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BRIAN HOOPS

By Staff | Feb 3, 2017

Axing TPP

President Donald Trump’s decision to back out of the Trans-Pacific Partnership trade deal, a $62 billion market for U.S. farmers, provides a fresh threat to a slumping agricultural economy that has grown increasingly dependent on exports. Agricultural groups expressed disappointment over the move and urged the new administration to find alternative ways to boost product shipments to Asian countries.

Trump announced the cancellation last week, quickly fulfilling one of his campaign promises. The TPP, which was never approved by Congress, was a 12-nation trade pact which the Obama administration framed as way for the United States to establish economic leadership in the region.

But Trump, who wants to boost manufacturing, claimed the deal hurt the U.S. job market. The United States is a net exporter of agricultural goods, and shipments to the 11 other countries in the TPP deal totaled $61.7 billion in 2015, latest data shows.

The Obama administration had touted TPP as a trigger for further gains. U.S. farmers and trade groups are also concerned that backing out of the deal could provide other countries with better access to China, a major agriculture goods importer that was not part of the TPP negotiations.

More meat

U.S. livestock producers are expected to produce an additional 3 percent of meat this year.

Ag Outlook Board Chair Seth Meyer said that will break the 100-billion-pound mark. That’s about an additional 3 billion pounds of meat production year-over-year.

That’s expanding supplies in all four categories: beef, pork, poultry and turkey. The increase in production is expected to push meat prices lower.

Meyer said steer prices are expected to be down more than 9 percent. Hog prices are expected to be down about 15 percent.

Farm loans

The number of new farm loans dropped sharply in the fourth quarter of 2016. The Federal Reserve Bank of Kansas City has released its agriculture finance databook.

In a survey, bankers said the volume of non-real estate farm loans is down 40 percent from a year ago.

That’s the largest year-over-year decline in nearly 20 years. Despite the drop in new loan originations, the amount of outstanding debt is rising at banks serving the farm sector. Outstanding debt is up 5 percent from a year ago. On the positive side, the five percent upturn in debt is the smallest increase in more than three years.

Farmland values

Average Iowa farmland value has shown a decline for the third year in a row – the first time this has happened since the 1980s – and is now estimated to be $7,183 per acre.

The statewide per acre value declined $450, or 5.9 percent, since November 2015. The statewide average value for an acre of farmland is now about 17.5 percent lower than 2013 values.

CORN

ANALYSIS

Corn closed the week 7 cents lower.

Last week, private exporters announced sales of 266,224 metric tons to an unknown destination.

Weekly export sales of corn showed a total of 54.8 million bushels (1.39 million mt) with 54 mb (1.37 mmt) for the 2016-2017 marketing year.

This was well above the 22.4 mb (570,200 mt) needed this week to be on pace with USDA’s January demand projection of 2.225 billion bushels.

Weekly ethanol data was also supportive. Production dropped to 1.05 million bpd, just a slight decrease from last week’s all-time record production. However ethanol stocks increased by 0.6 mb to 21.7 mb and the build in stocks over the past three weeks is an all-time record for a three-week period.

Corn is showing a potential bullish breakout on the weekly charts after closing at the highest levels since the middle of July. A pullback from this area should find plenty of fund demand as reduced acres this spring and strong demand trends leaves traders wanting to buy breaks in the market.

Informa estimated 2017 corn planted acres at 90.38 million, up 338,000 from its previous estimate versus planted acres of 94 million last year.

Strategy and outlook: A rally into weekly resistance was a great time to sell inventory, look to re-own on support as commercials have been big sellers lately.

SOYBEANS

ANALYSIS

Soybeans closed the week 18.5 cents lower.

Last week, private exporters reported sales of 112,000 mt of soybeans to Mexico and 163,000 mt of soybeans to an unknown destination.

Weekly export sales of soybeans showed a total of 24.4 mb (665,400 mt) with 19.8 mb (539,400) for the 2016- 2017 marketing year.

This was above the 6.5 mb (176,100 mt) needed this week to be on pace with USDA’s January demand projection of 2.05 bb.

Heavy rains in Argentina has reduced yield prospects for the corn and soybean crops there. As dry weather has set in the country, fields have dried out and allowed a better understanding of the crop damage.

The crop is now likely 53 to 55 mt versus the most recent USDA estimate of 57 mt.

Informa estimated 2017 soybean planted acres at 88.68 million, down 245,000 from its last estimate versus 83.43 million acres planted last year.

A pullback from technical resistance should find plenty of buyers based on strong demand trends and positioning for a potential rally this spring and summer will leave traders wanting to buy breaks in the market.

Strategy and outlook: Prices rallied off support as forecasted by the COT report. Maintain re-ownership strategies.

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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