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By Staff | Jul 4, 2014

New direction

Monsanto, a company best noted for genetically modified seed, has made a flourish from engineering its balance sheet, too.

The world’s biggest seed group has been pressed by shareholders to stop running at a net cash position, and run with borrowings, like most of its peers.

Introducing a net debt target of 1.5 times earnings before interest, tax, depreciation and amortization (ebitda) has put shareholders in line for a windfall.

To get a measure of it, consider that Monsanto ran its last financial year with a net cash positioning equivalent to 0.4 times ebitda.

Adjusting to its new target means the release of some $10 billion, assuming the ebitda of $5.3 billion next year that analysts have factored in.

And that’s before the net cash flows of some $3 billion a year that the company is throwing off.

The new share buyback of $10 billion these funds are supporting should win it quite a few friends.

Beef trade

USDA says the United States and Hong Kong have reached an agreement on new terms and conditions that will allow expanded exports of U.S. beef product into Hong Kong.

Under the new terms, Hong Kong will permit the import of the full range of U.S. beef and beef products consistent with access prior to December 2003.

The new terms went into effect June 17.

Broker reopening

The owners of a U.S. futures brokerage that regulators have ordered to close for helping to misappropriate customer funds will open a new brokerage with the same leadership and staff, company executives said.

The National Futures Association,based in Chicago and funded by industry fees, ordered Vision Financial Markets to shut its brokerage within six months and pay a $1.5 million fine for “failure to observe high standards of commercial honor.”

Company owners Robert Boshnack and Howard Rothman plan to register a new brokerage, High Ridge Futures, with the NFA and have appointed Vision’s chief operating officer, Richard DeMatteo, as its chief executive, according to a letter sent to customers this month.

High Ridge will be staffed by former employees of Vision, which will continue to operate as a separate clearing securities and options broker-dealer.

“The process of ‘spinning out’ Vision’s existing business to the new company has already begun,” general counsel David Stein said in a statement. High Ridge, which has not yet applied to register as a broker, will be subject to a “thorough fitness examination,” according to the NFA.

The regulator said customers who search for High Ridge in disciplinary records would find information about Vision.

The NFA banned Vision after Ace Investment Strategists, a commodity trading advisor that directed most of its business to the firm, was charged with misappropriating client money over three years.

Vision could have stopped the financial damage, according to the NFA. The firm paid $2 million in restitution to customers.


Corn closed the week 5.25 cents lower. Last week, private exporters announced a sale of 217,400 metric tons of U.S. corn to an unknown destination for the 2014/15 marketing year.

Weekly export sales of corn showed 12.7 million bushels of old crop sales and 9.1 mb of new crop sales.

In the weekly crop progress report, the USDA reported the corn crop is the second highest rated crop in the last 23 years.

At 74 percent good-to-excellent last year. All of the U.S. corn is now planted and weather is the main focus of the market until we are past the key yield development timeframe.

Our key yield development timeframe will occur near the normal timeframe, leaving July 4 through July 20 as most sensitive to weather.

Typically, funds exit long during the third quarter of the year as market trades lower into harvest, before funds buy into fresh longs in the last quarter of the year in hopes of a post-harvest rally.

A threat of extreme heat or dryness could force a short-covering rally, so be quick to change your marketing strategy if adverse weather threatens the Midwest.

Strategy and outlook: Producers are 25 percent sold of the 2014/15 crop and own 480 puts on 50 percent of the crop.

Roll puts to 440 puts to capture premium. Producers bought -the-money December calls on 25 percent of sales as insurance.


Soybeans closed the week 6.25 cents lower from last week. Last week, private exporters announced sales of 140,000 mt of U.S. soybeans to an unknown destination for the 2013/14 marketing year.

Weekly export sales of soybeans showed 11.7 mb for old crop and 16.8 mb for new crop sales.

In the weekly crop progress report, soybean conditions fell another 1 percent to 72 percent g/e versus 65 percent g/e last year.

Despite the slip in ratings, this is still the second best rating in history.

NOPA crush for May reported at 128.8 mb, is slightly above the average trade guess of 127 mb, but down from last month 132.7 mb.

The key pod-setting stage looks to begin about July 15 and last until the Aug. 5 time frame at which the biggest gains in yields estimates can surface with timely rain or biggest upside gains in futures will occur if heat and dryness occurs.

Highs are usually in by July’s end, but highs have likely occurred in early June unless threatening develops during the pod-setting stage that will reduce yields and drive prices higher.

With volatility extremely high, this is a high-risk weather market. Rain events that occur in late July and the first week of August should be sold as this will help the development of the crop.

Strategy and outlook: Producers are 25 percent sold of 2014/15 production. They should sell another 10 percent at $12.63 against March 2015. They should buy November puts on 50 percent of 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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