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BRIAN HOOPS

By Staff | Dec 20, 2013

WASDE

The latest World Agricultural Supply and Demand Estimates report from the USDA forecasts higher production of total red meat and poultry in the U.S. for both 2013 and 2014 at 93.3 billion pounds and 93.715 billion pounds, respectively.

For 2013, small changes are made to the fourth quarter of 2013 for the major species, based on slaughter data to date, taking the pig meat production estimate to 23.2 billion

pounds. The forecast for 2014 has been raised to 23.9 billion tonnes, based on an upward revision of hog carcass weights.

Pork imports are raised for both 2013 and 2014, based on estimates for the third quarter and early fourth quarter and expectations for slightly stronger imports in 2014. The latest estimate for 2013 is now 876 million pounds, rising to 880 million pounds for next year.

Pork exports have been revised down to 4.97 billion pounds for 2013, and to 5.2 billion pounds for 2014, based on slightly weaker demand in Asia.

Farm bill

It looks like there will not be a new farm bill by the end of 2013, but an extension of the current program uis being proposed.

On Dec. 12, the House approved an extension of the 2008 farm law until Jan. 31, 2014. That would give lawmakers more time to finish work on a new five-year policy.

Both the Senate and the House have passed farm bills this year, but the differences between the two measures have yet to be hammered out. The House passed its extension amid fears that the expiration of dairy subsidies at the end of the year will cause milk prices to rise.

But Agriculture Secretary Tom Vilsack said there would be no impacts on dairy prices in January. That will allow negotiators more time to continue their work and prepare a conference committee report that can be voted on early next month.

Senate Majority Leader Harry Reid has said the Senate will not pass an extension because it is unnecessary.

CORN ANALYSIS

Corn closed the week $.08 3/4 lower. Last week, private exporters reported sales of 240,000 metric tons of corn to an unknown destination.

Weekly export sales of corn showed a total of 27.4 million bushels. Total annual exports total of 1.051 billion bushels represent 73 percent of the USDA’s export of 1.450 bb.

In the USDA December supply/demand report, the USDA increased its projected usage for corn exports and ethanol usage by 50 mb each.

This brought ending stocks down 95 mb to 1.79 billion bushels, well below pre-report estimates of 1.87 bb.

This supported corn after the report as it shows that stocks are not increasing due to lack of demand. The January report could be very bearish as the USDA will issue its final production figure of the 2013 crop, which is expected to be larger than the November estimate.

The lack of farmer selling in December looks to at least mildly support corn as basis levels should remain firm without much country movement. Corn looks to be locked into a trading range with the downside supported by strong demand and the upside limited until springtime, when the possibility exists for a weather-related rally.

Strategy and outlook: Producers are 100 percent sold of 2013/14 crop. Producers are 10 percent sold of the 2014/15 crop.

SOYBEANS ANALYSIS

Soybeans closed the week $.02 higher from last week. Last week, private exporters reported a sale of 295,000 mt of soybeans to China.

Weekly export sales of soybeans showed a total of 40.7 mb. Total export sales of 1.422 bb are 96 percent of the USDA’s new annual forecast of 1.475 bb.

In the December supply/demand report, the USDA increased soybean exports 25 million bushels, dropping ending stocks for 13/14 to 150 mb , slightly below estimates of 153 mb.

Thus, no major changes were made to the balance sheets, but that will change in the January report, when the USDA will issue its final production forecast.

The trade will be concerned the USDA will increase production at the same time China may start to cancel U.S. soybean purchases.

Basis levels in South America are soft and with a large crop coming on, it is more than likely China will switch U.S. purchases to South American origin.

There remains no incentive to storing soybeans this year with the market signaling prices are better now than expected next summer.

Strategy and outlook: Producers are 90 percent sold of the 2013/14 crop. Sell 10 percent at $13.74.

Producers are 10 percent sold of 2014/15 production. Sell 10 percent at $12.10.

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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