Small grains report

In the quarterly stocks and small grains report, released on Sept. 30, the USDA forecast corn stocks well above expectations at 824 million bushels, including 260 mb in feed usage

during the fourth quarter. This is lower than the previous report of 407 mb in feed use.

Soybean stocks also came in above the September estimate and the average trade expectation at 141 mb.

In order to avoid a negative residual calculation, 2012 production was revised higher by 18.6 million bushels to account for the additional bushels.

Corn feed use during the quarter was a record low and was surprising since the delayed harvest would seem to preclude the early-harvest scenarios where new-crop bushels displace old-crop usage.

One possibility is the strong market inverse haa a similar effect for southern bushels that were ready prior to harvest.

The higher bean production number was hinted at by the relatively low residual calculation over the first three quarters, a situation resolved with the 19 mb increase.

Even higher production

Informa Economics, a private forecaster, pegged U.S. corn production this year at 14.01 billion bushels on yields of 158.8 bushels per acre.

Soybean production was estimated at 3.176 bb, and yields were seen at 41.7 bpa.

Informa’s forecast for corn production was higher than the USDA’s September forecast of 13.843 bb.

Its soybean output estimate was slightly higher than the 3.149 billion seen by USDA last month.

ADM fined

The U.S. Commodity Futures Trading Commission fined futures brokerage ADM Investor Services Inc. $425,000 for commingling customer funds with funds from its noncustomer

accounts, the top U.S. derivatives regulator said in a release.

As a futures commission merchant, ADM Investor Services, which is a fully owned subsidiary of U.S. agribusiness giant Archer Daniels Midland, is required to keep customer funds segregated from other accounts.

CFTC found that ADMIS violated the rule when it treated the accounts of certain ADM-owned affiliates as customer accounts prior to July 2011.

“The CFTC Order finds that as a result of ADM’s ownership and voting interests in ADMIS and the affiliates, ADMIS was prohibited from commingling its customers’ funds with funds held in the affiliates’ accounts,” the regulator’s news release said.

CORN ANALYSIS

Corn closed the week $.10 3/4 lower. Last week, private exporters did not report any private sales.

No weekly export sales this week due to the government shutdown.

The weekly crop progress and conditions report said U.S. corn conditions were unchanged at 55 percent good-to-excellent versus 25 percent last year with 12 percent of crop harvested versus 24 percent average.

With the USDA and private forecasters confirming larger yield potential compared to the September production figures and producers uncovering surprisingly strong yields in early harvesting, the corn market looks to find hedge pressure as harvest progresses during October.

This is the main harvest month for corn and when prices should find the most selling pressure from producers who don’t have enough on-farm storage.

Producers have been aggressively adding on farm storage, which may limit the pressure. With the larger production figures, reasonable downside targets look to be $4.07 and long term support of $3.87. This is where producers should look to lift hedges.

Strategy and outlook: Producers are 50 percent sold of 2013/14 crop and own the December 560 strike puts on 50 percent of production. Producers are 10 percent sold of the 2014/15 crop.

SOYBEANS ANALYSIS

Soybeans closed the week $.24 3/4 lower from last week. Last week private exporters reported a sale of 113,000 metric tons of U.S. soybeans to China.

No weekly export sales this week due to the government shutdown.

The crop progress and conditions report showed soybean rating improved 3 percent to 53 percent g/e versus 35 percent last year.

Harvest is progressing into more of the main soybean belt areas and producers are uncovering better-than-expected yields.

Informa raised its production forecast slightly higher than the current USDA forecast. The higher Informa forecast and the better-than-expected yield results, could mean the USDA raises its yield forecast on the October supply/demand report, if the report is released by the USDA.

The 62 percent retracement for November soybeans was nearly hit and prices have rallied again.

As prices recover on harvest delays, look at resistance points as selling opportunities as a huge carry is still being offered compared to storing soybeans into the summer.

Strategy and outlook: Producers are 60 percent sold of the 2013/14 crop and own the November 1260 put options on 50 percent of production.

Exit puts at $12.21 Novermber. Sell 20 percent of 2013/14 production at $13.07 against January. Producers are 10 percent sold of 2014/15 production.

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.