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BRIAN HOOPS

By Staff | Nov 25, 2016

JBS’ profits

Brazil’s JBS SA, the world’s largest meat processor, posted a 74 percent drop in third-quarter profit compared with the same quarter a year ago, due to reduced net sales and rising financial costs. Net profit for the company fell to R$887.1 million ($258 million) in the three months ended in September, down from R$ 3.44 billion a year ago and R$ 1.54 billion in the second quarter, JBS said in a market filing. JBS said its third-quarter net revenue fell 4 percent to R$ 41.2 billion from a year ago.

Most of the downward drag on sales came from clients in Mercosur, the trade block that includes Brazil, Argentina, Paraguay, Venezuela and Uruguay.

New USDA head?

There is plenty of speculation about who will take over as agriculture secretary in the Trump Administration. That list includes Chuck Conner, of the National Council of Farmer Cooperatives, former Texas Gov. Rick Perry, Kansas Gov. Sam Brownback, Texas Agriculture Commissioner Sid Miller, Indiana Ag Department Director Ted McGinney and Indiana Farm Bureau President Don Villwock.

Nebraska businessman Charles Herbster leads the Trump agricultural advisory committee and has been meeting with the transition team. Mike Torrey, who was a deputy chief of staff for former Agriculture Secretary Ann Veneman, is also advising the Trump team on USDA matters.

2016 farm exports

U.S. farm exports in fiscal year 2016 totaled nearly $130 billion, down 7 percent from the previous year, but 2 percent better than USDA forecast in August.

Farm imports fell $1 billion, to $113 billion. USDA analyst Bryce Cooke said the farm trade surplus declined 35 percent last fiscal year. The trade balance in Fiscal Year 2016 is $16.6 billion, which is much lower than in 2015, which was $25.5 billion.

U.S. farm exports surged this summer. The value of corn exports was up 4 percent in fiscal 2016, as volume increased 9 percent.

Soybean export volume was up 7 percent and wheat shipments gained 5 percent. For this fiscal year, USDA now projects a $6 billion increase in farm exports, but look for an update at the end of the month.

USDA and COF

In the monthly cattle on feed report, USDA reported cattle on feed for the slaughter market in the United States for feedlots with capacity of 1,000 or more head totaled 10.7 million head on Nov. 1. The inventory was 1 percent below Nov. 1, 2015.

Placements in feedlots during October totaled 2.17 million head, 5 percent below 2015. Net placements were 2.11 million head.

During October, placements of cattle and calves weighing less than 600 pounds were 610,000 head, 600-699 pounds were 525,000 head, 700-799 pounds were 471,000 head, and 800 pounds and greater were 565,000 head.

Marketings of fed cattle during October totaled 1.71 million head, 5 percent above 2015.

CORN ANALYSIS

Corn closed the week 5.25 cents higher.

Last week, private exporters reported sales of 106,200 metric tons of corn to an unknown destination and 175,000 mt of sorghum to China.

Weekly export sales of corn showed a total of 65.4 mb (1.66 million mt) with all for the 2016-2017 marketing year. This was above the 30.3 mb (770,300 mt) needed this week to be on pace with USDA’s November demand projection of 2.225 billion bushels.

NASS reported U.S. corn harvest advanced to 93 percent complete versus 94 percent expected and up from 86 percent last week and the average pace of 92 percent.

Informa estimated the 2017 planted acreage at 90.8 million, 3.7 million less than last year. Despite the largest U.S. crop in history, the downside of the market appears to be limited.

Even with a larger supply outlook than previous months, the market has failed to fall to new lows as long-term fund traders have been buying the market as they look ahead to 2017 in search of a cheap commodity that may see explosive price gains in the year ahead.

With lower expected planted acres, the traders hope a weather issue will lift prices. Until that happens, the upside looks limited. Basis levels will likely improve and the cash market should rally as it will be the only way to pry cash crop out of farmers hands with stronger basis levels throughout the winter.

Strategy and outlook:

Use rallies to sell inventory.

SOYBEANS ANALYSIS

Soybeans closed the week 7.25 cents higher.

Last week, private exporters reported sales of 583,500 mt to China and 324,000 mt of beans to an unknown destination.

Weekly export sales of soybeans showed a total of 52.1 mb (1.42 mmt) with nearly all for the 2016-2017 marketing year. This was above the 18.8 mb (510,600 mt) needed this week to be on pace with USDA’s November demand projection of 2.05 bb.

Soybeans are 97 percent harvested versus 97 percent expected and up from 93 percent harvested last week and nearly identical to the average pace of 95 percent.

NOPA crush came in at 164.641 mb, above the average estimate of 160.5 mb. This is the highest crush number ever recorded in the month of October and the third highest month overall.

Oil stocks came in lower at 1,343 billion pounds versus last month at 1.376 bp. This marks the fourth consecutive month of stocks decline for oil.

Informa estimated 2017 U.S. soybean acres at 88.6 million, up 4.9 million acres from a year ago. Farmer selling will slow now that harvest is complete, basis levels will likely improve and the cash market should rally as it will be the only way to pry cash crop out of farmers hands with stronger basis levels throughout the winter.

The market will be anticipating a record soybean crop in South America and updates on this year’s production from South America will be a major driving force for prices throughout the winter.

Weather during the South American growing season will be closely watched.

Strategy and outlook:

Use rallies to sell inventory.

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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