U.S. farm income will fall 6.7 percent in 2018 to the lowest in 12 years, according to the latest projections from the Department of Agriculture. But a closer look at the data reveals that some commodities will do a lot better than others: Rice and tobacco farmers will see the biggest increase in income this year, while vegetable and dairy producers will see the worst contraction.

Corn analysis

Corn closed the week $.05 1/4 higher. Last week, private exporters announced sales of 123,000 mts of corn to an unknown destination and 116,000 mts of corn to Japan.

Weekly export sales of corn showed a total of 81.6 mb (2,072,000 mt) with 77.7 mb (1,974.500 mt) for the 2017-2018 marketing year. This put total marketing year sales at 1.417 bb, 14 percent less than the previous marketing year. In the weekly EIA report, weekly ethanol production was reported at 1.016 million barrels per day, compared to last week at 1.057 million barrels per day. Stocks were reported at 22.9 million barrels compared to last week’s stocks at 23.5 million barrels. Commercials have turned very bearish to the corn market, very quickly.

Major weekly resistance occurs at $3.81. This should be the maximum rally unless a major drought effects a key growing region, either in the United States or South America.

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 $.37 1/2 higher. Last week, private exporters announced sale of 314,000 mts of soybeans to an unknown destination, a cancelation of a previous sale of 455,000 mts of soybeans to China and sale of 28,000 mts of bean oil to South Korea.

Weekly export sales of soybeans showed a total of 30.8 mb (837,500 mt) with 23.5 mb (322,400 mt) for the 2017-2018 marketing year. This put total marketing year sales at 1.647 bb, 13 percent less than the previous marketing year. January NOPA crush was reported at 163.11 million bushels, below expectations of 165.511 million bushels, but still a January record and the eighth highest for any month ever. In January of 2017, NOPA reported 160.621 million bushels were crushed and 166.3 mb in December. Soyoil stocks at 1.614 billion pounds vs. 1.518 in December and 1.629 last year.

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.