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BRIAN HOOPS

By Staff | Jan 22, 2016

Slow sales

Piles of unwanted grain on farms near Doug Schmitz’s storage bins in southern Minnesota are a stark reminder of just how bearish the outlook is for U.S.crop prices.

After record yields during the harvest a few months ago, growers in the area still have 80 percent of their corn crop left to sell and 70 percent of soybeans, said Schmitz, who operates four grain elevators and markets to processors and exporters. Normally, half the supply would be unloaded by now, he said.

While Schmitz Grain Inc. is under contract to collect 2 million bushels from local farmers, the outlook is so dim that most of that inventory hasn’t been priced yet, he said. Money managers are holding their most-bearish bets on grain prices since the government started tracking the data in 2006.

It’s easy to see why. Stockpiles of corn and soybeans in the U.S., the world’s largest grower, probably were the biggest ever on Dec. 1, and wheat inventories were the highest in five years, according to a Bloomberg survey of analysts.

“It’s the slowest sales pace in the 25 years I’ve been in the grain business,” said Schmitz, who’s based in Currie, Minnesota. “It’s amazing how well farmers were able to put away those bushels and wait for a recovery in prices that has failed to come.”

Monsanto losses

Monsanto reported first quarter losses of $253 million on falling sales and a stronger U.S. dollar.

Laura Meyer, who leads Monsanto Investor Relations, said while lower than a year ago, first quarter performance was better than expected.

“When compared to the prior year,” Meyer said, “currency accounted for approximately half of the decline in ongoing earnings per share.”

Cargill earnings

Cargill reported adjusted operating earnings in the second quarter of $574 million, a 13 percent decrease from the same period the previous year.

Net earnings on a GAAP basis were almost $1.4 billion, up 77 percent from the previous year.

The major differences between adjusted and net earnings included gains on the sales of the U.S. pork business and Cargill’s interest in the North Star BlueScope Steel joint venture, as well as a charge related to a change in accounting treatment for Venezuela.

Second quarter revenues decreased 10 percent, reflecting lower commodity prices and weaker demand in some markets.

CHS income

CHS Inc. , the nation’s leading farmer-owned cooperative and a global energy, grains and foods company, reported net income of $266.5 million for the first quarter of its 2016 fiscal

year.

Earnings for the period Sept. 1 to Nov. 30, 2015, declined 30 percent from the same period of fiscal 2015.

The decrease was primarily attributed to lower margins for much of the company’s energy and agricultural businesses.

Revenues for the quarter were $7.7 billion, down from $9.5 billion for the same period in fiscal 2015, largely due to lower selling prices for the energy and grain products which make up a significant portion of CHS business.

CORN ANALYSIS

Corn closed the week 6 cents higher.

Last week, private exporters reported sales of 152,000 metric tons of corn to an unknown destination and 102,100 mt to Mexico.

Weekly export sales showed corn sales were 26.4 million bushels. Annual sales are 832 mb, or 25 percent slower, than last year’s pace.

In the January supply/demand report, the USDA forecast U.S. corn production would be 13.6 billion bushels, down slightly from the last estimate of 13.654 bb.

This is the final yield estimate of the year and places the 2015 corn crop as the third largest on record.

Corn yield would be 168.4 bpa versus 169.3 bpa in November.

Quarterly corn stocks are 11.21 bb, nearly identical to last year’s and close to the all-time record.

Corn stocks increased to the largest of the 2015/16 marketing year at 1.8 bb, above estimates of 1.78 bb as the USDA lowered export forecasts.

In five of the past eight years, final corn demand has came in below the January forecast, indicating stocks are likely to grow in future months, which will be bearish for prices.

With the lower-than-expected winter wheat seedings, corn acres are now likely to increase by 2 million acres this spring.

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 ANALYSIS

Soybeans closed the week 13.75 cents higher.

Last week, private exporters announced sales of 12,000 mt of soybeans to China and 400,000 mt of soybeans to an unknown destination.

Weekly export sales of new crop soybeans were 41.1 mb. The export pace of the 2015/16 marketing year now stands at 1.44 bb, or down 11 percent, from last year’s pace.

In the January supply/demand report, the USDA forecast final 2015 soybean production at 3.93 bb, slightly lower than the previous forecast of 3.98 bb with a lower yield at 48 bpa versus 48.3 bpa in November.

That was the largest November to January production decrease for soybeans since 1987.

Harvested acres fell 600,000. The reduction in yield lowered U.S. soybean ending stocks to 440 mb, 33 mb below the average trade guess, despite the USDA lowering export demand by 25 mb.

In the quarterly stocks report, soybean stocks increased to 2.7 bb, below estimates, but significantly larger than last year’s 2.5 bb.

With winter wheat seedings falling more than expected, it is likely soybean acreage will increase this spring by 2 to 2.5 million acres.

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 during 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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