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BRIAN HOOPS

By Staff | Feb 28, 2014

The same weather pattern that caused drought in California and South America, may migrate east into the central U.S. during the Northern Hemisphere’s summer, a climate forecaster said.

A strong upper-atmosphere ridge anchored over Alaska and in the southeast South Pacific near Indonesia suggest that drought conditions from Texas to Iowa may intensify from June to August after a brief period of above-normal rain from May to early June, according to Scott Yuknis, the lead forecaster with Middleboro, Mass.-based Climate Impact Co.

There will be “beneficial late-spring, early-summer rains in the northern Great Plains,” Yuknis said in an e-mail. “Otherwise, central U.S. drought strengthens this summer. Spring rains will be too spotty to ease central U.S. drought.”

Crop insurance

After the 2012 drought, farmers turned to crop insurance in record numbers to protect their 2013 crops.

Data from the National Crop Insurance Services and American Association of Crop Insurers shows farmers spent $4.5 billion to buy crop insurance in 2013, a 10 percent increase over 2012 52,000 more policies were sold in 2013 than 2012.

A record 296 million acres, or 90 percent of insurable cropland, was covered by crop insurance last year. To date, 423,000 policies from 2013 have been indemnified, 15 percent less than the previous year.

CORN ANALYSIS

Corn closed the week 7.25 cents higher. Last week, private exporters did not report any private sales.

Weekly USDA export sales of corn showed a total of 27.2 million bushels. Annual exports of 1.389 billion bushels are 87 percent of the current USDA export forecast of 1.6 bb, which may to be raised in the future.

During USDA’s outlook conference, it forecast 2014 corn acreage to be down 1.5 million at 92 million acres, with a 165.3 bushel-per-acre yield.

This would place production at 13.38 bb and the 2014-2015 U.S. corn ending stocks at 2.1 bb on Aug. 29, 2015. This is well above the 2013-2014 ending stocks estimate of 1.481 bb.

Many producers are nervous about the upcoming growing season, wanting to get some hedges in place. Patience this year should provide selling opportunities.

There have been some weather forecasts for decent spring rains in April and May, but dryness during the summer months.

This would severely curtail yield potential for corn and soybeans.

On weekly charts, corn is close to breaking its multi-year downtrend line, but its too early to make a case of a major technical breakout.

Strategy and outlook: Producers are 100 percent sold of 2013/14 crop.

Producers are 10 percent sold of the 2014/15 crop. Sell 15 percent at $5.24.

SOYBEANS ANALYSIS

Soybeans closed the week 36.75 cents higher from last week. Last week, private exporters did not announce any private sales.

Weekly export sales of soybeans showed a total of 3.2 mb, the lowest total of the marketing year.

Total export sales of 1.59 bb, are 5 percent larger than the revised USDA forecast of 1.51 bb.

The USDA is assuming foreign buyers will eventually cancel U.S. purchases in favor of cheaper South American product. The weekly charts show an interesting pattern.

Soybeans broke out of a triangle or wedge pattern and a large move should follow.

This chart pattern is similar to the one found on cattle charts, that led to a major bullish rally.

During USDA’s outlook conference, it forecast soybean acres will increase 1.5 million in 2014 to 79.5 million acres.

In the NOPA monthly crush report, NOPA January soybean crush was reported at 156.9 mb, well below market expectations of 162.4 mb.

Crush was also down from December’s 165.4 mb and even a bit below last year’s January crush of 158.2 mb.

Marketing year-to-date NOPA crush of 748.2 mb is nearly exactly in line with last year’s pace of 748.7 mb.

Strategy and outlook: Producers are 100 percent sold of the 2013/14 crop. They re-owned 50 percent of the 2013/14 crop with $13.50 May calls.

Producers are 10 percent sold of 2014/15 production. Sell 15 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. Brian Hoops can be reached at (605) 660-1155.

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