Ag loan demands rise

Loan demand from ag lenders is rising in the Midwest, with the St. Louis, Kansas City and Chicago Federal Reserve banks all noting increases and they are also expressing caution at the potential for repayment issues to arise from their farm borrowers.

The Chicago Fed said loan renewals and extensions on non-real estate ag loans were up sharply in the third quarter compared to last year.

Tight cattle margins

Margins will remain tight for the cattle feeding sector in the beginning of 2016. CattleFax marketing analyst Ethan Oberst said break-evens have declined.

“I believe that the margin environment they’ve gone through with the amount of losses they sustained here in the second half of the year has definitely gotten their attention,” said Oberst. “With the current forage supplies, there is still demand for feeder calves.

“There’s a lot of operations out there that are willing to use those cheap feedstuffs and continue to put cheap weight gain on all different classes of cattle.”

CORN ANALYSIS

Corn closed the week 1.75 cents lower.

Last week, private exporters did not report any private sales. Weekly export sales showed corn sales were 100.9 million bushels, a marketing year high.

Annual sales are 672.5 mb, or 29 percent slower than last year’s pace. Prices are hovering near contract.

Iowa carryover stocks, at the start of next year’s harvest, were estimated at 1.760 billion bushels.

By comparison, last year at this time, the USDA forecasted corn ending stocks at 1.731 bb. Usage remains at a near record large pace of 13.655 bb, although that has been lowered in recent months due to the slow export pace.

It is interesting to note that demand is forecast at exactly the same as 2015 production, despite the U.S. producing one of the largest crops in history.

While total usage is outstanding, export demand is painfully slow.

The USDA supply/demand report on Dec. 9 looks to lend little direction to prices, with no production adjustment and the USDA likely to leave exports unchanged for now.

Fund short covering is the most bullish driving force for prices with very little farmer hedge pressure until after the first of the year.

Without better export demand and any weather problems or threats, the rally looks to be limited.

Producers storing grain should look to use the rally to make sales of the product or options to be rewarded with a storage hedge.

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 16 cents higher.

Last week, private exporters announced sales of 190,000 metric tons of soybeans to an unknown destination and 251,000 mt of soybeans previously sold to unknown changed to China.

Weekly export sales of new crop soybeans were 43.3 mb. The export pace of the 2015/16 marketing year now stands at 1.178 bb, or down 16 percent from last year’s pace.

The monthly NOPA crush report was released last week with a new record set for the month of October, but was a disappointment to the trade as it came in below expectations.

The October crush was 158.895 mb, below estimates of 161 mb, but still was the largest October crush on record, beating the previous record of 157.96 mb in 2014.

Crush rebounded from last month’s 126.7 mb as crushers purchased the plentiful new crop supplies during harvest.

Prices are hovering just above key weekly support and prices bounced off of it, producing a bullish weekly reversal.

The bullish reversal should limit the fund selling and enable the market to slowly rally into the end of the year, giving producers a marketing opportunity before the South American crop becomes available later this winter.

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 into the winter months.

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.

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