×
×
homepage logo

BRIAN HOOPS

By Staff | Apr 8, 2016

China’s grain demand

Grain traders worried about the risk for reduced demand from China after the government said it would scrap its corn stockpiling program at a time when global markets are awash with excess supplies.

Traders said importers in China would likely reduce purchases of farm products used to feed livestock, including sorghum and the ethanol byproduct distiller’s dried grains. They said the policy shift is expected to bring domestic corn prices in line with cheaper foreign supplies.

Last year, China imported about 40 million tonnes of substitutes for corn, including sorghum, DDGs and barley, from the United States and other countries, said Fred Gale, a senior economist for the U.S. Department of Agriculture.

China has accumulated an estimated 250 million tonnes of corn in its reserves, more than it can consume in a year.

Sales of the stockpiles will be a blow to global markets grappling with record supplies that are weighing down prices, economists said. The release of the reserves will be “one more factor adding to the bearish outlook for feed grain markets in general,” Gale said.

Deere and Hagie

Deere & Co. said it’s buying a majority stake in Hagie Manufacturing, the Clarion-based maker of high-clearance precision sprayers. No purchase price was disclosed.

Moline, Ill.-based Deere said the sprayers would continue to be built in the north central Iowa, where the company was founded in 1947 by Ray Hagie.

“Clearly, Deere has a very good tractor and combine portfolio,” said Kwame Webb, a Morningstar analyst, but the farm and construction equipment manufacturer needed to strengthen its sprayer lineup.

Deere said the Hagie purchase gives the company a new market. And it enables Deere to integrate its precision technology into Hagie’s equipment. The investment also makes Deere more competitive with CNH Industrial, the maker of Case IH farm equipment, which purchased a Wisconsin-based high-clearance sprayer manufacturer in 2014, Webb said.

“The argument from that seller was that when you’re doing $100 million in sales, you don’t have dedicated distribution” to sell equipment, Webb said. “It’s tough in the best of times.”

Deere said the sprayers would continue to carry the Hagie brand as products are integrated into its “global distribution channel over the next 15 months.”

CORN ANALYSIS

Corn closed the week 16.25 cents lower.

Last week, private exporters did not report any private sales. Weekly export sales of corn showed a total of 33.9 million bushels (860,200 metric tons) with 31.1 mb (790,600 mt) for the 2015-2016 marketing year.

Total sales for 2015-2016 were 1.246 billion bushels, 15 percent behind last year’s 1.472 bb for the same week. USDA’s is projecting a year-to-year decrease of 11 percent.

Its quarterly stocks report was bearish with stocks at the highest level since 1987 at 7.8 bb, above last year’s 7.75 bb. Meanwhile, the acreage report was extremely bearish, revealing a major surprise with 93.601 million acres intended to be seeded.

This is 5.6 million more acres than the 88 million seeded last year. If we produce trendline yields, this projects a crop the size of 14.5 bb and ending stocks of 2.5 to 2.8 billion bushels.

The good news is, this will be the largest acreage forecast of the year as producers are going to switch corn acres to soybeans due to profitability and, if forecasts for a cool, wet spring last two weeks of April are correct, planting additional corn acres will be difficult and producers are apt to switch those acres to soybeans.

We still have to produce a crop this year and smart traders remember the adage “its not how much you plant, its what you grow.”

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 8.5 cents higher.

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

Weekly export sales of soybeans showed a total of 13.3 mb (361,500 mt) with 10 mb (271,500 mt) for the 2015-2016 marketing year.

Total sales for 2015-2016 were 1.62 bb, 9 percent behind last year’s 1.781 bb for the same week. USDA is projecting a year-to-year decrease of 8 percent.

Its quarterly stocks report showed the largest soybean stocks since 2007 at 1.53 bb, an increase of 204 mb from last year.

The acreage report was positive for soybeans, however, as USDA projected 82.23 million acres to be seeded, down from 82.6 million a year ago.

While not bullish, it was enough to rally new crop soybeans to new highs for the move.

Soybean acreage is very likely to increase in the June report as producers will switch corn to soybean acres due to price and possibly weather, if corn plantings become delayed in the month of April.

A range is likely to develop between $9.40 and $9.85 for November soybeans until the crop is seeded. The $9.85 was the high from last summer and will serve as resistance.

Producers should use rallies into this zone to make sales and manage their risk for the upcoming growing season.

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.

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

Please Enter Your Facebook App ID. Required for FB Comments. Click here for FB Comments Settings page