Poor wheat crop

Jesus Silveyra, deputy of Argentina’s agriculture ministry’s grains markets, said Argentina’s wheat crop is poor.

“Farmers didn’t invest in fertilizing wheat crop because of previous government rules that cut profitability,” Silveyra said. “Half of 2015-16 wheat crop lacks minimum protein quality required by exporters.

“Brazil only buys wheat with 12.5 percent protein, while half of 2015-16 wheat crop has 10.5 percent protein.

“Some 80 percent of an estimated 4 million tons of carryover wheat lacks protein quality for mills.”

Sales record

CME Group announced its full-year, 2015 volume averaged a record 13.9 million contracts per day, up 2 percent from 2014, and included year-over-year growth across five of six product lines.

Other 2015 records included overall options average daily volume of 2.7 million contracts, up 7 percent from 2015. As part of that increase, electronic options volume also reached a new record of 1.4 million contracts, up 15 percent.

Fourth-quarter 2015 volume averaged 13.2 million contracts per day, down 11 percent from fourth-quarter 2014, and included 13 percent growth in energy average daily volume, as well as 3 percent growth in agricultural commodities.

December 2015 volume averaged 13 million contracts per day, down 4 percent from December 2014.

Total volume during December 2015 was more than 286 million contracts, of which 87 percent was traded electronically.

Options volume in December averaged 2.7 million contracts per day, up 3 percent versus December 2014, with electronic options growing 4 percent over the same period.

CORN ANALYSIS

Corn closed the week three-fourths of a cent lower.

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

Weekly export sales showed corn sales were 10 million bushels, a marketing year low. Annual sales are 805 mb, or 25 percent slower than last year’s pace.

USDA’s supply/demand report, due Jan. 19, has the potential to be a major market mover as USDA will issue the final production forecast for the 2015 crop and update the 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 has increased 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.

Producers report large amount of old crop corn remains in storage, waiting for higher prices. Corn has closed two consecutive weeks below major support and will need a bullish USDA report otherwise technical selling will increase.

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

SOYBEANS ANALYSIS

Soybeans closed the week 10.75 cents lower.

Last week, private exporters announced sales of 246,000 mt of soybeans to China and 217,000 mt of soybeans to an unknown destination.

Weekly export sales of new crop soybeans were 23.5 mb. The export pace of the 2015/16 marketing year now stands at 1.403 billion bushels, or down 11 percent, 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 USDA will issue the final production forecast for the 2015 crop and update the 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 should be anticipating USDA to increase the final 2015 soybean production estimate and decrease demand, therefore expanding ending stocks.

In six of the last seven years, USDA has increased yields from the November report into the January report.

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 not a solicitation.

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