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By Staff | Sep 4, 2018

China unloads first tarriffed soybeans

On August 13, China unloaded the first shipment of U.S. soybeans with a 25 percent tariff attached. China’s state grain stockpiling company accepted the shipment, despite warnings from government officials that the country would source products elsewhere. The Chinese company will pay the tariff on the 70,000 metric ton shipment, with the tax estimated at $6 million. U.S. soybean exports to China in 2017 were worth $12.7 billion, but the trade war between the two countries has sparked concerns over how much U.S. soy China will purchase. Two other ships carrying U.S. soybeans have been anchored along China’s coast for approximately five weeks.

NPPC looks for funding for FMD bank

The National Pork Producers Council has launched a campaign to increase awareness about the issues facing the U.S. pork industry. In addition to a swift resolution to the ongoing trade dispute, the NPPC wants full funding for a Foot-and-Mouth Disease vaccine bank, a reliable supply of labor and regulatory oversight for lab-produced protein products and gene-editing in livestock. This ‘Pork Over a Barrel’ campaign will include digital advertising and social media.

Tyson Foods reports profits

Tyson Foods is reporting third quarter profits of $541 million, an increase of 21 percent from one year ago. Net sales were two percent higher at $10.05 billion. Tyson says sales volumes were higher in its beef and prepared food segments, but were lower in its pork and chicken segments.

Corn analysis

Corn closed the week $.16 lower. Last week, private exporters a sale of 114,572 mts to an unknown destination and a 213,372 mts sale to Mexico.

USDA reported 6.8 mb (173,400 mt) of weekly corn export sales for 2017-18 and 41.5 mb (1,054,600 mt) for 2018-19 as of August 16.

In 2017-18, total shipments plus outstanding sales are now 2.379 bb, 7 percent above the previous marketing year. In the weekly crop progress report; U.S. corn crop conditions were rated 68 percent good/excellent versus 69 percent expected, 70 percent last week and 62 percent last year.

Corn in the dent stage is 44 percent versus 26 percent on average. In the weekly EIA report, U.S. ethanol production of 1.073 million barrels/day (315 million gallons/week) was essentially unchanged from the previous week’s 1.072 mbpd and was 2.0 percent above last year’s same-week production of 1.052 mbpd. Crude oil stocks saw a drawdown of 5.84 mb versus estimate of a 1.5 mb drawdown.

The International Grains Council pegged the world corn production at 1.064 billion tonnes, of which 370.5 mmt are slated for the US, on par with last year at 371.0 mmt. The Pro Farmer crop tour estimated the U.S. corn crop at 14.501 billion bushels, with an average yield of 177.3 bushel/acre. Historically, they underestimated the U.S. average yield last year by 9.5 bushels/acre, while the average underestimation over the last five years was by 4.8 bushels/acre.

Strategy and outlook

Plan on storing as much crop as possible this fall and look for higher prices next summer.

Soybean analysis

Soybeans closed the week $.43 1/4 lower. Last week, private exporters 146,000 mts of soybeans to an unknown destination and 250,000 mts of meal to an unknown destination.

USDA reported 5.6 mb (152,700 mt) of weekly soybean export sales for 2017- 18 and 42.2 mb (1,148,600 mt) for 2018-19. In 2017-18, total shipments plus outstanding sales are now 2.159 bb, 3 perccent less than a year ago.

In the weekly crop progress and conditions report, U.S. soybean crop conditions fell to 65 percent good/excellent versus 66 percent expected, down from 66 percent last week but still ahead of 60 percent last year. 91 percent of the soybean crop is setting pods, slightly ahead of last year’s 83 percent. History tells us that big crops get bigger, which will increase U.S. stocks even further until China re-emerges as a buyer of U.S. soybeans.

Brazil and Argentina will both increase their soybean seedings this fall to take advantage of increased soy demand. The Pro Farmer crop tour estimated the soybean crop at 4.586 billion bushels, with an average yield of 53.0 bushels/acre. Last year, the tour underestimated the U.S. average yield by just 0.6 bushels/acre last year, but even a similar “miss” this year would still imply a yield of 53.6 bushels/acre vs the USDA’s August Crop Production report estimate of 51.6 bushels/acre and would put the crop at a massive 4.763 billion bushels, 177 million bushels above the USDA’s 4.586 billion bushel estimate. Over the last five years, the tour has underestimated the U.S. soybean yield by an average of 1.9 bushels/acre.

Strategy and outlook

Plan on storing as much crop as possible this fall and look for higher prices next summer.

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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