Tyson cuts profit forecast

(Reuters) -Tyson Foods Inc. cut its full year profit forecast citing uncertainty in trade policies and increased tariffs, which has hurt domestic and export prices, specifically for chicken and pork. The increased volatility in the commodity markets due to China’s tariff measures has led to greater-than-expected increase in the domestic supply and lower sale prices of proteins such as beef and pork, Tyson said.

Demand for chicken in the United States, as a result of drop in prices of competing proteins, has taken a hit.”We still face pressure on chicken sales volume and pricing due to the abundance of relatively low-priced beef and pork on the market,” Chief Executive Officer Tom Hayes said. “Our fourth quarter is off to a slower than expected start driven primarily by market related factors,” he added.

Tyson Foods’ move comes as China implemented a 25 percent duty on most U.S. pork items on April 2 in response to U.S. tariffs on Chinese steel and aluminum products.

NFA has ordered Chicago, Ill. futures commission merchant R.J. O’Brien & Associates LLC (RJO) to pay a $150,000 fine. The Decision, issued by NFA’s Business Conduct Committee (BCC), is based on a Complaint issued by the BCC and a settlement offer submitted by RJO.

The BCC found that RJO failed to have adequate supervisory measures to monitor for and detect unusual allocation activity and to ensure that when NFA issues a Member Responsibility Action that RJO does not allow violations of the MRA to occur.

Bunge Ltd. surprised by losses

(Reuters) -Global grains merchant Bunge Ltd reported a surprise quarterly loss as its agribusiness unit took a $125 million hit from soybean hedges tied to the trade dispute between the United States and China. The result was in stark contrast to agricultural commodities trading rivals Archer Daniels Midland Co and Cargill Inc, which reported strong profits in their most recent quarters.

Bunge largely blamed a bet that soybean prices would rise as U.S.-China trade tensions eased during the period. However, the trade war escalated and soybeans fell sharply.

Bunge also reported a $24 million hit in the April-to-June quarter from currency hedges in Brazil, the world’s top soybean exporter, but said it expected to recover the losses in the second half of the year. The loss was particularly surprising because large international grain traders had been expected to benefit from market volatility and shifts in global grain flows resulting from a deepening trade war between the world’s two largest economies.

Corn analysis

Corn closed the week $.08 1/2 higher. Last week, private exporters an optional origin sale of 130,000 mts of corn to Vietnam.

Weekly export sales of corn totaled 50.3 mb (1,278,100 mt) as of July 26 with 11.5 mb (292,000 mt) for the 2017-18 season. Total shipments plus outstanding sales in 2017-18 are now 2.337 bb, 5 percent above the previous marketing year.

In the weekly crop conditions report, U.S. corn crop conditions are 72 percent good/excellent versus 71 percent expected, 72 percent last week and 61 percent last year. 38 percent of the corn crop is in the dough stage versus 20 percent last year.

In the weekly EIA report, Crude oil stocks saw a build of 3.8 mb vs an expected drawdown of 3.0 mb. U.S. ethanol production, for the week ended 7/27/18, slid to 1.064 million barrels/day (313 million gallons/week) from 1.074 mbpd (316 mil gal/week) the week prior and was 6.2 percent above last year’s same-week production of 1.002 mbpd (295 mil gal/week).

Crop ratings are one of the highest rated crop in the last 15 years, leaving the trade to believe a monster crop will be harvested this fall. Crop ratings historically decline in August under warmer and drier conditions. In August, watch the weather forecasts closely. 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.

Strategy and outlook

Typical rallies in late summer are 30 to 50 cents, which would be an excellent opportunity to make additional catch up sales if given the opportunity on production that can not be stored at harvest.

Soybeans analysis

Soybeans closed the week $.18 3/4 higher. Last week, private exporters did not announce any private sales.

Weekly export sales of soybeans totaled 23.5 mb (637,000 mt) with 3.4 mb (93,700 mt) for the 2017-18 marketing year. Total shipments plus outstanding sales are now 2.136 bb, 4 percent less than a year ago.

In the weekly crop progress and conditions report, U.S. soybean crop conditions are 70 percent good/excellent versus 69 percent expected, 70 percent last week and 59 percent last year. 60 percent of the crop is setting pods versus 41 percent a year ago.

By August 20th to the 30th soybeans will have completely filled the pod, and seasonal highs will be in. It is in this time frame that we will either produce a monster crop or a crop that does not meet expectations. Beans need moisture in the pod setting stage to achieve normal yields 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.

Strategy and outlook

Typical rallies in late summer are 30 to 50 cents, which would be an excellent opportunity to make additional catch up sales if given the opportunity on production that can not be stored at 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.