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BRIAN HOOPS

By Staff | Aug 1, 2014

Yield estimates

The Commodity Weather Group is forecasting the national average corn yield at a record 171 bushels per acre.

CWG estimates this year’s corn crop at 14.3 billion bushels, 440 million bushels above USDA’s current forecast.

National soybean yields are projected at 46.1 bpa, nearly 4 percent above trend, including record yields in many states.

If realized, this would produce a crop of 3.88 bb using the current USDA acreage figures.

Buying farms

Farmland Partners revealed a $100 million shopping list of U.S. farms as it unveiled plans to raise cash from a further share sale, only three months after raising $50 million at its stockmarket flotation.

The farmland investment group said its staff had “identified, and are in various stages of reviewing” more than 10 potential farm purchases, covering a total of 20,000 acres, with an estimated aggregate price of $100 million.

“We have engaged in preliminary discussions with some of the owners and commenced the due diligence process on certain of these farms,” the group said. However, it said that it did not expect to seal a deal until the completion of an offering of 3.71 million shares, with the option to underwriters to sell a further 557,620.

Morgan Stanley

(REUTERS) – After more than a year of scaling back in commodities, Morgan Stanley is ready to expand.

The Wall Street bank plans to hire a dozen traders, sales staff and other professionals in the United States. It’s building up commodities trading and financing businesses that can profit despite tougher regulations, people familiar with the matter told Reuters.

“The moves that we’ve made are in large part because we looked at these businesses through a new capital lens,” said one executive involved in the business’s strategy who spoke on the condition of anonymity. “That’s just the reality of life on Wall Street these days.”

For example, Morgan Stanley is looking at making more loans to energy producers and sell more commodity-linked products to retail investors, the sources told Reuters.

Commodities trading was big for Morgan Stanley before the financial crisis. Revenue from the business rose from $580 million in 2000 to $1.9 billion in 2007, according to estimates by Brad Hintz, a Bernstein analyst.

Since then, commodities trading has come under pressure at big banks as funding costs have risen and regulators have clamped on their ability to make bets with their own money.

CORN ANALYSIS

Corn closed the week six cents lower.

Last week, private exporters announced a sale of 23,368 metric tons to Mexico for 2013/14 and 245,716 mt of U.S. corn to an unknown destination for the 2014/15 marketing year.

Weekly export sales of corn showed sales of 56.5 million bushels.

In the weekly progress report, corn crop conditions improved to 76 percent good-to-excellent, unchanged compared to a week ago and well above last year’s 63 percent and the highest rating during this week in July since 2004.

The key yield development timeframe is occurring now, but will be over for the majority of the Corn Belt by next week.

The only thing left to significantly hurt this year’s corn crop is an early frost. Typically, funds exit longs during the third quarter of the year.

Without a weather threat, funds look to remain sellers and pressure prices in the process. Now that support of $3.79 has been broken, look for fund selling to maintain pressure against prices with $3.25 a likely possible downside target for December corn.

Expect foreign buyers to steadily book new crop corn as prices work lower. Demand should improve as prices work lower.

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

They bought out-of-the-money December calls on 25 percent of sales as insurance.

SOYBEANS ANALYSIS

Soybeans closed the week 2.5 cents lower from last week.

Last week, private exporters announced sales of 120,000 mt of soybeans to China for 2013/14 and 360,000 mt of soybeans to China for 2014/15; 765,000 mt meal to an unknown destination; 134,700 mt meal to Mexico; 180,000 mt meal to Vietnam and 20,000 mt bean oil to an unknown destination.

Weekly export sales of soybeans showed sales of 98.4 mb. So far, in the new marketing year, the U.S. has sold 541.1 mb, well above last year’s record pace.

In the weekly crop progress report, soybeans conditions improved 1 percent from a week ago at 73 percent good/excellent, and are above last year’s 64 percent rating.

This is the highest soybean ratings on record for early July since 1994. Several weeks ago, I wrote that “soybeans are a crop of August, so there is still time for this crop to be harmed due to poor weather.

Weather cycles and the six-week cycle of cool and wet conditions ended around July 4, and a warmer, drier pattern should now be prevalent.

A sustained period of dry weather will be needed to change the trend of the market.”

Along with strong demand trends, the dry weather is starting to change the trend of the market. A retracement rally in the November contract of $11.50 to $11.75 is certainly plausible and continued dry weather could force prices higher.

Strategy and outlook: Producers are 25 percent sold of 2014/15 production.

Producers own November puts on 50 percent of production.

They should exit puts and buy September at-the-money calls.

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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