Idemnity payments higher last year

Across the tri-state region, the USDA Risk Management Agency’s crop indemnity maps shows much higher payments for crops in 2017 than it did this year. In North Dakota, Barnes County had the largest crop insurance payments in the state this year with $4.7 million. Due to the drought, nearly every county in the state had higher crop insurance payments last year. Hettinger County had the highest indemnity payments in 2017 with over $40 million. On the Iowa-Minnesota border, Martin County has the highest crop insurance losses this year at $1.9 million. A year ago, Minnesota’s Marshall County suffered the most losses at more than $12 million. Sully County, which is in the central part of the state, had the largest crop insurance payments in South Dakota this year at $8.3 million. Sully County also had the most indemnity payments last year at $29.2 million.

Ag Processing Incorporated fined

Ag Processing Incorporated will pay a $500,000 fine to the EPA for not having adequate safeguards in place at its oilseed processing plants in Dawson, Minnesota and seven other facilities in Iowa and Nebraska. AGP will also come into compliance with federal rules to prevent potential spills at its vegetable oil and biodiesel production facilities.

Net farm income projections show drops

USDA released net farm income projections for 2018 that call for a $9.8 billion drop from 2017 to $65.7 billion. However, they also anticipate assets and equity to increase. According to USDA, net cash farm income is forecast to decrease 12.0 percent to $91.5 billion. “In inflation-adjusted 2018 dollars, net farm income is forecast to decline $11.4 billion (14.8 percent) from 2017 after increasing $13.0 billion (20.3 percent) in 2017,” the agency noted. “If realized, inflation-adjusted net farm income would be just slightly above its level in 2016, which was its lowest level since 2002.” Cash receipts for all commodities, including livestock, are forecast to remain nearly stable in 2018 at $374.0 billion.

Corn analysis

Corn closed the week $.03 higher. Last week, private exporters a sale of 273,800 mts to an unknown destination and a 100,611 mts sale to Mexico.

USDA reported 6.9 mb (175,400 mt) of weekly corn export sales for 2017-18 and 20.7 mb (525,000 mt) for 2018-19 as of August 23. In 2017-18, total shipments plus outstanding sales are now 2.383 bb, 7 percent above the previous marketing year.

In the weekly crop progress report; NASS reported U.S. corn crop conditions at 68 percent good/excellent versus 68 percent expected and unchanged from last week and ahead of 62 percent last year.

Corn in the dough stage was reported at 92 percent versus the 5 year average of 84 percent, corn dented was seen at 61 percent complete versus the 5 year avg of 42 percent, and corn mature was reported at 10 percent compared to the 5 year average of 5 percent.

In the weekly EIA report, crude oil stocks saw a drawdown of 2.6 mb versus and expected drawdown of 1.5 mb. Gasoline stocks saw a drawdown of -1.6 vs unchanged expectations. Ethanol production averaged 1,070,000 bpd versus 1,073,000 the prior week.

The USDA will provide traders with the next glimpse of market information on September 12 with the monthly supply/demand data. The trade will be looking for the USDA to slightly increase their production figure as big crops tend to get bigger. The USDA should be conservative with their estimate as they will most likely wait until more yield data comes in prior to making a major adjustment to their crop estimates. From the demand side, look for the USDA to slightly increase ethanol and feed usage as well as exports. This will create nearly unchanged ending stocks. Corn prices should slide lower during the early stages of harvest.

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 $.09 lower. Last week, private exporters 250,000 mts of soybeans to an unknown destination and 198,862 mts of meal to Mexico.

USDA reported 4.1 mb (110,900 mt) of weekly soybean export sales for 2017- 18 and 21.7 mb (591,600 mt) for 2018-19. In 2017-18, total shipments plus outstanding sales are now 2.163 bb, 3 percent less than a year ago. In the weekly crop progress and conditions report, U.S. soybean crop conditions improved slightly to 66 percent good/excellent versus 65 percent expected, 65 percent last week and 61 percent last year.

Soybean setting pods was seen at 95 percent complete compared to the five year average of 90 percent. Soybean dropping leaves was reported at 7 percent compared to the five year average of 4 percent complete.

The USDA will provide traders with the next glimpse of market information on September 12 with the monthly supply/demand data. The trade will be looking for the USDA to slightly increase their production figure due to ideas that August weather was beneficial to yields. The USDA should be conservative with their estimate as they will most likely wait until yield data comes in prior to making a major adjustment to their crop estimates. From the demand side, look for the USDA to leave crush mill usage as well as exports near unchanged. This will create nearly unchanged ending stocks for soybeans. Soybean prices could dip on some harvest pressure but look for only minimal selling at harvest as basis levels will be horrible.

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.