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BRIAN HOOPS

By Staff | Dec 12, 2014

Farm net income

USDA forecasts U.S. net farm income at $97 billion this year, down almost 22 percent from last year’s estimate.

The 2014 forecast would be the lowest since 2010, but would still be $16 billion above the previous 10-year average.

USDA senior economist Mitch Morehart sees higher expenses as the main driver for net farm income this year.

Total production expenses are forecast to be 5.7 percent higher in 2014. That would be the fifth consecutive increase.

Livestock receipts are expected to increase by more than 14 percent in 2014.

On the crop side, we’re expecting a decline of about 12 percent, that’s $27.2 billion.

That decline is led by a $10.5 billion reduction in corn receipts and a $7.9 billion cut in soybean receipts from a year

ago.

World grain

The International Grains Council has raised its estimate of this year’s total world grain production by 2 million tons, virtually matching last season’s record.

Global grain ending stocks are seen reaching a 15-year high, and up 6 percent from last year.

The global corn crop is up 2 million tons from October, while world wheat production is down a million tons, but still record large.

The IGC raised world soybean production 1 million tons; the crop is 8 percent larger than last year.

Global ending stocks are forecast to rise 38 percent.

The IGC raised its estimate of Chinese soybean imports, to 73.5 million tons.

CORN ANALYSIS

Corn closed the week 6.75 cents higher. Last week, private exporters reported sales of 109,736 metric tons of corn to Costa Rica and 232,000 mt of sorghum to an unknown destination.

Weekly export sales of corn showed corn sales of 46 million bushels. Annual corn sales stand at 896 mb, 132 mb less than a year ago.

Corn has rallied into major weekly resistance on the back of active fund buying. Meanwhile, commercials have sold into the rally. With more than 2 billion bushels of ending stocks, prices need to move lower to stimulate more demand and usage.

However, exports are below last year’s pace and the latest rally does nothing to encourage more usage. The USDA supply/demand report, scheduled for release on Wednesday, looks to lend little direction to prices, with no production adjustment, and the USDA likely to lower demand forecasts by 15 to 25 mb.

Fund buying is the most bullish driving force for prices with very little farmer hedge pressure until after the first of the year.

Strategy and outlook: Producers are 100 percent sold of the 2014/15 crop and have sold 10 percent of 2015 production.

They should sell another 15 percent at $4.50 December.

SOYBEANS ANALYSIS

Soybeans closed the week 24.75 cents higher from last week. Last week, private exporters announced sales of 355,000 mt of soybeans to China and 174,000 mt of meal to Thailand.

Weekly export sales of soybeans showed sales of 43 mb.

Annual soybean sales are 1.464 bb, 72.5 mb more than a year ago.

Brazil and Argentina currently are planting their crops in nearly ideal growing conditions. Note, Brazil and Argentina store little to no excess grain, as storage elevators are absent from the countryside, not like the U.S.

Grain goes from field to port, which means they need to forward contract, or pre-sell their crop before it’s harvested to insure it doesn’t pile up on the farm.

This means South America will post its price for beans under any U.S. price to ensure it captures export business, as there is nowhere to store it.

From the start of the U.S. harvest in October until the South American soybean harvest in March, the big demand window for U.S. soybeans is now.

China remains the world’s largest importer of soybeans as its growing economy demands high protein and oil contents.

The USDA supply/demand report on Dec. 10 looks to lend little direction to prices.

Strategy and outlook: Producers are 100 percent sold of 2014/15 production and have sold 10 percent of 2015 production.

They should sell another 15 percent at $10.95 November.

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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