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BRIAN HOOPS

By Staff | Feb 27, 2015

Farmland prices

Farmland prices in the central U.S. Plains stayed mostly steady in 2014 despite lower farm incomes, but weakness is expected this year amid continued depressed grain prices, the Federal Reserve Bank of Kansas City said on Feb. 20.

“Following several years of strong income and gains in cropland values, 2014 appeared to be a turning point for crop producers,” the bank said in its quarterly survey of district farm banks. “Lower crop prices and elevated input costs trimmed profit margins and slowed cropland value appreciation.”

Deere & Co.

Farm equipment maker Deere & Co. posted a 43 percent fall in first-quarter profit and cut its full-year profit forecast as lower corn prices and weak farm income weighed on demand for agricultural machinery.

The company, which gets nearly two-thirds of its revenue from farm and turf machinery, cut its 2015 net profit forecast to $1.8 billion from $1.9 billion.

Sales of Moline, Illinois-based Deere’s farm and turf machinery are expected to fall 23 percent globally this year, it said. This includes a 4 percent negative impact of a strong dollar.

The company earlier forecast a sales fall of 20 percent. The United States and Canada accounted for 62 percent of total revenue in 2014.

Deere’s overall equipment sales are expected to fall about 19 percent in the current quarter ending April 30.

The company’s sales have been hit as bumper corn harvests drive down prices, leaving farmers with less cash to spend on equipment. The U.S. Department of Agriculture said last week that net farm income is expected to fall 32 percent to $73.6 billion in 2015, the lowest since 2009 and a drop of nearly 43 percent from the record high of $129 billion in 2013.

CORN ANALYSIS

Corn closed the week 2.5 cents lower. Last week, private exporters did not report any private sales.

Weekly export sales showed corn sales at 37 million bushels. Annual corn sales now have reached 1.342 billion bushels and are now 43 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.

The USDA baseline report suggested U.S. planted acres for 2015/16 at 88 million acres. This places the 2015/16 production at 13.59 bb, with a yield of 166.8 bpa and a carryout of 1.687 bb.

This compares to the 2014/15 crop where production was at 14.216 bb, with a yield of 171 bpa and a carryout of 1.827 bb.

The 2013/14 crop was 13.829bb, with a yield of 158.1 bpa and a carryout of 1.23 bb.

Using a yield of nearly 167 bpa may be optimistic given the average yield after producing a record crop is a 20 bpa drop from trendline.

Strategy and outlook: Producers are 100 percent sold of the 2014/15 crop. They sold 10 percent of 2015 production. They should consider selling another 15 percent at $4.65 December.

They bought calls to re-own 50 percent of previous sales.

SOYBEANS ANALYSIS

Soybeans closed the week 9.5 cents higher. Last week, private exporters reported sales totaling 230,000 metric tons of U.S. soybeans to China.

Weekly export sales of soybeans were 19 mb. Annual sales have now reached 1.715 bb, up 133 mb from a year ago.

The NOPA soybean crush report for January was bullish as it showed 162.7 mb of beans crushed. While this was below the average trade estimate of 163.7mb, it was 2 mb larger than December and a whopping 5.7 mb larger than a year ago.

It was the largest crush for the month of January in history and the fourth largest month period. At the USDA outlook conference, the USDA forecast planted acres at only 83 million, with the 2015/16 soybean crop at 3.8 bb, a yield of 46 bpa and a carryout of 430 mb.

It estimated 2015/16 crush at 1.84 bb and exports at 1.82 bb. This compares to 2014/15 production at 3.97 bb, with a yield of 47.8 bpz and a carryout of 385 mb.

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.

They 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.

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

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