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BRIAN HOOPS

By Staff | Dec 16, 2016

Farm income forecast

USDA released its income forecast which shows a likely decrease in farm income for 2016.

USDA Chief Economist Rob Johansson is projecting net cash income down 14.6 percent from last year, with net farm income dropping more than 17 percent, to $66.9 billion.

That’s down from a 2015 estimate of $80.9 billion. The majority of that decline is coming from livestock receipts.

The livestock sector is projected to be down 12.5 percent.

Milk production grows

Milk production in the 23 major U.S. dairy states totaled 16.5 billion pounds in October.

That’s up 2.7 percent from last year. Minnesota milk output increased nearly 2 percent.

South Dakota milk production rose more than 8 percent. In Wisconsin, production was up 2.2 percent.

CORN ANALYSIS

Corn closed the week 11.75 cents higher.

Last week, private exporters reported sale of 276,000 metric tons of corn to South Korea and an optional origin sale of 332,000 mt of corn to South Korea.

Weekly export sales of corn showed a total of 58.9 mb (1.5 million mt) with nearly all for the 2016-2017 marketing year.

This was above the 25.9 mb (658,500 mt) needed this week to be on pace with USDA’s November demand projection of 2.225 billion bushels.

The December supply/demand report was expected to be quiet and it was. USDA reported U.S. corn stocks came in at 2.4 bb, unchanged from last month, while world reserves were 222.3 mt, up from 218.2 mt in November as the USDA increased Brazil’s corn production forecast to 86.5 mt.

Fund buying is the most bullish driving force for prices with little farmer hedge pressure until after the first of the year. Tight farmer holdings should improve basis levels into the end of the year. With lower expected planted acres and record demand, the traders hope a weather issue will lift prices, which will limit the downside risk.

A sideways trading range is likely to dominate the winter months of trade.

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 10.5 cents higher.

Last week, private exporters reported a sale of 990,000 mt of soybeans to China; 782,000 mt of soybeans to an unknown destination and 20,000 mt of bean oil to South Korea.

Weekly export sales of soybeans showed a total of 53.9 mb (1.46 mmt) with nearly all for the 2016-2017 marketing year.

This was well above the 12.8 mb (349,300 mt) needed this week to be on pace with USDA’s November demand projection of 2.05 bb.

The USDA supply/demand report was expected to provide little direction for the markets and the report was neutral to bearish for soybeans.

The USDA left U.S. soybean stocks unchanged at 480 mb, while world stocks increased from 81.5 mt to 82.9 mt.

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.

In late January, South America will post its price for beans under any U.S. price to insure it captures the export business, as there is nowhere to store it.

Production forecasts from South America will be a major driving force for prices throughout the winter as traders remember the remarkable rally soybeans had last spring during dry weather conditions in Argentina.

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.

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