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Midwest Marketing Solutions

By Staff | Apr 8, 2019

In the news

More than 40 livestock producers in the area have been caught up in legal action and bankruptcy of Plainville Livestock Commission, operated by Tyler Gillum.

This is just the latest in a series of financial problems and federal regulation violations faced by the market agency. On Feb. 12, Almena Bank froze two of Plainville Livestock Auction’s bank accounts. When the bank froze the accounts, tens of thousands of dollars worth of checks Gillum had written to area ranchers who had recently sold cattle at the Plainville Livestock Commission bounced.

In court filings, the bank noted Plainville Livestock Commission transferred more than $916,000 from its custodial account into its general operating account the bank’s officers believed to cover overdrafts in the general operating account.

Almena Bank has filed an interpleader case, which is legal action that seeks to determine to whom the money that was transferred out of the custodial account belongs.

When a market agency sells livestock, the money collected from the buyers is supposed to be deposited in a custodial account until the sellers are paid. The funds collected during sale have to be deposited into the account by the next business day. Regulations prohibit market agencies from using the proceeds from the sale of livestock sold on a commission basis for any purpose other than paying consignors the net proceeds from the sale of their livestock, after deducting the market’s lawful charges.

Plainville Livestock Commission was cited by federal court in 2012 and 2014 for not having sufficient funds in its custodial account. On July 31, 2017, an analysis of Plainville’s custodial account showed Plainville had outstanding checks drawn on its custodial account in the amount of $9,641,594. The custodial account had a balance of $45,928 with proceeds receivable of $46,615, resulting in a custodial account shortage of $9,549,050.

Between March 2018 and May 2018, Gillum issued 33 insufficient funds checks from its custodial account totaling more than $1.25 million. The checks were paid, but were paid up to two weeks late, resulting in $1,500 in overdraft fees and $775 in returned item fees on the custodial account.

The U.S. Attorney filed filed another case another case in July 2018 in which it stated Plainville Livestock Commission failed on numerous occasions to maintain funds in its custodial account. Gillum was fined $117,750. In addition to the interpleader case, Almena bank also attempted to foreclose on Gillum based on default of three loans totaling more than $3.49 million. The bank alleged in court documents Gillum was trying to dispose of assets that he had designated as collateral on the loans.

Corn analysis

Corn closed the week $.22 lower. Last week, private exporters did not announce any export sales.

U.S. corn exports, for the week ended 3/21/19, were 39.2 mb, a bit above market expectations of and were up from the previous week’s 31.6 mb. This is also well below last year’s same-week exports of 52.4 mb and were also below the roughly 43.2 mb/week corn exports will need to average through the end of August in order to reach the USDA’s current 2.375 billion bushel export projection.

The quarterly stocks report was a bearish surprise for the industry with corn stocks as of March 1 coming in 270 mb above expectations, the third largest increase in history.

The USDA estimated March 1 U.S. corn stocks at 8.605 billion bushels, sharply above the average trade estimate of 8.335 billion and down only 287 million bushels from last year. The last notable stocks surprise came in 2013 with an extra 369 mb of corn found.

With the increase of quarterly stocks, look for the USDA to revise their carry in stocks and increase old crop stocks to 2.110 bb in the April supply/demand report. The 92.792 million acre planting estimate is likely to be the largest of the marketing year as some acres will be switched to other commodities or even some acres will be abandoned as farmers take the preventive planting option.

Strategy and outlook

Producers should use options to re-own and manage risk. Weather related rallies are selling opportunities.

Soybeans analysis

Soybeans closed the week $.20 1/4 lower. Last week, private exporters announced sale of 816,000 mts of U.S. soybeans to China.

U.S. soybean exports last week were 31.5 mb, in line with market expectations and nearly unchanged from the previous week’s 31.2 mb. This is above last year’s exports of 26.1 mb and in line with the roughly 32.0 mb/week in which soybeans will need to average through the end of August in order to reach the USDA’s 1.875 billion bushel export projection.

The USDA increased soybean stocks by 33 mb above the average trade estimate, which was not as a bearish surprise as the corn market but still an all time record and just added bushels to an already overburdened market.

The USDA confirmed producers would plant considerably less acres of soybeans in 2019 compared to the prior year at 84.617 million, down 4.6 million from last year’s 89.196 million. This too could change this spring as corn acres that are too wet to plant corn on, could switch to soybeans. In five of the last seven years, the final soybean acreage figure was much larger than the USDA’s March estimate.

Strategy and outlook

Producers should use options to re-own and manage risk. Weather related rallies are selling opportunities.

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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