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BRIAN HOOPS

By Staff | Apr 1, 2016

Pork futures

Hedge funds are loading up with pork. With Americans expected to eat the most pork since 2007, money managers are now the most-bullish since 2014 on hog futures, which already are at a nine-month high.

Fast-food restaurant owners like McDonald’s Corp. are selling more bacon, and the price of pork bellies used to make the rashers has surged 30 percent this year.

Demand at home and abroad is rising faster than U.S. farmers are boosting output. Pork remains a cheaper alternative to beef cuts that last year surged to record highs as supply shrank, government data show.

Hog futures for settlement in June are up 18 percent since mid-November, more than almost every other commodity, including gold.

“You have to be bullish in the near-term,” said Donald Selkin, chief market strategist at National Securities Corp. in New York, who helps manage about $3 billion. “Exports have been strong, that’s what’s driving this.”

U.S. hog producers have been expanding after futures surged to a record in 2014, when a piglet-killing virus reduced the domestic herd. Pork production last year was the highest ever and is forecast to increase 2.1 percent in 2016, U.S. Department of Agriculture data show.

Trading fine

(Rueters) U.S. Commodity Futures Trading Commission has ordered Credit Suisse International to pay $665,000 in penalties to settle charges that it violated over-the-speculative position limit for wheat futures, the agency said. The CFTC, in a statement, also said Credit Suisse Securities gave the agency false or misleading information.

USDA-ERS

According to USDA’s Economic Research Service, since 1970, in inflation adjusted terms, only five years have registered lower net farm income than this year’s projected $54.8 billion.

With the exception of 2002, all of those years were in the early 1980s. The farm sector’s debt-to- asset ratio has edged up the past several years, but at 13.2 percent, remains well below the 1985 peak. The ERS said about 80 percent of the farm sector assets are attributable to farm real estate, and both farm real estate and non-real estate assets are expected to experience modest declines in 2015 and 2016.

Small tractors

Retail sales of small farm tractors, less than 40 horsepower, were up more than 26 percent last month, compared to a year ago.

However, sales of larger tractors continued to fall. Sales of two-wheel drive, 100 horsepower and up, tractors declined double digits.

The four-wheel drive farm tractor segment declined by single digits in January, but February sales fell almost 44 percent from last year.

CORN ANALYSIS

Corn closed the week 3 cents higher.

Last week, private exporters reported a private sale of 260,000 metric tons of corn to Taiwan.

Weekly export sales of corn showed a total of 35.6 million bushels (903,100 mt), with 31.6 mb (803,200 mt) for the 2015-2016 marketing year.

Total sales and shipments for 2015-2016 were 1.215 billion bushels, 17 percent below last year’s 1.456 bb for the same week.

Ahead of the March 31 planting intentions report, traders will anticipate an increase in planted acreage of 2 to 3 million acres.

Forecasts for a cool, wet spring could make planting additional corn acres difficult, thus corn could find strength into early April as the market will need to secure acres.

Commercial interests have been big sellers during the latest rally, but will view major pullbacks in the market as buying opportunities with forecasts for a cool, wet spring possibly giving way to a La Nina event this summer.

Thus, commercial entities, as well as large speculators, will want to be long ahead of the growing season after the crop is planted. With the already saturated soils and additional rain forecasted this spring, spring highs for corn are likely to be scored during the spring planting timeframe as values rally to secure enough planted acres to meet demand.

Strategy and outlook: Producers should use a rally during the spring planting timeframe to liquidate remaining inventory and begin to become defensive on new crop corn sales.

SOYBEANS ANALYSIS

Soybeans closed the week 13.25 cents higher.

Last week, private exporters reported sales of 304,000 mt to an unknown destination.

Weekly export sales of soybeans showed a total of 16.2 mb (440,100 mt) with 15.1 mb (410,800 mt) for the 2015-2016 marketing year.

Total sales and shipments for 2015-2016 were 1.61 bb, 10 percent below last year’s 1.78 bb for the same week. USDA is projecting a year-to-year decrease of 8 percent.

The key pod setting stage in South America should be completed by now, leaving the market to remove any weather premium that may remain in values.

In the March 31 acreage report, the trade will be expecting a possible reduction of 500,000 acres or an increase of the same amount of acres.

In seven of the last nine years, the USDA has come in below-the-average trade guess on the report day. If wet growing conditions materialize this spring as forecast, corn will rally to buy acres as the market anticipates farmers will shift corn acres to soybeans.

A very wet forecast will limit the upside for soybeans. Like with corn, technical breaks during April should be well supported by commercial entities as they begin to position long ahead of the growing season as they wish to extend coverage in case prices rally sharply on a weather related event.

Strategy and outlook: Producers should use a rally during the spring planting timeframe to liquidate remaining inventory and begin to become defensive on new crop soybean sales.

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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