Crop estimates

In absence of a mid-month USDA crop report, the following is a snapshot of RJ O’Brien’s commentary and its estimates for 2013 production and potential carryover stocks.

The 2.5 billion bushel 2013/14 corn carryover assumes 1 million less corn acres, a 161 bushel-per-acre yield and 125 million bushel lower for 2013/14 usage.

A carryover of this magnitude, if confirmed in upcoming crop reports, suggests sub $4 corn.

Our 205 million bushel 2013/14 U.S. soybeans carryover assumes 600,000 less planted soybean acres, a 42.5-bpa yield and 31 million bushel larger in 2013/14 uasge than USDA.

Basis and spreads will carry the load of keeping the pipeline supplied, not the board, especially if 2014 South American soy crop swells 10 to 12 million metric tons.

Crop insurance

The U.S. House voted over the weekend that farmers with more than $750,000 adjusted gross income a year should pay a larger share of crop insurance premiums.

The government now pays an average 62 cents of each $1 in premium. The proposal by Budget chairman Paul Ryan would reduce the subsidy by 15 percentage points.

Cargill

Cargill’s first quarter earnings of $571 million were down 41 percent from the record quarter last year.

First quarter revenues of $33.8 billion matched the year-ago period. Chairman and CEO Greg Page said Cargill did an excellent job managing the remaining effects of last year’s severe drought and smaller crops.

Cargill’s bid to buy Joe White Maltings in Australia was accepted. The acquisition is expected to be completed before the end of the year.

Cargill also purchased full ownership of the Prairie Malt joint venture in Saskatchewan.

CORN ANALYSIS

Corn closed the week $.08 1/4 higher. Last week, private exporters did not report any private sales.

No weekly export sales or crop progress reports this week due to the government shutdown. With the government shut down providing no crop progress or supply/demand figures, the trade is looking to the private sector for information.

Private forecasters and producers who are combining corn are confirming larger yield potential compared to the September production numbers and, in some cases, much larger than previously forecasted yields.

Thus, 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. Exit at $4.10.

Producers are 10 percent sold of the 2014/15 crop.

SOYBEANS ANALYSIS

Soybeans closed the week $.24 1/2 higher from last week. Last week private exporters reported a sale of 222,000 metric tons of soybeans to China and 140,000 mt of soybeans to an unknown destination.

No weekly export sales or crop progress reports this week due to the government shutdown. The shutdown and lack of harvest progress info, plsu lack of supply/demand info from USDA, private sources and producers are providing most of the trading info.

Soybean producers are uncovering more yields that were expected. Harvest pressure combined with the larger-than-expected yields are weighing on soybean prices.

As harvest progressies some of the large premiums that November was holding is being removed.

November and January still have a carry being offered compared to storing soybeans into the summer, so storing soybeans at harvest makes no financial sense.

NOPA soybean crush for September was reported at 108.7 million bushels, down a bit from August crush of 110.5 million bushels, but above market expectations of 106.4 million.

This was the lowest September crush since 2009 and second lowest in more than 10 years.

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 $12.60 November. 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. Hoops can be reached at (605) 660-1155.