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BRIAN HOOPS

By Staff | Sep 23, 2016

No La Nina?

The Climate Prediction Center, which is part of the National Weather Service, now says La Nina conditions are not expected to develop in the Northern Hemisphere this fall and winter. Last month, La Nina conditions were slightly favored to develop, but now the Climate Prediction Center says neutral conditions are more likely.

Farm credit merger

The boards of three large farm credit groups have voted for a merger. The merger of AgStar Financial Services, of Mankato, Minnesota; Badgerland Financial, of Prairie du Sac, Wisconsin; and 1st Farm Credit Services, of Normal, Illinois; will create an association that covers 144 counties in three states.

Rod Hebrink, who is now the president and CEO of AgStar, is expected to lead the proposed merged group. The headquarters will likely be in Sun Prairie, Wisconsin.

After a review and approval by AgriBank, the merger will come up for a vote by the stockholders. That vote will likely happen in early 2017.

ARC, PLC payments

With low commodity prices, USDA will be issuing $11 billion in Agriculture Risk Coverage and Price Loss Coverage payments. That’s $3 billion more than what the Congressional Budget Office forecast in March. The average U.S. corn and wheat base acreage is expected to receive the maximum payment for the 2016 crop. A payment is also expected for soybeans.

Class action dairy suit settled

A class action antitrust lawsuit involving some of the country’s largest dairy companies has been settled. This lawsuit began in 2011 claiming the National Milk Producers Federation, Dairy Farmers of America, Land O’Lakes, Dairylea Cooperative and Agri-Mark conspired to increase the price of milk. The lawsuit originated with an animal rights activist group called Compassion Over Killing.

The plaintiffs argued the dairy industry conspired to prop up milk prices with its herd retirement program, Cooperatives Working Together. This case has been settled for $52 million. Consumers in 15 states who purchased dairy products are now eligible to make a claim for payment.

Used machinery values

Used equipment values have been in a holding pattern for about a year now. Greg Peterson, who is known as Machinery Pete, said some people are surprised by that. The surprising part is that people assume used values are continuing to fall. They fell quite a bit, the most I’ve ever seen, in late 2013 through 2014. Then the rate of depreciation slowed.”

Bayer/Monsanto deal

As the global agricultural sector races to consolidate, Bayer AG’s $66 billion all-cash deal to acquire Monsanto Co will test growing political and consumer unease in the United States and abroad over the future of food production. Bayer’s pesticide-focused agricultural business has few overlaps with Monsanto’s dominant seed franchise, according to the companies’ executives. Still, marrying two of the world’s top farm suppliers at a time when rivals are also merging is fueling concern over reduced competition in the $100 billion global market.

CORN ANALYSIS

Corn closed the week 3.75 cents lower.

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

In the weekly export sales report, corn showed a total of 28.5 million bushels (724,600 metric tons) with 27.7 mb (703,500 mt) for the 2016-2017 marketing year. This was below the 29.4 mb (746,100 mt) needed this week to be on pace with USDA’s September demand projection of 2.175 bb.

Last week, NASS reported U.S. corn crop conditions at 74 percent good-to-excellent unchanged from last week and stronger than the 68 percent rating last year.

Corn is only 5 percent harvested, slightly behind the 7 percent average for this time of year.

In the September WASDE supply/demand report, U.S. corn yield was decreased from 175.1 to 174.4 bpa. This was still above trade estimates of 172.6 bpa and would be a new record.

The U.S. is expected to produce a 15-billion-bushels corn crop, a new record and up 11 percent from last year.

Ending stocks for corn did come down due to the production drop to 2.38 bb.

Argentine corn acres are expected to be 14.1 million versus 11.9 million last year. The question of how big the crop will be, will be answered in the upcoming weeks.

Early harvest yields started off as less-than-expected, but are now improving as producers move into later hybrids. Harvest data will determine the long term direction for the corn market.

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

SOYBEANS ANALYSIS

Soybeans closed the week 11.75 cents lower.

Last week, private exporters reported sales of 110,000 mts to an unknown destination.

In the weekly export sales report, sales of soybeans showed a total of 37.2 mb (1.02 million mt) with 37.4 mb (1.018 mmt) for the 2016-2017 marketing year (2017-2018 saw a reduction of 0.2 mb). This was above the 22.2 mb (604,100 mt) needed this week to be on pace with USDA’s revised September demand projection of 1.98 bb.

Last week, U.S. soybean crop conditions were also unchanged at 73 percent g/e compared to previous week and much better than the 61 percent rating last year, while 26 percent of soybeans were dropping leaves, right in line with the average pace.

The latest WASDE report showed a few surprises, the biggest one was the soybean yield was raised from 48.9 to 50.6 bpa, a new all time record. The trade was looking for yields between 48.5 to 50.1, so this weighed on soybean values.

The USDA offset some of the production increases with increases to exports in old and new crop, plus an increase to crush. This left soybean ending stocks at 365 mb, up 35 mb from last month.

The U.S. is expected to produce a crop of 4.2 bb, easily a new record and the third consecutive year of record yields.

NOPA’s crush number came in fairly low at 131.800 mb. The trade was expecting 136.233 mb, which was well below last year’s record of 135.304 mb. With large supplies overhanging the market, rallies due to harvest delays are selling opportunities.

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.

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