The USDA has announced another year of high farm loan activity. Farm families accessed nearly $6 billion in new credit through direct or guaranteed loans in 2017.

At the end of the year, the Farm Service Agency assisted more than 120,000 family farmers with loans worth more than $25 billion. More than 25,000 direct and guaranteed FSA loans went to beginning or underserved farmers and ranchers.

Corn analysis

Corn closed the week $.04 3/4 higher. Last week, private exporters announced sales totaling 285,000 mts of corn to Egypt; 340,000 mts to an unknown destination and 132,000 mts of corn to Spain.

Weekly export sales of corn showed a total of 74.1 mb (1,881,600 mt) with 56.9 mb (1,445,900 mt) for the 2017-2018 marketing year. This put total marketing year sales at 1.270 bb, 20 percent less than the previous marketing year. In the weekly EIA report, weekly ethanol production came in at 1.040 million barrels per day, down 22k barrels from last week at 1.062 million barrels per day and 1.054 million barrels per day this time last year. Weekly ethanol stocks were down 755,000 barrels per day to 23.05 billion barrels per day. This looks to be the largest weekly decline since last June. The February report should show slightly tighter ending stocks.

Corn producers are expected to plant about 1 million less acres in 2018 compared to 2017 as producer react to lower corn prices. In the South, look for producers to seed more cotton in favor of corn this 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.

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 analysis

Soybeans closed the week $.07 1/2 lower. Last week, private exporters announced sale of 108,860 mts of soybeans to Mexico.

Weekly export sales of soybeans showed a total of 15.1 mb (409,700 mt) with 22.6 mb (616,300 mt) for the 2017-2018 marketing year. This put total marketing year sales at 1.602 bb, 13 percent less than the previous marketing year. Because Brazil can only store up to 25 percent of their harvest, they are forced to forward sell approximately 75 percent of their early harvested soybeans. 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 a major pullbacks in the market.

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