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BRIAN HOOPS

By Staff | Dec 26, 2014

Cattle outlook

After a record-setting year for cattle producers in 2014, what’s the outlook for 2015?

Cattlefax senior market analyst Kevin Good said the industry is seeing signs of herd expansion this year.

When you combine that tremendous amount of profitability with lower input costs, two record corn crops, much better feed and better moisture conditions through the bulk of the U.S., it’s led us to some pretty rapid expansion signs in 2014.

Good is optimistic for cattle and beef values for 2015, but is acutely aware of the competition from pork and poultry.

With increasing supplies of pork and poultry, the price spread is becoming extreme. Because of that, it probably limits some of beef’s ability to push higher as we go through 2015.

Titan Machinery

Titan Machinery reports third quarter adjusted net income of $2.9 million, down 49 percent from the same period last year.

Equipment sales were down 22 percent.

For the first nine months, Titan’s adjusted net earnings were off 75 percent from last year. The company ended the third quarter with cash of $110 million.

During the quarter, Titan acquired certain assets of Midland Equipment Inc., consisting of one agriculture equipment store in Wayne, Nebraska.

Titan Machinery has revised its annual guidance downward. Net income is projected from $2.1 million to $6.4 million, from $6.4 million to $12.7 million previously.

In negotiations

Investment bank Jefferies Group LLC, owned by Leucadia National Corp, said it was in talks to sell its commodities and financial derivatives brokerage, which has been struggling with high costs and falling fees.

Jefferies, which also reported a fourth-quarter loss, is the latest bank to retreat from the commodities futures market as stricter regulation increases costs and intense competition and a decline in fees squeeze profit margins.

CORN ANALYSIS

Corn closed the week 4.25 cents higher.

Last week, private exporters reported sales of 126,000 metric tons of corn to an unknown destination, 101,604 mt to Mexico and 135,664 mt of to Japan.

Weekly export sales of corn showed sales of 27 mb. Annual corn sales stand at 961 mb, 72 mb less than a year ago.

The USDA revealed its new baseline projections as new crop corn acreage of 88 million, down 2.9 million from 2014/15.

This figure will no doubt encourage buyers this spring and corn should rally as a result.

USDA’s corn production forecast for 2015/16 is projected at 13.445 billion bushels versus 14.4 bb in 2014/15, with a yield at 167.2 bushels per acre.

Total consumption is estimated at 13.745 bb. Ending stocks are pegged at 1.7 bb.

Although these numbers will change significantly by next year, this tells us the lower acreage figure should be a bullish fundamental next spring and summer.

Traders will want to buy corn due to the reduced acres and the threat of adverse summer growing season sending prices sharply higher.

Strategy and outlook: Producers are 100 percent sold of the 2014/15 crop . They sold 10 percent of 2015 production and should sell another 15 percent at $4.50 December.

SOYBEANS ANALYSIS

Soybeans closed the week 16.25 cents lower.

Last week, private exporters announced sales of 1,5 mt to China.

Weekly export sales of soybeans showed sales of 26 mb. Annual soybean sales are 1.5 bb, 67.4 mb more than a year ago.

NOPA crush was released last week showing the crush at 161.2 mb, which was record-large for the month of November, but well below average market expectations of 165.4 million bushels and below the all-time record crush also of 165.4 million bushels set in December 2013.

November crush was above last year’s 160.1 million bushels and bested the previous November record of 160.3 million set in 2009, but clearly fell short of expectations.

November crush also rose from 158 mb in October.

In the USDA outlook forum, soybean acreage for 2015/16 is estimated at 84 million, down 200,000 acres from 2014/15.

Soybean production is projected at 3.8 mb versus 3.958 mb in 2014/15, with yield at 46 bpa.

Total bean consumption is estimated at 3.766 mb and ending stocks are pegged at 519 mb, with stocks-to-usage reaching a nine-year high of 13.8 percent.

Strategy and outlook: Producers are 100 percent sold of 2014/15 production. They sold 10 percent of 2015 production and should sell 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 not a solicitation. Brian Hoops can be reached at (605) 660-1155.

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