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BRIAN HOOPS

By Staff | Feb 24, 2017

Farm income

U.S. net farm income is forecast to decline 8.7 percent in 2017 to $62.3 billion, the lowest since 2002 when adjusted for inflation, but the decline in largely due to how USDA calculates farm income, USDA’s Economic Research Service said. In this case, net farm income does not include the expected sale of $8.2 billion of crops in storage.

That money was already assigned to 2016 since that is the year when the crops were produced. However, those sales are included in the $93.5 billion USDA forecasts for 2017 net cash farm income, which is up 1.8 percent from 2016.

Farmland values

The Federal Reserve Banks are reporting lower farmland values for the fourth quarter. The Kansas City Fed said land values fell 6 percent and the St. Louis Fed said quality land in its district fell 8 percent during the quarter.

The Fed Banks say continued low commodity prices and an ongoing slump in farm incomes is pushing land prices lower. In response to weakening credit conditions, 30 percent of bankers are reporting an increase in collateral requirements.

Machinery Pete says:

Greg Peterson, who is known as Machinery Pete, says the prices for good, used machinery are holding steady. That trend is happening despite a slowdown in the number of auctions in January. The good condition used stuff showing up at auctions still has solid pricing and buyer demand.

If it’s average condition equipment, the auction prices are sliding softer. Regional differences are being seen.

“In wheat country, they aren’t quite as optimistic. Auction models on late-model equipment may be off. In the strong, record soybean yield areas across the U.S., you will see equipment go a little higher.

ADM’s earnings

Archer Daniels Midland is reporting fourth-quarter earnings of 75 cents per share on an adjusted basis. ADM s reported operating profits of $806 million for the quarter.

ADM Chairman and chief executive officer Juan Luciano said ADM capitalized on an improvement in the ag sector, with strong results in the North American business.

Deere’s profits

U.S. farm equipment maker Deere & Co reported a higher-than-expected quarterly profit and forecast equipment sales to rise for the first time in three years, partly driven by improving economic conditions in Brazil and Argentina. The company has struggled with declining sales in the past three years as bumper corn and soybeans harvests in the United States dragged down prices, leaving farmers with less cash to spend on equipment.

To cope with the slump, Deere cut jobs and lowered production of its trademark green tractors and harvesting combines.

CORN

ANALYSIS

Corn closed the week 3.5 cents lower. Last week, private exporters announced sales of 423,112 metric tons of corn to Japan and 101,600 mt of corn to an unknown destination.

Weekly export sales for the week ending Feb. 9 were 30.8 mb of corn. Annual corn sales are 1.652 bb, up

641 mb from last year.

Weekly ethanol data was also very supportive. The EIA ethanol numbers showed another week of strong ethanol production. Production dropped by 15,000 barrels per day to 1.04 million, the 15th consecutive week above 1 million barrels. Ethanol stocks continue to build for the 6th straight week to 22.5 million barrels.

The market was expecting a 3.5-million-barrel rise in crude oil inventories, inventories rose by 9.5 million barrels. Traders don’t want to be short corn going into the springtime frame with strong demand, reduced planted acres in 2017 and possibility of weather problems sending corn prices sharply higher into the summer.

If you have been making cash sales, look for weakness into the end of the month as a buying opportunity.

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 27 cents lower. Last week, private exporters reported sales of 142,500 mt of soybeans to Mexico.

Weekly export sales for the week ending Feb. 9 saw 32.7 mb of soybeans. Year-to-date, soybean sales are 1.90 bb, up 372 mb from the previous year.

NOPA Crush report was supportive to the soybean meal as January crush came in 160 mb versus estimate average of 159 mb.

Meanwhile soyoil stocks were 1.629 billion pounds versus estimate average of 1.5 billion pounds, showing increasing oil stocks amid active crushings.

The January crush of 160 mb was much improved from the January 2016 crush of 150.4 mb.

Soybeans are struggling to maintain the hefty premiums in prices given the impending record South American harvest and slowing demand trends for U.S. soybeans. Coupled with increased 2017 U.S. planted acres, the month of March could be a bearish month for prices if previous sales begin to be canceled.

Demand trends are currently strong, but weather help will be needed to exceed weekly resistance levels.

Strategy and outlook: Maintain re-ownership strategies into the summer months.

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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