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By Staff | Jan 8, 2016

Bleeding commodities

Bloomberg newswires is reporting that “Commodity Funds are hemorrhaging cash as investors bail at a record pace.”

A record $857 million was pulled this year from U.S exchange-traded funds backed by broad commodity baskets. The value of these funds plunged 26 percent in 2015 and follows steep losses that extend back to 2013.

Ethanol exports

The USDA reported a significant jump in ethanol exports to China in 2015, following a USDA-led trade mission to the country last year. Representatives from nine state departments of agriculture and 28 U.S. companies, including renewable fuel businesses, traveled to northeast China to explore opportunities for trade in the region.

China is the largest market for U.S. food and farm products.

U.S. agricultural exports to the country tripled over the last decade and now account for nearly 20 percent of all foreign sales of U.S. agricultural products.

“Our objective for every trade mission is to create new markets for farm products made in rural America,” said USDA undersecretary for farm and foreign agricultural services Michael Scuse, who led the mission. “U.S. ethanol exports to China have jumped from $8 million to more than $86 million since our May 2014 visit.

In October, we exported more ethanol to China than in the previous 10 years combined.”

Scuse led the delegation to promote U.S. agriculture and explore the role renewable fuels might play in China’s long-term clean energy strategy. The delegation met with gasoline companies, fuel blenders, oil companies, commodity traders and government officials to promote the benefits of using higher ethanol blends.

During October, the U.S. exported 32.5 million gallons of ethanol to China – valued at $57 million, or 46 percent of total U.S. ethanol exports for the month.

Previous U.S. exports of ethanol to China averaged less than $3 million annually from 2005 to 2014.

Net farm cash

USDA’s Economic Research Service forecasts U.S. net cash farm income will decline by almost $36 billion, or 28 percent, this year. If realized, the forecast would be the lowest since

2009 and $14.7 billion below the previous 10-year average.

2015 crop receipts are forecast to decline by $18 billion from last year, led by corn and soybeans.

Livestock receipts are expected to decline by more than $25 billion, with the largest decreases in receipts expected for dairy, hogs and broilers.

Partially offsetting the reduced cash receipts are total cash expenses, which are forecast to fall $8 billion, the first decline since 2009.

Government payments are also projected to rise $1 billion.


Corn closed the week 6.5 cents lower.

Last week, private exporters did not report any corn sales. Weekly export sales showed corn sales were 31.8 million bushels. Annual sales are at 771 mb, or 23 percent slower than last year’s pace.

This month’s supply/demand report has the potential to be a major market mover as the USDA will issue the final production forecast for the 2015 crop and update demand figures.

Export forecasts are 23 percent slower compared to last year at this time. Traders are going to look for the USDA to increase its final 2015 corn production estimate and possibly decrease its demand estimates, slowly widening the balance sheets.

Farmer selling should increase after the first of the year as farmers will need to move corn to maintain the quality of the stored crop, but basis levels should narrow through the winter months.

Strategy and outlook: Producers should use rallies to make additional sales or buy protection if storing the crop until a weather scare develops in the summer months.


Soybeans closed the week 10.75 cents lower.

Last week, private exporters announced sales of 119,000 metric tons of soybeans to China.

Weekly export sales of new crop soybeans were 76 mb. The export pace of the 2015/16 marketing year now stands at 1.373 bb, or down 14 percent mb from last year’s pace.

The market has been anticipating a record soybean crop in South America and updates on this year’s production from South America will be a major driving force for prices throughout the winter.

This month’s supply/demand report has the potential to be a major market mover as the USDA will issue the final production forecast for the 2015 crop and update demand figures.

Export forecasts are down 15 percent from last year at this time and with South America lowering export taxes, demand should remain soft.

Traders will be looking for the USDA to increase its final 2015 soybean production estimate and decrease demand, therefore expanding ending stocks.

Farmer selling looks to be a minimum this winter as producers are more interested in selling corn and holding onto their soybeans in case another weather problem develops in South America and prices move higher.

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. 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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