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BRIAN HOOPS

By Staff | Jul 26, 2017

The Trump budget proposal calls for cuts to the crop insurance program. Similar proposals have also surfaced in Congress. Kansas State University Ag Economics professor Art Barnaby emphasizes these proposals are a long way from becoming law, but there is reason for concern.The crop insurance critics want to eliminate the Harvest Price Option, put limits on adjusted gross income eligibility and implement a $40,000 limit on the government’s share of the premium.

Once the $40,000 limit is reached, the farmer would pay 100 percent of the premium cost for any covered acres above that level. The first thing that the $40,000 limit would do is the farmers will do everything possible to avoid it. The first thing they’ll do is try to create more farms. They’ll add their spouse and get a second policy. What you’ve done is double the number of policies and paperwork, added to the cost of the insurance agent and added to number of policies for RMA to audit, all of which will probably require more employees. You’re adding administrative costs.

Corn analysis

Corn closed the week three cents higher. Last week, private exporters did not report any private sales.Weekly export sales of corn showed a total of 26.7 mb (678,600 mt) with 18.4 mb (466,500 mt) for the 2016-2017 marketing year. This was above the 3.6 mb (92,600 mt) needed this week to be on pace with USDA’s July demand projection of 2.225 bb.

In the weekly crop conditions report, NASS reported this year’s corn crop is rated at 64 percent good/excellent, down 1 percent from last week’s crop rating of 65 percent good/excellent, 76 percent last year and 69 percent average.

Iowa is now rated 71 percent good/excellent with Illinois 62 percent, Indiana 47 percent, Minnesota 79 percent, Nebraska 65 percent, North Dakota only 45 percent and Missouri 69 percent.

Weekly ethanol production increased by 19,000 barrels to 1,026,000 barrels per day. Ethanol stocks increased by .9 million barrels to 22.1 million barrels. Corn has traded the entire spring range over the last two weeks as the market is attempting to determine the extent of crop damage. Significant rainfall in the eastern cornbelt has resulted in flood damage in many areas while heat and dryness in the western belt during pollination have likely trimmed yields. The question the market will try to answer prior to harvest is how much damage has occurred? This may be a year that storing the crop will pay dividends.

Strategy and outlook

Producers should make sales that address cash flow need during harvest.

Soybean analysis

Soybeans closed the week19 cents higher. Last week, private exporters did not report any private sales. Weekly export sales of soybeans showed a total of 71.0 mb (1,932,100 mt) with 15.1 mb (409,600 mt) for the 2016-2017 marketing year. This raised total sales to 2.218 bb, or 6 percent above USDA’s July demand projection of 2.100 bb. In the weekly crop conditions report, soybean ratings fell 1 percent to 61 percent good/excellent compared to 62 percent last week, 71 percent last year and 66 percent average. Iowa is rated at only 63 percent, Illinois at 66 percent, Minnesota at 72 percent, Nebraska 63 percent, Missouri at 65 percent and North Dakota at only 40 percent.

The monthly NOPA crush report was bearish with crush at 138.074 mb, below estimates of 140 mb – 144 mb versus the June, 2016 crush figure of 145.1 mb.

Like the corn market, significant rainfall in the eastern belt has resulted in flood damage in many areas while heat and dryness in the western belt have likely trimmed yields. The question the market will try to answer prior to harvest is how much damage has occurred. This may be a year that storing the crop will pay dividends.

Strategy and outlook

Producers should make sales that address cash flow need during harvest.

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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