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BRIAN HOOPS

By Staff | Feb 6, 2015

The U.S. Commodity Futures Trading Commission aims to approve by the end of this year proposed rules to crack down on speculation in energy, grain and metals markets, the agency’s chief of staff said.

New regulations on position limits in commodity markets will not go into effect immediately once they are approved, said CFTC Chairman Tim Massad, to a commodities conference in Miami. “The chairman’s goal is to try to get approval finalized for position limits before the end of this year,” he said.

Caterpillar

Caterpillar Inc. reported lower quarterly net profit that missed expectations as lower prices for copper, coal and iron ore hurt mining equipment orders, and warned the recent fall in oil prices would make for a difficult year in 2015.

The report sent the company’s shares down nearly 6 percent in premarket trading. The world’s largest maker of construction and mining equipment said it expects only a modest improvement in the global economy in 2015 and gave an earnings outlook for the year below Wall Street estimates.

Chief Executive Officer Doug Oberhelman said without a doubt Caterpillar faces a tough year in 2015.

The Peoria, Illinois-based company reported fourth-quarter net profit of $757 million, down nearly 25 percent from $1.03 billion a year earlier.

Revenue totaled $14.24 billion, down from $14.4 billion a year earlier, but above expectations of $14.18 billion.

EPA and RFS

The Environmental Protection Agency will release the 2014 Renewable Fuels Standard this spring. A key EPA official made that claim during the National Biodiesel Board meeting this past week in Texas.

In November, EPA said it would not release the mandate obligations for 2014, 2015 and 2016 until sometime this year, so this statement is consistent with previous comments from EPA.

CORN ANALYSIS

Corn closed the week 15.75 cents lower.

Last week, private exporters reported sales of 116,000 metric tions of grain sorghum to an unknown destination.

Weekly export sales showed corn sales at 42.1 million bushels. Annual corn sales now have reached 1.237 billion bushels and are 1 percent above a year ago.

As we anticipated, farmer selling has increased after the first of the year, which has pressured prices. This is the type of scenario we feared and advised clients against.

Producers stored inventory without hedges and are forced to sell as prices turn lower. With demand starting to improve, the only negative fundamental is the slowdown in ethanol usage.

This is the time of the year that crude prices bottom and rally, which will help ethanol usage and corn prices overall. Producers should be looking to use this weakness in prices to re-own sales they have made and plan for a rally this spring and summer to finalize their marketings.

Remember acres will be down compared to a year ago and the threat of adverse summer growing season could send 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 consider selling 15 percent at $4.50 December.

Producers bought July 400 calls to re-own 50 percent of previous sales.

SOYBEANS ANALYSIS

Soybeans closed the week 11.75 cents lower.

Last week, private exporters reported a cancelation by China of 120,000 metric tons and a purchase of 111,000 mt to an unknown destination.

Weekly export sales of soybeans were 32.6 mb. Annual sales have now reached 1.66 bb, up 96 mb from a year ago.

Farmer selling has increased as everyone is fearful of the big crop in South America. Prices have weakened and funds are now net short.

Early harvest results in key states of Mato Grasso and Panora have only reached 11 percent completed, but yields are good.

Prices find seasonal support in early February, which the market will need as well as fund buying interest to drive prices higher.

Producers should be looking to use this weakness in prices to re-own sales they have made and plan for a rally this spring and summer to finalize their marketings.

If the South American crop fails to yield as predicted, the strong demand base and the threat of adverse summer growing season could send prices sharply higher.

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

They sold 10 percent of 2015 production and should consider selling another 15 percent at $10.95 November.

They bought July 1040 calls on 50 percent of 2014/15 crop to re-own previous sales.

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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