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BRIAN HOOPS

By Staff | Dec 2, 2016

Tyson’s tumble

Tyson Foods Inc. shares tumbled after the nation’s biggest meat processor forecast lower-than-expected 2017 profit, and said Chief Executive Donnie Smith would step down at the end of the year. The company also reported disappointing quarterly results due to increased investment spending and shortfalls in its chicken and prepared food businesses.

The seller of Jimmy Dean sausage and Ball Park hot dogs expects profit of $4.70 to $4.85 a share in the year ending September 2017, below analysts’ average estimate of $4.98, as it boosts capital spending to $1 billion from $700 million in 2016 to improve worker safety, animal welfare, food safety and its supply chain.

CBOT

The Chicago Board of Trade, a unit of CME Group, will temporarily delay listing the July 2020 and December 2020 contracts for corn futures and mini-sized corn futures while the exchange reviews feedback regarding expanding the delivery territory to St. Louis, the CME said.

The two contracts were scheduled to be listed on Dec. 14. Also, the Exchange has suspended the listing of all subsequent contract months until further notice. During that time contract months will be limited to the current March, May, July, September and December for 2017, 2018 and 2019.

“The Exchange is in the process of soliciting feedback regarding a potential expansion of the corn futures contract’s delivery territory to St. Louis. If such feedback directs the Exchange to pursue delivery amendments to the Contract, this temporary suspension of the contracts’ listing schedule will provide a mechanism for the Exchange to implement the delivery amendments commencing with the 2020 contract months,” the CME said.

Deere forecast

Deere & Co. posted quarterly earnings and a 2017 profit forecast that exceeded analysts’ estimates as the world’s largest agricultural equipment maker’s cost-cutting efforts offset some of the effects of lower demand. Net income fell to 90 cents a share in the Deere’s fiscal fourth quarter, which ended Oct. 31, from $1.08 a year earlier, the Moline, Illinois-based company said.

That beat the 39-cent average of 18 estimates compiled by Bloomberg. It forecast net income will be $1.4 billion in fiscal 2017, more than the $1.21 billion average estimate. Deere has now reported better-than-expected profit for 16 straight quarters, despite three successive years of declining revenue as farmers cut spending amid lower commodity prices.

The company said job cuts initiated in the fourth quarter are expected to generate savings of about $75 million. It reiterated a plan to reduce overall costs by $500 million by the end of 2018.

In cold storage

In the monthly cold storage report, the USDA reported total red meat supplies in freezers were down 3 percent from the previous month, but up 1 percent from last year. Total pounds of beef in freezers were up 3 percent from the previous month and up 5 percent from last year.

Frozen pork supplies were down 7 percent from the previous month and down 1 percent from last year.

Stocks of pork bellies were down 17 percent from last month but up 16 percent from last year.

CORN ANALYSIS

Corn closed the week 3.5 cents higher.

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

Weekly export sales of corn showed a total of 66.5 million bushels (1.688 million metric tons ) with all for the 2016-2017 marketing year. This was above the 27.0 mb (685,100 mt) needed this week to be on pace with USDA’s November demand projection of 2.225 bb.

Corn harvest was posted at 97 percent complete and NASS will no longer post corn harvest results.

The first Brazilian corn crop is 92 percent planted versus 83 percent last year. Corn managed to rally slightly on spillover strength from soybeans and news of the EPA announcement for renewable fuel standards for 2017.

Total renewable fuel volumes will grow by 1.2 billion gallons, which is a 6 percent increase from 2016. Ethanol makes up 500 million gallons, which means corn usage should increase by about 175 mb. 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 as the only way to pry cash crop out of farmers hands is with stronger basis levels throughout the winter.

Strategy and outlook: Use rallies to sell inventory.

SOYBEANS ANALYSIS

Soybeans closed the week 49.75 cents higher.

Last week, private exporters reported a sale of 30,000 mt of bean oil to China.

Weekly export sales of soybeans showed a total of 69.8 mb (1.898 mmt) with nearly all for the 2016-2017 marketing year. This was above the 15.1 mb (410,700 mt) needed this week to be on pace with USDA’s November demand projection of 2.050 bb.

NASS will no longer post soybean harvest reports as harvest has been virtually completed nationwide.

Soybean planting in Brazil is now 76 percent complete, slightly ahead of the average pace of 72 percent.

Soybean planting in Argentina is behind normal at only 24 percent complete. Last year, farmers were 36 percent complete with the average pace of 41 percent.

Prices rallied sharply last week as China devalued its Yuan and bullish EPA data rallied soybean oil. EPA announced renewable standards for 2017 with advanced biofuels showing an increase of 670 million gallons, which would mean an extra 250 to 275 million bushels of vegetable oil will be consumed.

The rally in soybeans assures a record planting of South American soybean acres as well as U.S. acres next spring. Production forecasts 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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