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BRIAN HOOPS

By Staff | Sep 9, 2016

Two of the world’s biggest agricultural trading houses bungled crop sales they made on behalf of U.S. farmers this year because of what one described as “unique” price moves for soybeans, prompting both to take rare steps to keep disgruntled customers.

Every year, hundreds of U.S. farmers trust major grain traders, including privately held Cargill Inc and Bunge Ltd, to sell parts of their harvests on their behalf for a fee. They hope the global reach and expertise of these companies will secure the best price and profits.

But this spring, a 37 percent surge in U.S. soybean futures caught many traders and veteran agriculture economists off guard. Large supplies were expected to keep prices low, but flooding in Argentina sparked heavy buying instead.

Cargill and Bunge separately sold most of the soybeans they were trading on behalf of farmers at about $9 a bushel, well below the rally’s peak near $12 in June, five farmers who used the services told Reuters.

CORN ANALYSIS

Corn closed the week 3.5 cents higher.

Last week, private exporters reported sale of 404,500 metric tons of corn to Mexico.

Weekly export sales of corn showed a total of 33.9 million bushhels (861,600 mt) with 8.4 mb (214,100 mt) for the 2015-2016 marketing year.

This put total old- crop sales at 1.972 billion bushels, 2 percent ahead of USDA’s August demand projection of 1.925 bb.

Last week, NASS reported U.S. corn crop conditions remained near all time highs at 75 percnet good-to-excellent, unchanged from last week and well above the 68 percent rating from last year.

Corn is 9 percent mature vrsus 11 percent last year at this time.

USDA will provide traders with the next glimpse of market information on Monday with the monthly supply/demand data.

The trade will be looking for USDA to slightly increase its production figure due to high crop ratings.

The USDA should be conservative with its estimate as it will most likely wait until more yield data comes in prior to making a major adjustment to its crop estimates.

From the demand side, look for USDA to leave ethanol and feed usage unchanged while slightly increasing exports.

This will leave ending stocks near unchanged, which are already burdensome. Corn prices should slide lower into harvest, barring a surprise announcement from USDA.

Harvest data will determine the long-term direction for the corn market. If prices begin to firm, watch the downtrend lines on the daily charts for a technical breakout as that will be a buy point for fund traders.

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

SOYBEANS ANALYSIS

Soybeans closed the week 14.5 cents lower.

Last week, private exporters reported sales of 666,000 mt to an unknown destination and 187,000 mt of soybeans to China.

Weekly export sales of soybeans showed a total of 58.2 mb (1,583,900 mt) with 3.9 mb (107,500 mt) for the 2015-2016 marketing year.

This put total old-crop sales at 1.942 bb, 3 percent above USDA’s August demand projection of 1.88 bb.

Last week, NASS said the U.S. soybean crop conditions improved 1 percent to 73 percent g/e, above expectations, and up from 72 percent last week and 63 percent last year.

Five percent soybeans were noted as dropping leaves.

The USDA will provide traders with the next glimpse of market information on Monday with the monthly supply/demand data. The trade will be looking for USDA to slightly increase its production figure due to improving crop condition ratings during the month of August.

The USDA should be conservative with its estimate as it will most likely wait until yield data comes in prior to making a major adjustment to its crop estimates.

From the demand side, look for USDA to leave crush mill usage unchanged, while slightly increasing exports.

This will create nearly unchanged ending stocks for soybeans.

Soybean prices should remain weak ahead of the USDA’s supply/demand report as traders will be fearing a major increase in production.

Barring a major bullish surprise, look for rallies to be sold by traders as they want to take profits ahead of the upcoming harvest and reposition when yield results become known.

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

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