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BRIAN HOOPS

By Staff | Feb 13, 2015

Bonuses cut

DuPont Co.’s Pioneer seed unit took it on the chin from Monsanto Co. this year, and now salaried employees are taking a hit in the wallet. DuPont is cutting 2014 bonuses and delaying 2015 salary increases until July 1, according to an internal memo distributed.

The company saved $175 million from reduced bonuses, with half the reduction coming at the expense of agriculture unit employees, DuPont said in a presentation.

Operating profit in agriculture, DuPont’s biggest business, fell 5.3 percent last year as the Pioneer unit lost market share to Monsanto, which increased operating income 14 percent.

Agriculture along with the nutrition unit would be the focus of a smaller DuPont under a plan by activist investor Trian Fund.

The farm bill’s bill

The Congressional Budget Office estimates farm programs will cost $18 billion more over the next 10 years than previously estimated.

Mandatory spending for farm programs reached $19 billion in fiscal 2014, $1 billion more than the CBO forecast last August. The costs are expected to dip to $11 billion this fiscal year, before increasing to $16 billion in 2016 and $19 billion in 2017.

CORN ANALYSIS

Corn closed the week 15 cents higher. Last week, private exporters reported sales of 132,000 metric tons of corn to Mexico. Weekly export sales showed corn sales at 33.9 million bushels. Annual corn sales now have reached 1.266 billion bushels and are now 42 mb below a year ago.

Demand isn’t strong, ethanol production is slowing and cattle supplies are the second lowest since 1952, but the market is still worried that usage is better than what has been factored in.

With another positive report in February, ending stocks could tighten even further. Corn producers are expected to plant 2 to 3 million fewer acres this spring compared to a year ago.

Weather this spring will be so important to the growing season. It won’t matter how many acres are planted if it doesn’t rain. Producers should look to buy the weakness in the month of February for a rally into the spring and possibly the summer if weather conditions remain dry.

Strategy and outlook: Producers are 100 percent sold of the 2014/15 crop. They sold 10 percent of 2015 production and should consider selling another 15 percent at $4.50 December. Producers bought calls to re-own 50 percent of previous sales.

SOYBEANS ANALYSIS

Soybeans closed the week 13 cents higher from last week. Private exporters did not report any private sales.

Weekly export sales of soybeans were 18 mb. Annual sales have now reached 1.669 bb, up 93 mb from a year ago.

Normally, February looks to bring the addition of slower U.S. export sales as early planted beans in Northern Brazil come to harvest and hit the world market at a price lower than any U.S. posted price.

Because Brazil can only store 25 percent of its harvest, it is forced to forward sell approximately 75 percent of its early harvested soybeans.

It is the period between mid-February and May that South America over takes the U.S. as the primary port of origin for beans.

This will leave weather on late-maturing crops as the sole bullish factor for South American soybean values.

February in Brazil and Argentina is like August here as it’s a key yield-developing month for three quarters of the crop.

If weather turns hot and dry, prices will rally sharply, however with good rains across the country, the price of soybeans should turn south.

Producers should buy pullbacks in the market. Ahead of the February USDA supply/demand report, traders will anticipate the USDA to leave ending stocks unchanged due to the record strong demand pace for soybeans.

The soybean market’s main job is to not lose acres to other crops this spring. Therefore, if corn rallies, soybeans should as well. U.S. producers are expected to plant an additional 1 to 2 million acres this spring.

Strategy and outlook: Producers are 100 percent sold of 2014/15 production. They sold 10 percent of 2015 production. They should consider selling another 15 percent at $10.95 November. Producers bought 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.

Brian Hoops can be reached at (605) 660-1155.

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