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BRIAN HOOPS

By Staff | Jul 3, 2015

Farm bill

The House Agriculture Appropriations subcommittee has marked up its 2016 spending bill.

The $144 billion bill is $3.2 billion below President Obama s request and $3.8 billion less than this fiscal year. The bill provides 18 percent less than the president requested for agriculture research.

It would cut funding for the Conservation Stewardship and the Environmental Quality Incentives Programs.

Trading challenge

CME Group Inc’s plan to close most of its futures pits next month is facing its first organized opposition from a small group of Chicago traders and brokers who have hired a law firm to push regulators to give more time for review.

Lawyers from Katten Muchin Rosenman sent a letter to the Commodity Futures Trading Commission on behalf of the group, who work on CME’s open-outcry financial trading floor in Chicago, to request a 90-day review on the closure of the pits, traders backing the effort said.

TPA OKd

The House has passed Trade Promotion Authority on a vote of 218 to 208, less than a week after TPA was approved, while Trade Adjustment Assistance was voted down.

South Dakota Congresswoman Kristi Noem thinks TPA will be an important tool for U.S. trade negotiators.

“We have been without Trade Promotion Authority since 2007,” Noem said, “and in that time, we have seen over 100 trade agreements that have been made around the world without America being involved.”

The stand-alone TPA legislation will now go to the Senate where part of the strategy includes attaching TAA to a separate trade preferences bill.

Cutting costs

Monsanto, flagging “industry headwinds,” revealed it was working on plans to cut costs by $300 million to $500 million, as it forecasts a slowdown after a quarter in which its performance beat expectations.

The U.S.-based seeds giant, which is attempting to takeover agrichemicals group Syngenta, said that sector hardships stemming from factors such as a dent to farm spending from low crop prices would last beyond its current financial year, which ends in August.

“Looking beyond the current year,’ a Monsanto statement reads, “the company anticipates the continuation of several of the industry headwinds, ranging from weakening foreign currencies to low commodity prices driving reduced acres.”

CORN ANALYSIS

Corn closed the week 33.5 cents higher.

Last week, private exporters did not report any private sales.

Weekly export sales showed corn sales at 24.7 million bushels. Annual corn sales now have reached 1.721 billion bushels and sales are now down 154 mb compared to a year ago.

In the weekly crop progress report, corn ratings fell 2 percnet to 71 percent good-to-excellent, lower than last year’s 74 percent g/e rating.

Ratings in Ohio were down 19 percent, in Indiana down 15 percent and Illinois down 6 percent.

Too much rain has been the culprit this year, which is hard to rally the market on as the trade has a “rain makes grain” mentality. Yield potential remains high due to all the moisture, but there may be some areas that will not produce due to drowned out sports.

The next major market moving report will be the stocks and acreage report on June 30. The USDA may recognize the slow planting pace of Missouri and Kansas as well as drowned out acres and lower-planted acres in that report.

Given the current crop conditions, the USDA yield estimate of 166.8 bpa seems reasonable. Producers, who have been looking for an opportunity to market old and/or new crop inventory, should use this rally as there may not be another opportunity this year.

Strategy and outlook: Producers are 100 percent sold of the 2014/15 crop, re-owned 50 percent with September calls. Sold 30 percent of 2015 production. Sell 20 percent at $4.15 December and buy December 400 puts on balance of production. Sell 20 percent of 2016 crop at $4.30 December.

SOYBEANS ANALYSIS

Soybeans closed the week 45 cents higher.

Last week, private exporters announced sale of 147,100 metric tons of meal to Mexico.

Weekly export sales of soybeans were 4.88 mb old crop and only 12.8 mb for new crop sales.

New crop sales are at a five-year low. The weekly crop progress report showed soybean ratings also fell 2 percent to 65 percent g/e, now this year’s rating is 7 percent lower than last year’s.

The soybean crop is now 90 percent seeded with the lagging states of Missouri at 51 percent and Kansas at 73 percent. This equates to about 3.8 million acres. This is the latest seeded soybean crop since 1996.

Ohio ratings fell 14 percent last week with ratings of the Indiana crop down 13 percent and Illinois fell 10 percent.

The acreage report at the end of the month could be a shocker to the trade. The market has already anticipated larger seeded acres, however if producers planted more acres to corn than previously thought due to a record fast corn planting pace and some acres go unseeded due to wet conditions, prices could find strength after the report’s release.

As with corn, there may not be another marketing opportunity this year, so producers should take advantage of this rally.

Strategy and outlook: Producers are sold 100 percent of 2014/15 production and sold 30 percent of 2015/16 production. Sell 10 percent at $10.07 and 10 percent at $10.35 November and buy 10.00 November puts on balance of production. Sell 20 percent of 2016 at $9.80 November.

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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