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BRIAN HOOPS

By Staff | Nov 13, 2015

High trading volumes

MGEX, reported its second-highest volume during the month of October since 2007, coming in at 158,766 contracts traded.

This marks the seventh consecutive month that MGEX has recorded a volume of more than 130,000.

Electronic volume from October finished the month at 137,143, making it the second-best total ever for the month.

Total volume for the calendar year now stands at 1.878 million, which is 4 percent higher than at this time a year ago.

Open interest following Friday’s activity was 73,958, which is 6 percent higher than a year ago.

Meanwhile, CME Group, the world’s leading and most diverse derivatives marketplace, announced that October 2015 volume averaged 12.8 million contracts per day, down 27 percent from an exceptionally strong October 2014, which included its highest daily trading volume on October 15 – 39.6 million contracts.

Total volume during October was more than 282 million contracts, of which 86 percent was traded electronically.

Average daily volume to date in 2015 is 14.1 million contracts, up 3 percent versus the same period in 2014, with year-over-year growth across four of six product lines.

ADM sales drop

Archer Daniels Midland Co. posted steeper-than-expected declines in quarterly sales and profit as the grain giant contended with weak commodity prices and slowdowns in some emerging markets, Chief Executive Officer Juan Luciano told investors on a post-earnings conference call.

ADM, which warned investors earlier this year about tougher conditions in the ethanol business, reported that third-quarter operating profit in its ethanol-producing division dropped 78 percent to $40 million, the biggest decline among ADM’s units.

CORN ANALYSIS

Corn closed the week 9 cents lower.

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

Weekly export sales showed corn sales were 22.6 million bushels for corn.

Sales are 518 mb, or 32 percent from last year’s pace.

In the weekly crop progress and conditions report, USDA reported U.S. corn harvest is now at 85 percent complete and in line with trade estimates.

Due to the excellent harvest weather this fall, this is above the 62 percent done last year at this time and the five-year average of 79 percent complete.

A higher quality crop has been harvested with producers reporting no drying costs associated with this year’s corn.

Yield estimates continue to trend better than expected and the November supply/demand report will likely show a larger corn crop compared to a month ago.

Informa’s latest production estimates set the stage for a bearish USDA report as Informa estimated the U.S. corn yield at 170.1 bushels per acre versus the October USDA number of 168 bpa, and a production number of 13.718 bb versus the USDA at 13.555 bb.

Farmer selling will slow now that harvest is complete, basis levels will likely improve and the cash market should rally as it will be the only way to pry cash crop out of farmers’ hands with stronger basis levels throughout the winter.

There is a huge demand base for corn, currently estimated at 13.755 billion bushels.

With the huge demand base and corn now locked away in farmer storage, the corn market will need to bid for acres this spring to rebuild the ending stocks at a more comfortable level.

Strategy and outlook: Producers should use a rally into the end of the year to make additional sales or wait until a weather scare in the summer months.

SOYBEANS ANALYSIS

Soybeans closed the week 17.5 cents lower.

Last week, private exporters announced sales of 120,000 metric tons of soybeans to China and 20,000 mt of bean oil to an unknown destination.

Weekly export sales of new crop soybeans were 24.1 mb, a marketing year low.

The export pace of the 2015/16 marketing year now stands at 1.026 bb, or down 22 percent from last year’s pace.

The weekly crop progress report saw U.S. soybean harvest came in at 92 percent complete versus 81 percent last year and above the five-year average of 88 percent complete.

Missouri is one of the laggard states at only 80 percent harvested with Kansas at 84 percent complete.

Yield estimates continue to trend higher and the November supply/demand report will likely show a larger soybean crop compared to a month ago.

Informa estimated the soybean yield of this year’s crop at 47.9 bpa versus the USDA October’s number of 47.2 bpa.

Production is estimated at 3.95 bb versus the USDA’s latest of 3.888 bb.

Farmer selling will slow now that harvest is complete, basis levels will likely improve and the cash market should rally as it will be the only way to pry cash crop out of farmers hands with stronger basis levels throughout the winter.

My concern for this market remains the huge ending stocks level. Stocks are currently forecast at 425 mb, nearly double any stocks over the last eight years and could increase if

yields increase in future report.

Strategy and outlook: Producers should use a rally into the end of the year to make additional sales or wait until a weather scare in the summer months. Do not store unprotected soybeans.

This material has been prepared by a sales or trading employee or agent of Midwest Market Solutions and is not a solicitation. Brian Hoops can be reached at (605) 660-1155.

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