The USDA released the monthly supply/demand report on Aug. 12. The report held a major surprise for the corn market as the trade had expected a small increase in production, however the USDA lowered corn production to 13.76 billion bushels.
World corn ending stocks for 2013-14 fell within the range of trade expectations at 150.17 million metric tons, a minor change from USDA’s July estimates.
For soybeans, the USDA lowered soybean production from its July estimates as USDA pegged it at 3.255 bb with an average yield of 42.6 bpa.
In August, the USDA resurveyed farmers in 14 states. USDA estimated planted acreage at 77.2 million acres, down less than 1 percent from June.
Harvested area is forecast at 76.4 ma. slight increase from last month.
If realized, this would be the third largest production year on record and yield would be the fifth largest.
Corn closed the week $.10 1/4 higher and posted a bullish weekly reversal.
Last week, private exporters sold 252,155 metric tons of U.S. corn to Mexico.
In the weekly export sales report, new crop corn sales were 36.7 mb.
In the weekly crop progress report, corn conditions were unchanged at 64 percent good-to-excellent.
Silking is pegged at 94 percent and corn in the dough stage is estimated at 32 percent, behind the 48 percent five-year average.
The crop continues to be late in maturity and with the late maturity, the threat of an early frost would be a bullish catalyst to send prices soaring.
Additionally, demand for late-season dryness will cut yield potential as the crop will need moisture to fill ears. The worst case scenario for prices looks to be weekly support of $3.87.
Rallies will find selling interest from producers who have not pre-sold much of the crop this year and need to make some cash sales prior to harvest.
Strategy and outlook: Producers are now 100 percent sold of 2012/13 crop and are also 50 percent sold of the 2013/14 crop.
Producers own December corn puts on 50 percent of 2013 production. We will look to buy at-the-money calls if weather turns adverse.
Soybeans closed the week $.77 higher from last week.
Last week, private exporters reported sales of 1,107,000 mt of U.S. soybeans to China and 266,000 mt of U.S. soybeans to an unknown destination.
In the weekly export sales report, new sales were excellent at 69.9 mb.
With the large private sales last week, the weekly export sales report should be bullish.
The crop progress report showed soybean conditions unchanged at 64 percent g-to-e.
Eighty-eight percent, 92 percent last year, are blooming and 58 percent, 68 percent last year, are setting pods, both behind the five-year averages.
The soybean crop is made during August and has received some timely rains this month to help pod fill, but a dry rest of the month will send prices higher as more moisture is needed for the late seeded crop to reach full yield potential.
NOPA reported July U.S. soybean crush by its members at 116.3 mb down from 119.1 million last month, and down 15 percent from last year’s July crush of 137.4 million.
This was the lowest crush for the month of July since 2004.
South American hedge pressure will increase and limit the upside for the soybean market.
Strategy and outlook: Producers are 100 percent sold of the 2012/13 production and are 40 percent sold of 2013/14.
Sell 10 percent at $13.45 against the January contract. Producers own November puts on 50 percent of 2013 production.
Lift the puts if November trades to $11.29.
This material has been prepared by a sales or trading employee or agent of Midwest Market Solutions and is, or is in the nature of, a solicitation. This material is not a research report prepared by Midwest Market Solution’s Research Department. The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that Midwest Market Solutions believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such.
Brian Hoops can be reached at (605) 660-1155.
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