×
×
homepage logo

BRIAN HOOPS

By Staff | Dec 9, 2016

More farm income losses

U.S. net farm income is expected to drop for a third consecutive year in 2016, sinking 17.2 percent to $66.9 billion, the lowest level since 2009, the U.S. Department of Agriculture said. The updated forecast from the agency’s Economic Research Service was down from its August forecast of $71.5 billion and down 46 percent from record profits for the sector of $123.7 billion in 2013.

Record trading volume

CME Group Inc. will set a monthly record for trading volumes in November, a top executive said as U.S. President-elect Donald Trump’s surprise victory has injected uncertainty into markets.

Three of CME’s top 10 trading days for volumes have occurred since Trump’s election on Nov. 8, and volumes have been averaging more than 20 million contracts per day, said John Pietrowicz, CME’s chief financial officer, on a webcast of a JP Morgan investor conference.

That is up about 45 percent from November 2015, when the average daily volume was 13.7 million contracts. On Nov. 9, the day after the election, futures and options trading volumes set a one-day record of 44.5 million contracts at CME, which owns the Chicago Mercantile Exchange and other markets.

The previous record was 39.6 million contracts on October 15, 2014. On Nov. 23, CME set a record open interest of 117 million contracts, beating the previous record from June.

MGEX trading

MGEX reported its seventh-highest total volume month, coming in at 225,377 contracts traded. Total volume from November concluded at high numbers once again, falling short of the highest all-time record set in November 2015 – 272,202.

This marks only the second time that volume has surpassed 200,000 during the month of November. Additionally, the Exchange has reported a total volume greater than 200,000 for five months during the calendar year.

The Exchange also concluded the month with its 10th-highest electronic volume, closing in at 195,715 contracts traded. Calendar year volume now stands at 2,051,490 with one month remaining.

Russian wheat

Russia may have a harder time exporting its wheat this season as bumper crops expected in Australia and Argentina increase competition for buyers. Shipments from Russia, the world’s biggest exporter, have so far lagged expectations after a record harvest.

That means the country has more left to sell as the southern hemisphere producers add to global supplies. Wheat crops in both Australia and Argentina will rise to the highest levels in five years, according to the U.S. Department of Agriculture.

They are the fifth- and eighth-largest exporters, respectively, according to the International Grains Council. Argentina may collect 14.4 million metric tons of wheat, 27 percent more than last year, according to the USDA. Australia’s crop will rise 16 percent from the previous year to 28.3 million tons.

Argentina and Australia end wheat harvesting in January. Russia will probably have exported 13.3 million tons by December since the start of the 2016-17 season in July, according to consultant SovEcon in Moscow. That compares with 14.4 million tons two years ago.

CORN ANALYSIS

Corn closed the week 11 cents lower.

Last week, private exporters did not report any private sales. Weekly export sales of corn showed a total of 39 million bushels (761,600 metric tons) with all for the 2016-2017 marketing year.

This was above the 26 mb (660,700 mt) needed this week to be on pace with USDA’s November demand projection of 2.225 billion bushels.

The USDA supply/demand report that was expected to be released today looks to lend little direction to prices, with no production adjustment and the USDA likely to make minimal demand changes.

Fund buying is the most bullish driving force for prices with very little farmer hedge pressure until after the first of the year.

This should improve basis levels into the end of the year. Long-term support comes from fund traders who have been buying corn 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 and record demand, the traders hope a weather issue will lift prices. Until that happens, the upside looks limited.

Strategy and outlook: A rally into weekly resistance was a great time to sell inventory, look to re-own on weekly support.

SOYBEANS ANALYSIS

Soybeans closed the week 16.25 cents lower.

Last week, private exporters reported a sale of 123,000 mt of soybeans to China.

Weekly export sales of soybeans showed a total of 53.4 mb (1,454,000 mt) with 51 mb (1.388 million metric tons) for the 2016-2017 marketing year. This was above the 13.8 mb (374,900 mt) needed this week to be on pace with USDA’s November demand projection of 2.05 bb.

The USDA supply/demand report that was expected to be released today looks to lend little direction to prices, with no production adjustment and the USDA likely to raise export forecasts by 5 to 10 mb as weekly export sales remain strong.

Brazil and Argentina are actively seeding their crops and will store little to no excess grain, as storage elevators are absent from the countryside, not like here in the U.S.

Grain goes from field to port, which means they need to forward contract, or pre-sell their crop before it’s harvested to insure it doesn’t pile up on the farm. This means South America will post its price for beans under any U.S. price to insure they capture the export business, as there is nowhere to store it.

From the start of the U.S. harvest in October until South American soybean harvest in March, the big demand window for U.S. soybeans as South American supplies are unavailable and the U.S. is the only port of origin for the world’s needs.

Production forecasts from South America will be a major driving force for prices throughout the winter.

Strategy and outlook: A rally into weekly resistance was a great time to sell inventory, look to re-own on weekly support.

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