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BRIAN HOOPS

By Staff | Mar 20, 2015

RMA price projections

The Risk Management Agency has issued its 2015 crop year projected prices for common crop insurance policies and area risk protection insurance.

The projected prices include barley at $3.51 per bushel; canola 16.1 cents per pound; corn at $4.15 per bushel; grain sorghum at $3.99 per bushel; soybeans at $9.73 per bushel; oil sunflowers at 16.9 cents per pound; confectionary type sunflowers at 26.5 cents per pound; all wheat at $5.85 per bushel; and durum at $6.32 per bushel.

Compared to a year ago, the projected price for corn is down 47 cents per bushel; soybeans are off $1.63, and the wheat projected price is down 66 cents from last year’s projected price.

Farm bill peak

Government support for U.S. grain farmers under the five-year farm bill will peak with the coming 2015 crop, the Food and Agricultural Policy Research Institute said, in a new report.

The 2014 farm bill replaced traditional direct payments to farmers with support tied to market prices, with farmers choosing one of two basic formulas – ARC or PLC – by March 31. The option they choose, will be for the duration of the farm bill.

Agriculture Risk Coverage makes payments based on moving five-year average prices at the county level. Price Loss Coverage provides payments when national average prices fall below fixed reference points.

“Payments under 2014 farm bill programs increase when crop prices fall,” FAPRI said in its 2015 U.S. Baseline Briefing Book. The think tank estimated that $3.9 billion in ARC and PLC payments for last year’s 2014 crop would be made after fiscal 2016 begins on Oct. 1.

“ARC spending is greatest in 2015/16, but declines in later years as the moving averages that determine benchmark revenues adjust,” FAPRI said. “Projected average ARC and PLC payments peak with the 2015 crop at about $6.5 billion, but decline to $3.4 billion for the 2018 crop.”

FAPRI, based at the University of Missouri, said actual ARC and PLC payments are likely to differ greatly from the projected averages, given price and yield volatility.

The projected farm support payments are separate from the huge U.S. private crop insurance program, which the government both guarantees as a reinsurer and subsidizes by paying 50 percent or more of farmer premiums. FAPRI estimated crop insurance net outlays would average more than $8 billion per year over the next 10 years.

CORN ANALYSIS

Corn closed the week 5.75 cents higher.

Last week, private exporters reported a sale of 107,255 metric tons of sorghum to China.

Weekly export sales showed corn sales at 32.6 million bushels. Annual corn sales now have reached 1.402 billion bushels and are now 75 mb below a year ago.

In the monthly supply/demand report, the USDA revealed a friendly report for corn, continuing a trend of chipping away at the once burdensome corn carryout levels.

The report showed an increase of corn exports of 50 mb, an increase in feed usage of 50 mb and a reduction in ethanol usage of 50 mb, allowing for a net decrease of 50 mb to 1.777 bb.

World ending stocks decreased slightly more than 4 million metric tons to 185.3 mmt. South Africa accounted for 2 mmt of the decrease.

With the report out of the way, attention will turn to early planting progress in the South, which is already behind schedule and the quarterly stocks and acreage report at the end of the month.

Corn should find strength into the report as the slow planting pace, especially if corn needs to buy acres into the planting timeframe.

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 10.25 cents lower.

Last week, exporters did not report any private sales.

Weekly export sales of soybeans were 18.4 mb. Annual sales are record large at 1.75 bb, up 128 mb from a year ago.

In the monthly supply/demand report, the USDA left the U.S. soybean carryout unchanged at 385 million bushels from the previous month.

Pre-report expectations were looking for a drop to 376 million bushels, providing a slightly negative tone.

World-ending stocks increased marginally to 89.5 mmt.

With the report out of the way, trade attention will turn to the quarterly stocks and acreage report at the end of the month. Record soybean demand should provide a bullish stocks figure while most in the trade will be anticipating a small increase in soybean acres this spring.

This could change if producers get in the fields in a timely fashion and plant more corn than previously thought.

If corn tries to rally to buy acres this spring, currently the market is anticipating farmers will shift corn acres to soybeans, look for soybeans to rally as well.

Strategy and outlook: Producers are sold 100 percent of 2014/15 production. They sold 10 percent of 2015/16 production. They should consider selling another 15 percent at $10.95 November.

They bought calls on 50 percent of 2014/15 production 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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