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BRIAN HOOPS

By Staff | Aug 3, 2017

For its third quarter, CHS reports a net loss of more than $45 million. That compares to net income of $190 million one year ago. Earnings increased for its country operations, but margins were down in the wholesale crop nutrients, energy and food processing segments.

One of the biggest factors in the loss was the bankruptcy of a Brazilian commodities trader. The failed Brazilian company resulting in charges of $230 million.

Corn analysis

Corn closed the week $.04 3/4 lower. Last week, private exporters reported 135,000 mts of corn to an unknown destination.

Weekly export sales of corn showed a total of 22.8 mb (578,600 mt) with 3.6 mb (92,000 mt) for the 2016-2017 marketing year. This was above the 1.6 mb (40,300 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 U.S. corn crop conditions at 62 percent good/excellent versus 63 percent expected, down 2 percent from 64 percent last week and well below 76 percentlast year.

Iowa fell 3 percent, Nebraska 4 percent, Missouri 6 percent but Illinois and Minnesota were both 1 percent higher.

In the EIA report, U.S. ethanol production, for the week ended 7/21/17, slipped to 1.012 million barrels/day (298 million gallons/week) from 1.026 mbpd (302 mil gallons/week) the previous week. U.S. ethanol stocks dipped to 904 million gallons (21.529 million barrels) from 930 million gallons (22.137 million barrels) the previous week.

If weather would turn hot and dry in the final kernel filling stage, we would have one final rally this summer.

Weather must turn adverse before August 25th as after this date, our key yield development time will be over.

On the flip side, an early frost during the kernel filling stage would also send prices higher as a killing frost could potentially hurt yields. Seasonals show a small rally during the August timeframe, before turning lower as harvest begins in September. Look for commercial and end user interests to become buyers during the early stages of harvest as they will try to buy when the basis levels are largest.

Strategy and outlook

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

Soybeans analysis

Soybeans closed the week $.09 1/4 lower. Last week, private exporters reported sale of 264,000 mts of soybeans to an unknown destination.

Weekly export sales of soybeans showed a total of 30.7 mb (835,200 mt) with 11.1 mb (303,400 mt) for the 2016-2017 marketing year. This raised total sales to 2.219 bb, or 6 percent above USDA’s July demand projection of 2.100 bb.

In the weekly crop conditions report, U.S. soybean crop conditions also were down, but 4 percent to 57 percent good/excellent versus 60 percent expected, 61 percent last week and 71 percent last year.

Iowa was down 1 percent, Nebraska and South Dakota down 4 percent, Missouri down 2 percent while Minnesota was unchanged and Illinois was down 8 percent.

August is the key yield development month for soybeans, not July. For new crop soybean pricing, ignore demand signals as weather and its impact on the developing crop remains 95 percent of our pricing influence.

By August 20th to the 30th soybeans will have completely filled the pod, and seasonal highs will be in. Beans need moisture in the pod setting stage to achieve normal yields and forecasts into early August are for cool and wet conditions.

However, hot and dry conditions will force moisture to the root system, leaving the bean in the pod to develop small. The soyoil content is what suffers most, leaving bean oil undervalued if hot and dry conditions set in across the Midwest.

Seasonally, soybeans post lows in the month of August in the first half of the month and rally into Labor Day where the highs will be formed before harvest pressure weighs on the market.

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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