Seems to us that a logical fix would be to blend 15% ethanol into the gasoline supply.   But, that’s another fight and another argument for another day.

It’s hard to say at this point if there’s more downside in corn and soybean prices due to this development.  The EPA stated that these are proposals only.  A 60-day comment period will be opened up soon for the pros and cons to be forwarded for review.  The EPA says it will likely be next spring before the new minimum requirements are instituted.  It should also be pointed out that the levels we’re referring to here are MINIMUMS only.  Ethanol production has exceeded these RFS mandated levels in 6 of the past 7 years.  That being said, we are concerned that some in the trade (the funds, weak longs and perhaps farmers) will view this development as a “tipping point”.  Last week’s low of $4.15 1/2 could be a target to start next week.  The bears will be gunning for it and the bulls may want to test it for signs of stability.

Weekly export sales were announced this morning.  The corn number at 47 million bushels was well above expectations and puts sales to date at DOUBLE the amount we had on the books a year ago this time. The sales figure for soybean meal was about as expected.  Everything else was under expectations.

Trade Range of Estimates       This week           Last Week

Corn         31 – 39  mln bu          47.4 mln bu         67.7 mln bu

Beans        33 – 44  mln bu          31.2 mln bu         37.4 mln bu

Wheat        13 – 20  mln bu          10.6 mln bu         15.3 mln bu

Meal        200 – 350(000) tonnes    283,200 tonnes      287,800 tonnes

Oil          25 – 50 (000) tonnes      7,200 tonnes       65,900 tonnes

See below for the Informa planted acreage numbers released this morning. Their corn and soybean acres were trimmed just slightly from last month.  They now see 3.9 million less corn, 1.2 million more wheat and a whopping 7.4 million more beans.  Informa did not update their yield and production numbers.  However, we’ve posted their numbers from last month and the latest estimates from USDA for this year’s crops.

Total Production     Planted Acres       Yield

INFM Oct 2014 Corn   13.692 bln bu       91.7 mln acres      163.0 bpa

INFM Nov 2014 Corn                       91.5 mln acres

USDA Nov 2013 Corn   13.989 bln bu       95.4 mln acres      160.4 bpa

INFM Oct 2014 Beans   3.684 bln bu       83.9 mln acres       44.5 bpa

INFM Nov 2014 Beans                      83.8 mln acres

USDA Nov 2013 Beans   3.258 bln bu       76.5 mln acres       43.0 bpa

Here’s a quick snapshot of corn basis bids as of this afternoon.  The first four bids are processor bids across the Corn Belt.  Of course, the New Orleans bid is at the Gulf of Mexico.  The landscape has sure changed.  It’s hard to believe that the best bid in the Corn Belt the month of November is at a land-locked location in NC Iowa. A brand new 150,000/day Cargill ethanol facility that’s opened right across the road from a 100,000/day VeraSun ethanol facility has created a “black hole” of demand.

Blair, NE    Ft Dodge, IA    Decatur, IL    Lafayette, IN    New Orleans, LA

+ 5            +35            +10             -10               +85

That’s all for now.  Have a great weekend!

CBOT  Closes                  Today    Wkly Chg      Yearly Highs

Dec 13 Corn   $ 4.22         –  4 1/2   –   4 3/4    $ 6.05

May 14 Corn   $ 4.30 1/2     –  6       –   8          $ 6.14

Jul 14 Corn   $ 4.45 3/4     –  6 1/2   –   8          $ 6.21

Dec 14 Corn   $ 4.59 3/4     –  6 3/4   –   8 3/4    $ 5.87 3/4

Dec 15 Corn   $ 4.76 1/4     –  7       –   5 1/2      $ 5.68 3/4

Jan 14 Beans  $12.80 1/2     – 33       –  15 1/2     $14.06

Mar 14 Beans  $12.65 3/4     – 31 3/4   –  11         $13.77 3/4

Jul 14 Beans  $12.45         – 30 3/4   –   8 1/4     $13.50 3/4

Nov 14 Beans  $11.53 1/2     – 23 1/2   –   7 1/2     $13.15

Nov 15 Beans  $11.45         – 23 1/2   –  10 1/4     $12.71 1/2

Dec 13 Wheat  $ 6.44 1/2     –    1/4   –   5 1/4     $ 8.34 1/2

Mar 14 Wheat  $ 6.54 1/2     –    3/4   –   7         $ 8.45

Jul 14 Wheat  $ 6.55 3/4     –  3 1/2   –  12 3/4     $ 8.22 1/4

KCBT Closes

Dec 13 Wheat  $ 6.98 1/4     –  4 3/4   –  10 1/4     $ 8.90

Mar 14 Wheat  $ 7.00 1/4     –  4 1/2   –  11         $ 8.90 1/2

Jul 14 Wheat  $ 6.90 3/4     –  6       –  15 3/4     $ 8.39

MPLS Close

Dec 13 Wheat  $ 6.96 3/4     –  3 1/4   –  11 1/4     $ 9.03 1/4

Mar 14 Wheat  $ 7.06 1/2     –  3 1/2   –  13         $ 9.06 1/2

Jul 14 Wheat  $ 7.21 1/4     –  1 3/4   –  11 1/2     $ 8.90

Futures trading may not be suitable for all investors. The trading of

futures/options involves substantial risk of loss and you should fully

understand those risks prior to trading. This material should be construed as

the solicitation of an offer to sell or the solicitation of an offer to buy

the derivative(s) noted in any jurisdiction where such an offer or

solicitation would be legal. These materials have been created for a select

group of individuals, and are intended to be presented with the proper context

and guidance.  Information contained herein was obtained from sources believed

to be reliable, but is not guaranteed as to its accuracy. These materials

represent the opinions and viewpoints of the author, and do not necessarily

reflect the viewpoints and trading strategies employed by AgriSource, Inc.

AgriSource, Inc. 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. It does not constitute an individualized recommendation, or

take into account the particular trading objectives, financial situations, or

needs of individual customers. Contact AgriSource, Inc. designated personnel

for specific trading advice to meet your trading preferences or goals.

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