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Becoming more farm literate

By Staff | Aug 8, 2014

Wheat yields

Scouts on the Wheat Quality Council’s annual spring wheat tour calculated this year’s average hard red spring wheat yield at a record 48.6 bushels per acre.

That’s up from last year’s 44.9 tour estimate, and the five-year average of 44.7.

Over the last 22 years, the average yield estimate from the spring wheat tour has been higher than USDA’s final yield estimate in all but six years. The average USDA spring wheat yield over the past 22 years is 35.5 bushels per acre, 2.4 bushels per acre less than the average spring wheat tour yield calculation.

Durum yields were calculated at 36.6 bpa, down about five bushels from a year ago.

Softening demand

AGCO warned of “softening” demand for agricultural equipment worldwide as it cut its forecast for full-year results, despite a less severe drop in its performance in the latest quarter than investors had expected.

The farm equipment maker, whose brands include Fendt and Massey Ferguson, is expecting the first decline in five years.

On 2014 profits, AGCO cut its forecast by $1 per share to $5 per share, a four-year low, and below the $5.45 a share that Wall Street has pencilled in.

“Global industry demand is softening compared to 2013 and declines are anticipated across all major global agricultural markets, particularly in the professional producer segment,” the group said.

Request denied

Eleven judges at the United States Court of Appeals for the District of Columbia Circuit denied the request by the American Meat Institute, National Cattlemen’s Beef Association, and other meatpacker lobby groups, for an injunction that would have halted enforcement of the U.S. country-of-origin labeling law.

While the decision to uphold the denial of the meatpacker-requested preliminary injunction was unanimous, the Appeals Court ruled 8 to 3 to reinstate the specific judgment by the original three-judge panel of the Appeals Court that decided in March that COOL did not violate the meatpacker lobby groups’ First Amendment free speech protections.

The specific First Amendment question resolved by today’s ruling was whether the original panel had used the proper standard for determining when the Constitution allows compelled commercial speech.

CORN ANALYSIS

Corn closed the week 10.5 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 old crop sales of 6.8 million bushels and new crop sale of 49.9 mb.

In the weekly progress report, corn crop conditions fell to 75 percent good-to-excellent, down 1 percent compared to a week ago and well above last year’s 63 percent, and the highest rating during this week in July since 2004.

Crop ratings reveal the highest rated crop in the last 10 years, leaving the trade to believe a monster crop will be harvested this fall.

Crop ratings historically decline in August under warmer and drier conditions. In August, watch the weather forecasts closely.

If weather would turn hot and dry in the final kernel filling stage, we would have one final rally this summer. Weather must turn adverse before Aug. 25 as after this date, our key yield development time will be over.

On the flip side, an early frost during the kernel-filling stage would also send prices higher as a killing frost could potentially hurt yields.

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 should exit at $3.25.

SOYBEANS ANALYSIS

Soybeans closed the week 23.5 cents lower.

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 of 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 old sales of 6.9 mb and new crop sales of 46.6 mb.

In the weekly crop progress report, soybeans conditions fell 2 percent from a week ago at 71 percent good/excellent and are above last year’s 63 percent rating.

This is the highest soybean ratings on record for early August since 1994.

August is the key yield development month for soybeans, not July. For new crop soybean pricing, ignore demand signals as weather and its impact on the developing crop remains 95 percent of our pricing influence.

By Aug. 20 to Aug. 30 soybeans will have completely filled the pod, and seasonal highs will be in.

It is in this time frame that we will either produce a 3.5 billion bushel crop or a 2.5 billion bushel crop.

Beans need moisture in the pod setting stage to achieve normal yields. However, hot and dry conditions will force moisture to the root system, leaving the bean in the pod to develop small.

The soyoil content is what suffers most, leaving bean oil undervalued if hot and dry conditions set in across the Midwest.

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

Producers exited puts and bought September at-the-money calls. If support at $10.55 is broken, exit calls and re-enter puts.

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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