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BRIAN HOOPS

By Staff | Mar 7, 2014

FCS

Farm Credit Services of America had 2013 net annual income of nearly $515 million. That compares to $481 million in 2012.

Loan volume increased to more than $20 billion, up from $18.5 billion the previous year. Most of the loan volume was in the long-term real estate portfolio.

Farm Credit Services of America serves four states-South Dakota, Iowa, Nebraska and Wyoming.

Fading commodities

Traders anticipate that commodities will fade as 2014 continues, even though the sector has performed better than global equities this year.

Citigroup said that commodity investments experienced record outflows in 2013, while about $1.6 billion has entered the sector so far this year.

“While this is hardly a strong V-shaped recovery given $50 billion in product net outflows for 2013, data are continuing to affirm our view that tepid 2014 investor flows would not be nearly as dire as last year,” said Citi analyst Aakash Doshi.

Weak corn, wheat in 2014

The world faces weaker production of both corn and wheat next season, thanks to the likelihood of yields failing to match elevated levels of the latest harvests, the International Grains Council said.

The intergovernmental group, in its first forecast for the world corn harvest for 2014-15, pegged it at 954 million tonnes, a drop of 5 million tonnes year-on-year.

For wheat, the council forecast a world harvest of 696.3 million tonnes, down 11.4 million tonnes year-on-year, and trimmed from a previous estimate of 697 million tonnes.

The downgrade reflected a cut of 500,000 hectares to the estimate for world area, although this will still come in at 223.7 million hectares on a harvested basis, up 5 million hectares year on year.

CORN ANALYSIS

Corn closed the week 4.25 cents higher. Last week, private exporters reported a sale of 284,480 metric tons of corn to Mexico and a total of 203,200 mt of corn to an unknown destination.

Weekly export sales of corn showed a total of 33.1 million bushels.

Total annual exports total of 1.422 billion bushels are already 850 mb larger than last year.

At the current pace, the USDA’s export forecast of 1.6 bb looks to be raised in the future.

Commercial interests will view pullbacks in the market as buying opportunities with forecasts for a cool, wet spring could give way to flooding across the Midwest key growing regions during the heart of the growing season.

Thus commercial entities as well as large speculators will want to be long ahead of the growing season.

Highs for corn are likely to be scored during the spring planting timeframe or very early summer as values rally to secure enough planted acres to meet demand.

As price levels rise, producers should be offsetting price risk by making cash sales and using options to manage the risk.

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 53 cents higher. Last week, private exporters sales of 568,000 mt of U.S. soybeans to an unknown destination; 112,000 mt of optional origin beans to China and 112,000 mt of optional origin beans to Egypt.

Weekly export sales of soybeans showed a total of 12 mb for old crop and 11.8 mb of new crop.

Total export sales of 1.597 bb, well above the current USDA forecast of 1.510 bb. This year’s export pace is 309 mb above last year’s record pace.

The USDA is assuming foreign buyers will eventually cancel U.S. purchases in favor of cheaper South American product.

In the March 31 acreage report, the trade should be expecting an increase in U.S. soybean seedings of 500,000 to 1 million acres.

If wet growing conditions materialize this spring as forecast, corn will rally to buy acres as the market anticipate farmers will shift corn acres to soybeans.

A very wet forecast will likely limit the upside for soybeans.

Like with corn, technical breaks should be well supported by commercial entities as they begin to position long ahead of the growing season as they wish to extend coverage in case prices rally sharply on a weather related event.

Soybeans are only beginning their breakout on the weekly charts and further upside is expected.

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.

They should exit at $14.56.

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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