Ag spending bill

The Senate Appropriations Committee has approved a $148 billion spending bill for agriculture for fiscal year 2017. That’s about $22 billion below the president’s request, but $7 billion above this year’s enacted level.

Ag research funding for the Agriculture and Food Research Initiative is $25 million more than this year. That includes an additional $2 million for the U.S. Wheat and Barley Scab Initiative. The Animal and Plant Health Inspection Service and Natural Resources and Conservation Service also got funding increases over fiscal 2016. Language in the bill prohibits the Farm Service Agency from closing county offices, and there’s $1.5 million to open a USDA office in Cuba.

EPA’s RFS levels

More than this year; less than the law says it should be; and, less than many farmers and proponents would like.

These sum up the reaction to the Environmental Protection Agency’s draft proposal for 2017 volume and blending requirements for ethanol and other biofuels.

The EPA is calling for 18.8 billion gallons to blend into the U.S. fuel supply, 4 percent more than this year, but less than the 24 billion gallons called for in the law that established the Renewable Fuel Standard.

Agriculture Secretary Tom Vilsack said his agency continues to do what it can, regardless of the RFS. EPA’s corn ethanol mandate is 14.8 billion gallons, an increase of 530 million gallons compared to this year. The proposed rule calls for 2.1 billion gallons of biomass-based diesel in 2018, up from 1.9 billion this year and two billion gallons next year.

The final RFS levels for 2017 will be announced later this year.

Insider trading

The former chairman of Dean Foods has been charged with insider trading. Thomas Davis allegedly provided information about Dean Foods’ financial outlook to professional golfer Phil Mickelson and Las Vegas gambler William Walters. Davis resigned from the Dean Foods’ board in August and pled guilty. Davis is reportedly cooperating with the investigation.

CORN ANALYSIS

Corn closed the week 18.5 cents higher.

Last week, private exporters reported sales of 130,000 metric tons of corn to Taiwan and 253,000 mt of corn to an unknown destination.

Weekly export sales of corn showed a total of 64.1 million bushels (1.62 million metric tons) with 54.4 mb (1.38 mmt) for the 2015-2016 marketing year.

This was well above the 8.9 mb (225,500 mt) needed to be on pace with USDA’s May demand projection of 1.725 billion bushels.

The USDA revealed U.S. corn plantings have advanced to 86 percent complete, slightly ahead of market expectations of 85 percent and a 10 percent gain from last week.

This is right in line with the five-year average pace of 85 percent and last year’s pace of 86 percent.

Iowa is 96 percent planted, Illinois is 89 percent, Nebraska 90 percent and Minnesota is 98 percent done; while Indiana is only 62 percent complete and Ohio is 51 percent done.

During June, the outlook for prices is simple as weather and how it impacts the emerging crops will be 95 percent of the pricing movement.

The only other supply side news the market will deal with is the June 10 USDA monthly supply/demand crop report.

The market will want to be bullish as the key pollination time period is directly ahead of the market. Producers will want to use options as a way to manage risk and provide price insurance.

This will enable producers to make sales and cover the upside if weather is adverse. The end of the month will also have the quarterly stocks and planting intentions report from the USDA. This report could be a shocker to the market as some reports have farmers decreasing seeded acres from the last report in March. Seasonal highs are usually formed by June 23.

Strategy and outlook: Producers should have used weakness to re-own sales with options to manage price risk and summer volatility.

SOYBEANS ANALYSIS

Soybeans closed the week 11.75 cents higher.

Last week, private exporters reported sales of 246,000 mt of soybeans to an unknown destination; 110,000 mt of beans to China; 100,000 mt of meal to an unknown destination and 20,000 mt of bean oil to an unknown destination.

Weekly export sales of soybeans showed a total of 22.3 mb (606,800 mt) with 16.8 mb (456,800 mt) for the 2015-2016 marketing year. This put total old-crop sales at 1.74 bb, above USDA’s May demand projection of 1.74 bb.

The weekly crop progress report showed U.S. soybean seedings advanced to 56 percent complete, slightly behind trade estimates of 60 percent, but still ahead of the average pace of 52 percent. Last year, the U.S. was 56 percent seeded at this time.

Iowa is 74 percent done, Illinois is at 51 percent, followed by Indiana at 31 percent, while Minnesota is 86 percent and Nebraska is 54 percent finished.

Soybean meal has been the upside leader as Argentina, the world’s leading meal exporter, has largely been out of the market, leaving U.S. endusers to scramble to secure supplies as their export business has dramatically improved.

Until U.S. new crop supplies can be guaranteed, prices will remain strong. The month of June looks to be similar to corn as we are in a weather market and weather forecasts will be the primary driving force. The crop looks to be seeded before June 15 leaving beans to spend the rest of June developing root system.

Rains after June 15 will be viewed as beneficial to crop development and negative for prices.

However, dryness in the month of June will send prices sharply higher. Like the corn market, producers should use options as a risk management tool and price insurance. The month of June is not the key reproductive month for soybeans, however, the market will be quick to add a premium into prices on less than ideal weather.

The acreage report at the end of the month could be a shocker to the trade.

Strategy and outlook: Producers should look to re-own sales with options to manage price risk and summer volatility during price weakness in May.

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.