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BRIAN HOOPS

By Staff | Feb 10, 2017

NAFTA

Bob Young, American Farm Bureau Federation chief economist and deputy executive director of public policy, said renegotiating the North American Free Trade Agreement will mean different things to different commodities. Sugar would probably be one of those commodities to watch as we move this process forward.

Mexico is one of our largest corn export markets. It’s going to be interesting to see how this process rolls forward. Young expects more focus on bilateral trade agreements.

“The only problem could be is if we get all of our attention devoted to Canada and Mexico, there’s a lot of balls that have to be kept in the air at the same time if we’re going to renegotiate NAFTA.

Pipelines

President Donald Trump has signed an executive order that will advance the Keystone XL and Dakota Access oil pipelines. North Dakota Congressman Kevin Cramer said the executive orders affirm President Trump has respect for the law.

The Obama administration’s meddling, trying to block this legally permitted project, has encouraged civil disobedience (and) has threatened the safety of local residents.”

In a statement, North Dakota Senator John Hoeven said the decision “takes us one step closer to a time when life can return to normal for the people who live and work in the pipeline area.”

North Dakota Senator Heidi Heitkamp welcomed a focus on an all-of-the-above North American energy strategy.”

Farm challenges

Heading into 2017, ag lenders and borrowers are being more cautious. The Federal Reserve Bank of Kansas City assistant vice president Nathan Kauffman is seeing financial challenges in farm country.

“I think we’re still continuing to see some stress,” he said. “Certainly not to the point where we would think it would be turning into something that would resemble a crisis. It’s certainly not on par with the 1980s. It’s still something worth being mindful of.”

Kauffman said borrowers need to understand their production costs for the upcoming year. It’s also important for farmers to be transparent with lenders.

Decling values

Farmers National Co. is anticipating farmland prices declining. In Minnesota, high quality land averaged $7,100 per acre last year. That’s down $700 per acre from 2015. The top ag land in North Dakota averaged $5,500 per acre this past year, a decline of $500 per acre from the previous year.

For South Dakota, the high quality land had an average of $7,400 per acre, down $600 per acre from 2015. FNC said land values are being driven by location, the quality of the land and interest rates.

Another good month

MGEX has concluded the month of January with a total volume of 250,929, making it the fifth-best month in the history of the Exchange. This is also the highest January volume total, up 26 percent from the previous January record set in 2008.

Electronic volume for the month also finished at fifth-best all-time and set a new January record, coming in at 218,764 contracts traded.

Three daily volume records were set during the month, including a record breaking total of 27,095 occurring on Jan. 12.

CORN

ANALYSIS

Corn closed the week 1.25 cents higher.

Last week, private exporters announced sales of 14,000 metric tons to an unknown destination, 110,000 mt of corn to Japan and 105,000 mt of corn to Columbia.

Weekly export sales of corn showed a total of 54.8 mb of corn. Annual corn sales are 1.58 billion bushels, 629 million bushels above last year.

Weekly ethanol data was also supportive. Ethanol production came in at 1.06 billion barrels per day, an increase of 10,000 bpd from the previous week and a new all-time high.

This was the 14th consecutive week of production over 1 million bpd. Ethanol stocks increased by 0.15 mb to 21.9 mb. Ethanol margins are at a positive 2 cents per gallon.

Informa estimated 2017 corn planted acres at 90.489 million, up 338,000 from their previous estimate versus planted acres of 94 million last year.

Weather this spring will be so important to the growing season. It won’t matter how many acres are planted if it doesn’t rain. Producers should look to buy the weakness in the last half of February for a rally into the spring and possibly the summer if weather conditions remain dry.

The February supply/demand report will have little influence on prices.

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 22.75 cents lower.

Last week, private exporters reported sales of 236,700 mts of soybeans to an unknown destination.

Weekly export sales of soybeans showed 24.5 mb were sold. This year, the U.S. has sold a record large 1.854 bb of soybeans, 365 mb above last year and already 91 percent of the USDA annual forecast.

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 million metric tons versus the most recent USDA estimate of 57 mmt.

Informa estimated 2017 soybean planted acres at 88.647 million, down 245,000 from its last estimate versus 83.433 million acres planted last year.

It is the period between mid-February and May that South America over takes the U.S. as the primary port of origin for beans. This will leave weather on late-maturing crops as the sole bullish factor for South American soybean values.

February in Brazil and Argentina is like August here as it’s a key yield-developing month for three quarters of the crop. If weather turns hot and dry, prices will rally sharply, however with good rains across the country, the price of soybeans should turn south.

Producers should buy any major pullbacks in the market.

Strategy and outlook: Prices have pulled back off major resistance. 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.

Brian Hoops can be reached at (605) 660-1155.

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