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Midwest marketing solutions

By Staff | Jan 25, 2019

I-states hit hard by declining farm incomes

Farm incomes have been on a steady decline since their peak in 2013. Just how much incomes are depressed varies, sometimes greatly, by state.

The most current USDA ERS data showing farm incomes dates back to 2017, but still tells a compelling story.

David Widmar, of Agricultural Economic Insights, compares farm incomes from the 2011 to 2013 boom to the average of 2016 and 2017.

“At the national level, net farm income has declined 42 percent across these two periods,” he said in a recent post. The Midwest was hit hard, with I-States falling by more than 60 percent, and areas outside of the Midwest fell even harder.”

CHS reports increased in first quarter net earnings

CHS is reporting first quarter net earnings of more than $347 million. That’s an increase of $160 million from the same quarter last year. Higher margins in the crop nutrients business and improved market conditions in the energy segment were factors. CHS, which held a 25 percent stake in West Central Distribution, has exercised its option to purchase the remaining 75 percent of the company.

Corn analysis

Corn closed the week $.01 3/4 higher. Last week, private exporters did not release any export sales due to the temporary government shutdown.

U.S. corn exports, for the week ended 1/10/19, rebounded respectfully in post-holiday activity with 39.9 million bushels shipped in the week, up from the previous week’s 19.7 million bushels and right in line with the average over the prior six-week period of 39.1 million bushels/week.

In the weekly EIA report, U.S. ethanol production rebounded solidly for the week ended 1/11/19 to 1.051 million barrels/day (309 million gallons/week) from 1.000 mbpd (294 mil gal/week) the week prior, but was still nearly 1 percent below last year’s same-week production of 1.061 mbpd (312 mil gal/week), reflecting the eigth out of the last nine weeks in which weekly production was below the previous year’s level.

Crude oil stocks saw a drawdown of 2.68 mb versus expectations of a drawdown of 1.3 mb. Farmer selling has increased after the first of the year as producers parted with some inventory to meet cash flow needs. A potentially bullish USDA supply/demand report has been delayed. Looking for short covering to develop when the report is rescheduled.

Strategy and outlook

Producers should look to sell the carry for spring or summer months and use options to re-own and manage risk. Don’t store unpriced crop.

Soybeans analysis

Soybeans closed the week $.04 1/2 higher. Last week, private exporters did not release any export sales due to the temporary government shutdown.

U.S. soybean exports last week were a 7-week high at 39.9 million bushels, up solidly from the previous three weeks’ exports which ranged from 24.5-27.9 million bushels, and were above market expectations of 23.0-34.9 million bushels, but were still below last year’s same-week exports of 45.7 million bushels. The monthly NOPA crush report saw its members crush 171.8 million bushels of soybeans in December, up from 167.0 million bushels in November and a new record. This figure was above average market expectations of 170.0 million and 3.3 percent above last year’s December crush of 166.3 million bushels.

Trade has been disappointed with the Chinese soybean purchases so far. China is likely to only buy hand to mouth from the U.S. as the trade war continues.

South American weather remains a wild card as some private estimates have lowered soybean production estimates for Brazil due to dry conditions but recent rainfall has stabilized the crop. Agroconsult estimated Brazil soybean crop at 117.6 mmts down from 122.8 mmts previously in November. CONAB slightly lowered their soybean production for Brazil at 118.8 mmts versus 120.1 mmts previously.

Strategy and outlook

Producers should look to sell the carry for spring or summer months and use options to re-own and manage risk. Don’t store unpriced crops.

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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