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BRIAN HOOPS

By Staff | Aug 3, 2016

TPP vs. candidates

Both major presidential candidates are opposed to the Trans-Pacific Partnership, which may not yet be a market factor. Rich Feltes, vice president of research for R.J. O’Brien, thinks trade could become a bearish market factor. Without question, agriculture has been one of the primary sectors in our economy that has benefitted from these trade barriers.

The agricultural tariffs coming in to major food importers have been the largest and most onerous. That’s where a lot of progress has been made,” Feltes said. “I can’t speak to the impact of the trade deals in other sectors of the economy, but if you attend any of USDA’s Outlook conferences, they’re always showing the benefits in terms of enhanced trade.

“They were big proponents of the Trans-Pacific Partnership.

Chewing equity

American Farm Bureau Federation Chief Economist Bob Young said there are many farmers who will lose money this year and will be chewing through equity.

“I think we have a farm sector that’s not so good at the moment,” says Young. “When you look at what income is doing, what cash flow is doing at this stage in the game, there’s probably more outflow right now than income. You might be able to hold that for a little while, but pretty soon, you’re going to have to sit down and make some hard choices.”

Stockholders vote

Stockholders of Dow Chemical and DuPont have voted to approve a merger of the two companies. In a joint press release, the two companies say they expect the merger transaction to close in the second half of this year, subject to customary closing conditions, including receipt of regulatory approvals.

The votes mean the companies can now look at where to cut their operations given the $3 billion in estimated synergies that will result from the merger. If the merger proceeds as planned, the new DowDuPont will split into three separate, publicly traded companies focused on agriculture, material science and specialty products.

Farm lending

According to the Federal Reserve’s Agricultural Finance Databook, the need for farm lending remained high in the second quarter, driven by ongoing demand for operating loans.

Respondents to the Fed’s banker survey said the total number of non-real estate loans made to farmers in the second quarter increased 6 percent from a year ago.

GMO wheat

Genetically modified wheat developed by Monsanto Co., and never approved by federal regulators, has been found growing in a Washington state farm field, the U.S. Department of Agriculture said.

The discovery of 22 unapproved GMO wheat plants has prompted an investigation by federal and state investigators – the third such discovery in three years. A farmer found the GMO wheat in a field that has not been planted since 2015.

The plants had been identified as being one of Monsanto’s experimental varieties “a few weeks ago,” a spokesman from the Washington State Department of Agriculture said.

CORN ANALYSIS

Corn closed the week 1.5 cents lower.

Last week, private exporters reported sale of 247,912 metric tons of corn to an unknown destination.

Weekly export sales of corn showed a total of 36 million bushels (915,300 mt) with 17.3 mb (438,800 mt) for the 2015-2016 marketing year. This put total old- crop sales at 1.9 billion bushels, 1 percent ahead of USDA’s July demand projection.

NASS revealed corn conditions 76 percent good-to-excellent versus 75 percent expected, unchanged from last week, but better than last year’s 70 percent rating. The report showed corn ratings the third best in the last 16 years.

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

In fact, only four times in history has the crop been rated this high and each year yields have been 5.4 percent to 12.9 percent above trend.

With the increase in production, supply will outpace demand and ending stocks will swell. Harvest lows will be determined by how large the ending stocks end up being.

Strategy and outlook: Producers should maintain hedges until harvest lows are scored.

SOYBEANS ANALYSIS

Soybeans closed the week 7.5 cents lower.

Last week, private exporters reported sales of 457,000 mt of soybeans to an unknown destination and 260,000 mt of soybeans to China.

Weekly export sales of soybeans showed a total of 24.9 mb (676,800 mt) including a 0.1 mb (1,400 mt) reduction for the 2015-2016 marketing year.

Total old-crop sales remain at 1.91 bb, 6 percent above USDA’s July demand projection of 1.795 bb.

Soybean conditions were 71 percent g/e versus 70 percent expected, also unchanged from last week and solidly ahead of last year’s 62 percent rating.

Soybean conditions statistically improved last week with a 1 percent shifting from good up to excellent. This was the second-highest soybean rating in the last 22 years.

It is still too early to justify an increase in soybean yields, but trendline yields seem likely.

Production will match the demand pace, leaving ending stocks near unchanged.

The market is trading an inverse currently, encouraging producers to sell production off the combine rather than storing crop into the summer.

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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