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BRIAN HOOPS

By Staff | Jul 13, 2016

June volume

MGEX said it concluded June with a total volume of 245,738 trades, making it the 5th-highest volume in the exchange’s history.

Electronic volume for the month totaled 206,355. Each of the top five months in MGEX history have occurred in the last year.

This is the third consecutive year to report a volume greater than 200,000 during the month of June. Additionally, June is the third month this year to report a volume greater than 200,000. Total volume for the year now stands at 1.125 million contracts.

Four and out

An online cattle auction site has been shut down after just four sales. The Fed Cattle Exchange is owned by Superior Livestock Auction.

The website says it will not host auctions for an indefinite time while it deals with technology problems.

Cargill selling

U.S. grain trader Cargill Inc has agreed to sell its ag-retail business in the United States to farming input seller and distributor Agrium Inc, the companies said.

Calgary-based Agrium, North America’s largest retail seller of crop inputs like seed, fertilizer and pesticides, will acquire 18 ag-retail locations in Nebraska, South Dakota, Minnesota, Wisconsin, Michigan and Indiana.

The businesses have annual revenues exceeding $150 million. The transaction, which does not include Cargill’s Canadian crop input business, is expected to close by the end of the third quarter after a regulatory review, they said. It is the latest transformative move for privately held Cargill, which has been refocusing its operations by exiting some lower-margin businesses and expanding into higher-margin endeavors like food ingredients and aquaculture.

The 151-year-old grain trader is also trimming some operations in the face of slumping commodities prices and focusing on its core strengths such as grain trading and processing.

The company said in February that it would stop selling seeds, fertilizer and crop chemicals in the Black Sea region.

Unloading cattle

Cargill is selling its two Texas cattle feedlots as it continues to redefine its protein businesses, the company announced. The agribusiness giant, based in Minnetonka, Minnesota, is selling its feed yards in Bovina and Dalhart, Texas, to Amarillo-based Friona Industries L.P. The sale is pending and terms have not been disclosed.

Cargill will keep its cattle feed yards in Leoti, Kansas, and Yuma, Colorado. It is Cargill’s latest in a series of divestments in businesses with low margins, specifically those in meat.

A year ago, Cargill sold its entire pork business to BS USA Pork for $1.45 billion, a deal that combined two of the country’s largest pork processors.

Cargill, the largest privately-held company in the U.S., has spent about $500 million in the last year on protein-related acquisitions or facility upgrades with an eye fixed on higher growth markets.

The Dalhart feedlot has more than 160,000 head of cattle pass through its facility each year, while the Bovina lot handles 120,000 head per year.

CORN ANALYSIS

Corn closed the week 4.25 cents lower.

Last week, private exporters reported sales of 137,160 metric tons of corn to Mexico.

Weekly export sales of corn showed a total of 32 million bushels (813,000 mt) with 14.6 mb (369,800 mt) for the 2015-2016 marketing year. This put total old-crop sales at 1.86 billion bushels, or 2 percent above USDA’s June demand projection of 1.825 bb.

The weekly crop progress report saw corn ratings unchanged at 75 percent good-to-excellent, a bearish surprise for the trade that expected a slight decline in ratings.

Last year, 68 percent of the crop was rated g/e. Fifteen percent of the crop is silkingversus 13 percent on average.

The report showed corn ratings the second best in the last 12 years.

Iowa’s summer month weather premium high has already been achieved by the market. The USDA is currently forecasting corn production at 14.515 bb, a record large amount, but needed given the strong demand base the U.S. has.

Typically, funds exit longs during the third quarter of the year as the market trades lower into harvest, before funds buy into fresh longs in the last quarter of the year in hopes of a post harvest rally. A threat of frost could force a short-covering rally, so be quick to change your marketing strategy if adverse weather threatens the Midwest.

Strategy and outlook: Producers should have made cash sales and used options to manage price risk and summer volatility.

SOYBEANS ANALYSIS

Soybeans closed the week 80.25 cents lower.

Last week, private exporters reported sales of 120,000 mt of soybeans to China and 35,000 mt of bean oil to China.

Weekly export sales of soybeans showed a total of 44.9 mb (1.22 million mt) with 23.4 mb (637,300 mt) for the

2015-2016 marketing year.

This put total old-crop sales at 1.885 bb, 7 percent above USDA’s June demand projection of 1.76 bb.

The weekly crop progress report showed soybean ratings fell 2 percent g/e to 70 percent, but still well above last year’s 63 percent.

Twenty-two percent of the crop is blooming versus 16 percent on average.

This was the second-highest soybean rating in the last 13 years. The key pod-setting stage looks to begin about July 15 and last until around Aug. 5, when the biggest gains in yields estimates can surface with timely rain or biggest upside gains in futures will occur if heat and dryness occurs.

Highs are usually in by July’s end, but highs have likely occurred in early June unless threatening weather develops during the pod-setting stage that will reduce yields and drive

prices higher.

With volatility extremely high, this is a high-risk weather market. Rain events that occur in late July and the first week of August should be sold as this will help the development of the crop.

Strategy and outlook: Producers should have made cash sales and used options to manage price risk and summer volatility.

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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