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BRIAN HOOPS

By Staff | May 23, 2014

Land O’Lakes

Land O’Lakes enjoyed strong first quarter earnings. Net income was $125 million, up 74 percent from the same quarter last year.

The dairy foods segment recorded big gains with rising cheese, butter and milk powder markets contributing to the upswing.

The Land O’Lakes crop inputs business, including the WinField brand, had positive first quarter results.

The feed business, which includes the Purina brand, also contributed to the significant quarterly gains.

Tyson Foods

Tyson Foods is posting a record second quarter with sales topping $9 billion for the first time, up 7.7 percent from a year ago.

Operating income increased 53 percent to $361 million.

Tyson’s pork business posted operating income of $107 million, while its chicken business posted operating income of $234 million.

Deere and Co.

Deere and Co. is reporting a 9.5 percent decline in second-quarter net income on lower demand for farming equipment.

With farmer income projected to decline, Deere said sales of agriculture and turf equipment could fall about 7 percent this year.

The company expects a 4 percent drop in equipment revenue for fiscal 2014, the same decrease it’s expecting for the current quarter.

Net income fell to $980.7 million, or $2.65 per share, compared with $1.08 billion, or $2.76 per share, in the same quarter a year ago.

Revenue fell 8.9 percent to $9.95 billion.

Ag land values

Farmland prices in the Corn Belt softened in the first quarter of 2014, reflecting expectations for lower farm income as grain prices slide, the Federal Reserve Bank of Chicago said.

Land values dipped 1 percent from the fourth quarter of 2013, halting the rise in district land values – a trend similar to results earlier in May for the central and southern Plains and the southern Midwest by the Kansas City and St. Louis Fed banks.

“Even with the first quarterly decrease in five years,” the Chicago Fed said in its quarterly survey of 214 regional farm lenders, “the year-over-year change in district agricultural land values managed to stay positive in the first quarter of 2014.”

The Chicago Fed district stretches across most of Iowa, Wisconsin and Michigan as well as northern Illinois and Indiana, a region that contributes about one-third of U.S. corn and soybean production as well as large amounts of dairy, pork and cattle production.

CORN ANALYSIS

Corn closed the week 23.75 cents lower. Last week, private exporters announced a sale of 126,000 metric tons of corn to South Korea.

Weekly export sales of corn showed a total of 15.4 million bushels. To reach the current USDA forecast, corn only needs to average 3.6 mb each week.

The weekly crop progress report showed the corn crop is 59 percent planted as of May 11 versus the five-year average of 58 percent and 18 percent emerged versus the five-year average of 25 percent.

As we have been expecting, the planting pace has moved close to normal while emergence remains behind normal due to the cold weather.

Informa’s May acreage review showed corn acres down 110,000 at 91.6 million acres.

With 4 million less corn acres this year, the market will be more sensitive this year to weather issues should they arise.

Commercials will be using this break in prices to build long positions in an attempt to benefit from a weather event.

Producers can look at out-of-the money call options for insurance as a cheap way to benefit from a weather-related rally if it occurs.

Buying out-of-the-money calls on price weakness during the month of May can pay dividends on a weather-inspired rally during June and or July.

Strategy and outlook: Producers are 100 percent sold of 2013/14 crop. Producers are 25 percent sold of the 2014/15 crop and own 480 puts on

50 percent of the crop.

Buy out-of-the-money December calls on 25 percent of sales if December corn hits $4.66.

SOYBEANS ANALYSIS

Soybeans closed the week at 20.75 cents lower from last week.

Last week, private exporters announced a sale of 180,000 mt of soybeans sold to an unknown destination; 116,000 mt of soybean meal to Thailand and 40,000 mt of bean oil to China.

Weekly export sales of soybeans showed 2.7 mb for old crop and 11.9 mb for new crop sales.

In the weekly crop progress report, USDA showed soybeans at 20 percent planted versus the five-year average of 21 percent.

The April NOPA crush was above the average estimate of 130.15 mb at 132.67 mb.

Oil stocks were built to 2.06 billion pounds above the average guess of 1.998.

Informa’s May acreage review showed soybean acres up 580,000 to 82.1 million. Front month prices have stalled below key resistance and pulled back, trying to find a price level that will stimulate demand.

Meanwhile, new crop prices have held steady as the market has not seen enough planting progress to remove planting premium from prices.

The market is anticipating nearly double the ending stocks this growing season compared to last year, but that is assuming nearly perfect growing conditions.

Soybean producers intend to seed more acres this year than the previous year, but the old trading adage of its not what you plant, its what you grow applies this year to soybeans.

Strategy and outlook: Producers are 100 percent sold of the 2013/14 crop. Producers are 25 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.

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