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BRIAN HOOPS

By Staff | Oct 10, 2014

Grain forecasts

The International Grains Council has raised its forecast of world grain production by 8million tons, to nearly 2 billion tons. That’s only 10 million tons below last year’s record.

Global wheat production is pegged at a record 717 million tons, 4 million more than last month and last year.

The world corn crop is raised by 1 million tons from last month, but is 9 million tons below last year.

The world soybean crop is up 6 million tons from August, to a new record of 310 million tons, 10 percent above last year.

Global soybean ending stocks are expected to be up 34 percent from the previous year.

The world wheat carryover is at a five-year high.

Goldman Sachs cut forecasts for grain and cotton futures, citing ample supplies, but was particularly downbeat over prospects for soybean prices, foreseeing a further slump to levels not seen since 2008.

The investment bank cut its expectations for corn futures prices on the three- and six-month horizons to $3 per bushel, and for wheat futures to $4.50 a bushel on the same time scale, more gloomy outlooks than investors are factoring in.

However, soybean futures “present the largest downside,” Goldman Sachs said, forecasting prices on a spot contract basis tumbling to $8 per bushel on three- and six-month outlooks – implying a further drop of 13-14 percent in values is on the cards.

Deere & Co.

Deere and Co. is putting its crop insurance business up for sale. Deere has been selling off its portfolio of side businesses in an effort to focus on building and selling farm and construction equipment.

Deere has already sold its wind-energy business, irrigation equipment business and its landscaping supply business.

CORN ANALYSIS

Corn closed the week .75 cents higher.

Last week, private exporters announced sales of 174,000 metric tons of corn to an unknown destination.

Weekly export sales of corn showed corn sales of 25 million bushels.

In the weekly crop progress report, the USDA reported the national corn harvest is 12 percent complete, ahead of last year, but behind the average pace of 23 percent done and behind trade estimates.

Corn harvest looks to continue to run behind normal. The downside target is the weekly chart support of $2.75 to $3.

With huge yield results already trickling in, it is too early to anticipate a harvest low forming.

In the quarterly stocks report, the USDA pegged Sept. 1 stocks at 1.236 bb, well above the average trade guess and above the USDA’s Sept. 11 report. This implies that the USDA will use a larger carry-in stocks figure in the Oct. 10 report.

Private estimates are making large increases in production forecasts, making it likely the Oct. 10 report could see the largest USDA yield estimate of the year as northern states are not finding record yields this year.

Lows could come in near the $3 mark shortly after the report’s release.

Strategy and outlook: Producers are 25 percent sold of the 2014/15 crop and own December puts on 75 percent of the crop. They should exit puts at $3.

SOYBEANS ANALYSIS

Soybeans closed the week 1.5 cents higher.

Last week, private exporters did not report any private sales.

Weekly export sales of soybeans showed sales of 32 mb.

In the weekly crop progress report, the USDA reported the national soybean harvest is only 10 percent complete versus 23 percent on average and in line with trade estimates.

The early stages of harvest are uncovering record large soybean yields. Harvest lows normally occur near Oct. 2, but lows should occur later this year due to the harvest running several weeks behind normal.

In the quarterly stocks report, the USDA lowered Sept. 1 stocks to 92 mb, the lowest since 1972.

If this was the March or June report, prices would have soared higher.

However, since a record crop is due to be harvested, the market is focused on the pipelines being replenished.

The USDA also raised the 2013 production, 69 mb, to 3.358 billion bshels, but added 107 mb back into the residual category to achieve a 38 mb reduction to carryout.

Look for harvest lows to occur shortly after the Oct. 10 supply/demand report.

Strategy and outlook: Producers are 25 percent sold of 2014/15 production. Producers own puts on 75 percent of the crop. They should exit puts at $8.80.

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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