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BRIAN HOOPS

By Staff | Dec 25, 2015

Blender credit

Fuel blenders would be able to claim a $1-per-gallon tax credit for biodiesel through the end of 2016 as part of tax extenders legislation being brokered by House and Senate leaders.

The extension would be retroactive to Dec. 31, 2014 and continue until Dec. 31, 2016, said Michael McAdams, president of the Advanced Biofuels Association, in phone interview.

Soybean growers and farm belt lawmakers had sought to change the credit so it could only be claimed by producers , not blenders.

Ben Evans, spokesman for National Biodiesel Board, said by phone, “We keep seeing imports rise, and it just doesn’t make sense to have a U.S. policy that incentivizes foreign production.”

Cattle prices

Live cattle prices, near three-year lows, are to remain weak, undermined by beef market dynamics which are handing retailers “huge margin opportunities,” but offering few spoils to the likes of packers and feedlots.

The U.S. Department of Agriculture, issuing reasoning behind a downgrade last week to its forecast for benchmark fed steer values, said “depressed prices are expected to carry into 2016.”

The forecast reflected in part the “high volume of very heavy fed cattle leaving feedlots,” a reflection of weak grain prices and improved pasture conditions which are prompting both cattle growers and feeders to hang on to animals in the hope of higher weights.

The proportion of heavyweight cattle, of more than 800 pounds on feedlots, was up 5 percent year-on-year in October, while “all other weight categories were down for that period,” USDA said.

CORN ANALYSIS

Corn closed the week 1.75 cents lower. Last week, private exporters did not report any corn sales.

Weekly export sales showed corn sales were 22.8 million bushels. Annual sales are 739 mb, or 23 percent slower than last year’s pace.

Informa lowered its forecast of 2016 U.S. corn plantings to 88.926 million acres, from 90.1 million last month.

Prices have only had a minor rally off of long-term technical support as funds are covering shorts into the end 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 rallies into the end of the year to make additional sales or buy protection if storing the crop until a weather scare develops in the summer months.

SOYBEANS ANALYSIS

Soybeans closed the week 21 cents higher.

Last week, private exporters announced sales of 544,000 metric tons of soybeans to China and 220,046 mt to an unknown destination.

Weekly export sales of new crop soybeans were 32.6 mb. The export pace of the 2015/16 marketing year now stands at 1.297 billion bushels, or down 14 percent from last year’s pace.

The NOPA crush report for November came in well below trade estimates at 156.134 mb.

Estimates were between 157.7 and 165.4 mb with the average guess at 161.7 mb, which would have been a new record crush for November.

The November crush is a 2 percent decrease from October, and a 3 percent decrease from last November.

This was the first time since 2010 that the crush declined from October to November.

In a bit of a surprise, Informa cut its forecast of U.S. 2016 soybean plantings to 84.537 million acres, from 85.3 million previously.

The rally that developed in November looks to have ended with concerns about increased exports from Argentina capping the rally.

Producers who did not take advantage of rally need to protect themselves from lower prices the South American crop becomes available later this winter.

Strategy and outlook: Producers should have used the last rally to make additional sales or buy downside protection if storing until the summer.

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

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