×
×
homepage logo

BRIAN HOOPS

By Staff | Sep 2, 2016

Negative cash flow

Due to low commodity prices, bankers expect nearly 20 percent of crop farmers to suffer a negative cash flow this year. The Creighton University Rural Mainstreet Index is put together from a survey of rural bankers in the Midwest. These lenders expect loan defaults to grow by more than 5 percent over the next year.

Looking back over the past 12 months, the rural bankers said farmland prices declined six percent.

Lawsuit settled

The National Milk Producers Federation has settled a lawsuit with dairy processors over a herd retirement program that was in place from 2003 to 2010. The NMPF board officers have approved the $52 million settlement. The Cooperatives Working Together program was a voluntary program that took dairy cattle out of production. The lawsuit claimed CWT manipulated the milk supply to increase milk prices .

More Deere layoffs

Deere & Co. plans to cut more production of its tractors and combines this fall in response to the continued downturn in the global farm economy. Deere is trimming production

and laying off workers at plants in Illinois and Iowa.

The company outlined its latest cost-cutting efforts as it reported a 5 percent decline in third quarter net income versus a year ago. Through nine months, net income is down 22 percent. Global net sales and revenues decreased 11 percent for the third quarter, with equipment sales off 14 percent.

Equipment sales in the U.S. and Canada declined 16 percent for the quarter and 13 percent year to date.

More meat

Going into 2017, per capita meat consumption is increasing. USDA is forecasting U.S. beef consumption at 55.6 pounds per person.

Per capita pork consumption is forecast at just shy of 51 pounds. Beef and pork consumption is expected to be up about two pounds per person from 2015 levels. Chicken consumption are estimated to be at 91.6 pounds per person in 2017, up nearly three pounds from 2015.

CORN ANALYSIS

Corn closed the week 18.75 cents lower.

Last week, private exporters reported sale of 101,000 metric tons of corn to an unknown destination.

Weekly export sales of corn showed a total of 41.7 mb (1.6 million metric tons ) with 2.8 mb (71,100 mt) for the 2015-2016 marketing year.

This put total old- crop sales at 1.96 billion bushels, 2 percent ahead of USDA’s August demand projection of 1.925 bb.

Last week, NASS revealed U.S. corn crop conditions at 75 percent good-to-excellent versus 73 percent expected, and up 1 percent from 74 percent last week and well above last year’s 69 percent.

IGC raised its forecast for the 2016/17 world corn crop by 13 mmt last week to a record 1.03 billion tonnes.

The seasonal tendencies point to lower prices starting this week through the beginning stages of harvest in late September. Basis levels look to implode this fall under this massive crop and these wide basis levels should make a great opportunity to lock in feed costs.

Producers need to maintain hedge positions until we can be sure harvest lows have been scored. The massive crop looks to pressure December corn to near $3.

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

SOYBEANS ANALYSIS

Soybeans closed the week 37 cents lower and posted a bearish reversal.

Last week, private exporters reported sales of 120,000 mt to an unknown destination.

Weekly export sales of soybeans showed a total of 75.5 mb (2.05 mmt) with 4.2 mb (115,100 mt) for the 2015-2016 marketing year.

This put total old-crop sales at 1.946 bb, 4 percent above USDA’s August demand projection of 1.880 bb.

Last week, NASS said the U.S. soybean crop conditions were unchanged at 72 percent g/e versus 72 percent last week and 63 percent last year.

Like corn, soybeans have enjoyed a rally since the August supply/demand report on short covering and strong demand news. However, prices reversed lower near chart resistance and the outside reversal looks to weigh on prices until harvest lows are scored.

The seasonal tendencies point to lower prices through the beginning stages of harvest in late September. The massive crop looks to pressure soybeans to below $9 by Oct. 1.

Producers should notice how the structure of the market is changing with deferred contracts starting to build a premium into prices.

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

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.

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