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BRIAN HOOPS

By Staff | Jul 21, 2016

Crops covered

The Risk Management Agency said a stronger and more diverse federal crop insurance program has provided America’s diverse farmers with a reliable farm safety net, while taking steps to strengthen program integrity.

This year, the federal crop insurance program includes more than 118,000 coverage options for 543 varieties of crops, nearly doubling the coverage options that were available just seven years ago.

The total crop insurance liability rose from $79.5 billion to more than $102 billion over the same period. RMA reduced its improper payment rate by more than half, from 5.6 percent in 2014 to 2.2 percent in 2015.

RMA estimates that 85 percent of planted acreage for major crops is now covered by crop insurance, along with 73 percent of the eligible specialty crop acreage.

Farm trade deficit

U.S. farm exports were below the value of farm imports in May, the third straight monthly trade deficit.

USDA analyst Bryce Cooke said it’s never happened in 49 years of export statistics.

Through the first eight months of this fiscal year, U.S. farm exports are down $14 billion, or 14 percent, from last year. However, the U.S. still had a $10 billion farm trade surplus from October through May.

The last time the U.S. had a farm trade deficit for the year was 1959. Cooke said export values for most farm products are below last year. Through the first eight months, wheat exports are down 22 percent, corn is down 15 percent and soybeans are down 20 percent in value terms.

Red meat products are down 13 percent. Poultry products are down 26 percent and dairy products are down 22 percent in value terms compared to last year.

Compared with last year, the value of the U.S. dollar has increased, which has influenced export demand.

China wants U.S. pork

China has been active in the market for U.S. pork. Minnesota Pork Board Executive Director David Preisler said China has displaced Japan from a standpoint of pork export volume.

“Our No. 1 market from a volume standpoint for pounds of pork is still Mexico,” he said, “but in the last couple of months we’ve seen China actually surpass Japan. That demand has been extremely helpful and has helped add onto prices that farmers are receiving.

“We don’t know how long that’s going to last, but it has been extremely helpful.”

Preisler said the strong value of the dollar compared to the euro makes it tougher to export.

CHS reports income

For the first nine months of its fiscal year, CHS reports net income of nearly $426 million.

That compares to $650 million in the same period last year. For the third quarter, net income was just over $190 million, a 7 percent improvement over last year.

Weakness in the agriculture and energy sectors impacted the financial situation.

CHS, which is based in St. Paul, Minnesota, is the largest farm cooperative in the U.S.

CORN ANALYSIS

Corn closed the week 4.75 cents lower.

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

Weekly export sales of corn showed a total of 53.4 mb (1.35 million metric tons) with 26.3 mb (667,800 mt) for the 2015-2016 marketing year.

This put total old- crop sales at 1.887 billion bushels, 1 percent below USDA’s revised July demand projection of 1.9 bb.

The weekly crop progress report saw corn ratings improved 1 percent last week to 76 percent good-to-excellent, well above last year’s 69 percent rating.

Iowa is rated 79 percent g/e; Illinois 76 percent, Minnesota 81 percent and Nebraska 80 percent g/e. The report showed corn ratings the second best in the last 12 years.

The USDA left corn yields at 168 bpa, but raised production to 14.54 bb due to the increased harvested acres.

This raised projected ending stocks to 2.08 bb, up from 2.008 bb last month, but this was less than expected as the trade looked for stocks to swell to 2.205 bb.

For the first time in 30 years, the USDA ignored the increase in quarterly stocks and actually increased usage instead of decreasing.

Due to the high crop ratings, look for USDA to increase yields in future reports and increase ending stocks as well.

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 1 cent lower.

Last week, private exporters reported sales of 320,000 mt of soybeans to an unknown destination.

Weekly export sales of soybeans showed a total of 33.5 mb (911,200 mt) with 13.4 mb (364,200 mt) for the 2015-2016 marketing year.

This put total old-crop sales at 1.8 bb, 6 percent above USDA’s revised July demand projection of 1.79 bb.

The weekly crop progress report showed soybean ratings also improved 1 percent to 71 percent g/e, well above last year’s 62 percent rating.

Iowa is rated 77 percent g/e with Illinois 74 percent, Nebraska 78 percent and Minnesota 75 percent g/e.

This was the second highest soybean rating in the last 13 years.

In the monthly supply/demand report, similar to corn, the USDA chose to leave soybean yields unchanged at 46.7 bpa and only increased production due to the larger harvested acres.

Production was forecast at 3.88 bb, still below forecasted usage of 3.97 bb. This leaves this marketing year as a draw down in stocks year with ending stocks now forecast at 290 mb, in line with trade estimates.

The USDA increased exports by 20 mb to a new record 1.9 bb.

It is still too early to justify an increase in soybean yields, especially with the hot and dry forecasts that could trim soybean yields.

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.

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

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