The three-year drop in farmland values has at least taken a temporary pause, according to the 2017 Iowa State University land values survey released Dec. 12, which shows values climbed 2 percent during the past year. The survey, reflecting values as of Nov. 1, showed a statewide increase of 2 percent to an average price of $7,326 per acre. Only four of the state’s 99 counties reported a drop in value. The state-wide increase stopped a stretch of three consecutive years when values fell – the longest drop since the 1980s.
Corn closed the week $.05 1/4 lower. Last week, private exporters announces sales of 262,000 mts to Mexico, and 134,503 mts of corn to Costa Rica.
Weekly export sales of corn showed a total of 34.1 mb (866,900 mt) with all for the 2017-2018 marketing year. This put total marketing year sales at 935.6 mb, 28 percent less than the previous marketing year.
In the weekly EIA report, Ethanol production for the week ending 12/8 put in the second highest production number on record, but was down slightly from the previous week to 1,089,000 barrels per day. Ethanol stocks decreased by 7 million gallons from the week before to 940 million gallons, but nevertheless were up 17 percent from last year at this time. The December WASDE report was neutral to bearish for corn, beans, and wheat. The WASDE figures were within trade estimates and reminded traders that there are ample supplies worldwide. The report showed US corn ending stocks at 2.437 billion bushels which was within trade estimates and down slightly from November at 2.487 bb. Corn used for ethanol increased 50 million bushels to 5.525 billion bushels. Stock to use is now 16.8 percent from 17.2 percent last month. Fund short covering would be bullish if funds are given a reason to cover positions to pay year end bonuses. There should be very little farmer hedge pressure until after the first of the year, helping basis to narrow and futures to rally.
Strategy and outlook
As prices rally during the winter months, producers look to sell the carry and lock in basis as it narrows. Selling inventory on rallies and replacing ownership with option strategies not only decreases risk, but also allows producers to free up equity and generates cash flow.
Soybeans closed the week $.0. 1/4 lower. Last week, private exporters announced sales of 426,300 mts of beans to an unknown destination and 257,000 mts of beans to China.
Weekly export sales of soybeans showed a total of 57.5 mb 1,565,800 mt) with 53.4 mb (1,452,600 mt) for the 2017-2018 marketing year. This put total marketing year sales at 1.389 bb, 16 percent less than the previous marketing year.
The December WASDE report showed U.S. soybean ending stocks at 445 mb, within trade estimates and up from November’s estimate of 425 mb as soybean exports decreased 25 mb and seed use increased 5 mb. The stock to use ratio increased from 9.8 percent to 10.3 percent. The NOPA crush report came in at 163.546 mb vs. 163.3 mb expected with soyoil stocks 1.326 bil lbs versus 1.285 expected. CONAB Brazil soy production forecast is bearish for soybeans as it was increased to 109.2 mmts versus 107.5 mmts previously while corn production was lowered to 92.2 mmts versus 92.3 mmts previously. From the start of the U.S. harvest in October until South American soybean harvest in March, the big demand window for U.S. soybeans as South American supplies are unavailable and the U.S. is the only port of origin for the world’s needs. China remains the world’s largest importer of soybeans as their growing economy demands high protein and oil contents.
Strategy and outlook
Producers should have made sales as prices rallied into resistance. Selling inventory on rallies and replacing ownership with option strategies not only decreases risk, but also allows producers to free up equity and generates cash flow.
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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