Green Plains selling plants to Valero Renewable Fules

Green Plains announced it will sell its ethanol plants in Lakota, Iowa, Bluffton, Ind. and Riga, Mich. to Valero Renewable Fuels. The company will receive $300 million in cash plus approximately $28 million of working capital, also paid in cash. “The sale of these three ethanol plants demonstrates our commitment to strengthening our balance sheet and unlocking value for our shareholders,” said Todd Becker, president and CEO of Green Plains in a recent press release.

The transaction includes 20 percent of the company’s reported ethanol production capacity -or 280 million gallons of nameplate capacity. In addition, Green Plains also entered into an asset purchase agreement with Green Plains Partners LP (Partnership) to gain their storage and transportation assets and the assignment of railcar leases with the Lakota, Bluffton and Riga ethanol plants. Green Plains will exchange $120.9 million worth of units it owns of the Partnership, to the partnership for the storage and transportation assets as well as railcar leases. In total it’s approximately 8.9 million units.

Sales of tractors rise in U.S.

According to an Association of Equipment Manufacturer’s report, U.S. sales of all tractors were up two percent in September compared to the same time-frame in 2017. For the first nine months of 2018, a total of 181,515 tractors were sold. That represents an eight percent increase for the year. In September, sales of two-wheel drive tractors over 100 horsepower were up 29 percent, while four-wheel drive tractor sales were up 52 percent. For the year, four-wheel drive tractor sales were up 19 percent. Combine sales were up nine percent for the month and 21 percent over the year.

USDA releases low beef production numbers

The forecast for 2018 red meat and poultry production declined from last month. According to the October USDA report, beef production dropped due to an expected decline in fourth quarter slaughter. Carcass weights were also down due to more cows going to slaughter. Lighter carcass weights also influenced the pork supply.

Broiler and turkey production forecasts were reduced with expectations for a drop in slaughter numbers for the balance of the year. The supply/demand report increased the milk production outlook for 2018 and 2019. On a per-cow basis, milk production is growing faster than expected. Dairy cow numbers are also estimated to increase in 2019. The Class III milk price forecast was lowered for 2018, but increased for 2019.

Corn analysis

Corn closed the week $.07 lower. Last week, private exporters did not announce any private sales.

For the week ending October 11, USDA reported 15.1 mb (382,500 mt) of corn export sales for 2018-19 and none for 2019-20. There are 830 million bushels of total commitments in 2018-19, up 41 percent from a year ago.

In the weekly crop progress and conditions report, NASS reported U.S. corn crop conditions at 68 percent good/excellent versus 67 percent expected, 68 percent last week and 65 percent last year.

U.S. corn harvest advanced to 39 percent complete versus 40 percent expected, 34 percent last week, 27 percent last year and 35 percent average.

In the weekly EIA report, U.S. ethanol production, for the week ended 10/12/18, declined to 1.011 million barrels/day (297 million gallons/week) from 1.040 mbpd (306 mil gal/week) the week prior and reflected the lowest production in 25 weeks (4/20/18), as well as a small decline from last year’s same-week production of 1.019 mbpd (300 mil gal/week). Weekly crude oil stocks saw a build of 6.49 mb, well above estimates of a build of 2.2 mb. Producers should combine the bulk of the U.S. corn over the next three weeks.

Strategy and outlook

Plan on storing as much crop as possible this fall. Now look to sell the carry for spring or summer month

Soybeans analysis

Soybeans closed the week $.11 1/4 lower. Last week, private exporters private exporters announced a cancellation of 180,000 mts of soybeans to China and cancellation of 120,000 mts of soybeans to an unknown destination.

The USDA reported 10.8 mb (293,600 mt) of weekly soybean export sales for 2018-19 and 100,000 bushels (2,000 mt) for 2019-20. There are 766 mb of total commitments in 2018-19, down 21 percent from a year ago.

In the weekly crop progress and conditions report, U.S. soybean crop conditions dropped to 66 percent good/excellent versus 67 percent expected, 68 percent last week and 61 percent last year.

U.S. soybean harvest moved to 38 percent complete versus 40 percent expected, 32 percent last week, 47 percent last year and well behind 53 percent on average.

In the monthly NOPA crush report, NOPA reported its members crushed 160.8 million bushels of soybeans in September, above expectations of 157.4 million bushels and slightly up from August NOPA crush of 158.9 million bushels. It is up a huge 17.9 percent from last year’s September NOPA crush of 136.4 million bushels. For the 10th consecutive month, NOPA September crush was also a new monthly record, smashing the previous NOPA crush record for the month of 139.8 million bushels set in 2007. Soyoil stocks were lower at 1.531 billion pounds and soymeal exports were at 785,267 tons. A new trade agreement with China is imperative to see an improvement in demand and a reduction in the burdensome ending stocks of 885 mb. This figure could easily increase in subsequent reports as demand slows compared to last year.

Strategy and outlook

Plan on storing as much crop as possible this fall. Now look to sell the carry for spring or summer months.

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.