Agricultural lending has increased

According to the American Bankers Association’s annual farm bank performance report, U.S. farm banks increased agricultural lending by more than five percent in 2018. The farm loans totaled $108 billion. More than 94 percent of farm banks were profitable last year. Asset quality remained healthy and the number of non-performing loans was at a fraction of one percent.

ADM announces first quarter earnings

First quarter earnings for ADM totaled $233 million, down from $393 million the previous year. Revenue was also down from $15.5 billion in 2018, reported at $15.3 billion. The company says poor weather conditions in North America hurt operating profit by about $60 million. ADM is taking measures to improve long-term value. That includes phasing out the production of high-fructose corn syrup at Marshall, Minnesota to produce starches and liquid feedstocks for food and industrial products.

MGEX has record month

MGEX welcomed April 2019 into the record book as the 16th best month of all-time with 239,934 contracts traded. Alongside this achievement, it was the second-best April in MGEX history.

CME Group sees lower average daily volume contracts

CME Group reached average daily volume (ADV) of 15.7 million contracts during April 2019, compared to 17 million contracts in April 2018.

Open interest (OI) at the end of April was 132 million contracts, up 14 percent from year-end 2018 and up 5 percent from April 2018.

Agricultural volume averaged 1.6 million contracts per day in April 2019, down 10 percent from April 2018.

Corn analysis

Corn closed the week $.08 3/4 higher. Last week, private exporters did not announce any export sales.

U.S. corn exports in recent weeks have been running at a rather impressive pace in light of the advancing record Argentine harvest with each of the last six weeks’ export running at or above the average weekly level needed to reach the USDA’s 2.300 billion bushel export projection.

Corn exports, for the week ended 4/25/19, 53.8 million bushels, up slightly from last week’s 53.4 mb and comparable to last year’s same week shipments of 58.3 million bushels. Corn exports over the last six weeks averaged 47.4 million bushels/week (62.4 million/week last year), which is above the roughly 37 million bushels/week estimated corn inspections will need to average through August to reach the USDA’s export projection.

In the weekly crop progress report; U.S. corn planting advanced to 15 percent complete versus 14 percent expected, 6 percent last week, 15 percent last year and 27 percent average.

While the pace is similar to last year, it could fall further behind over the next two weeks with a wet forecast. In the month of May, U.S. producers should finish planting the 2019 corn crop and weather will then be 95 percent of the pricing influence.

If weather is warm with ample moisture, prices will work lower into the summer. However, if weather becomes hot and dry, prices will have no choice but to trade higher in an attempt to ration U.S. ending stocks this spring. The other wildcard is if China becomes a buyer of U.S. corn.

If the Chinese persistently buy U.S. corn, the short funds will no doubt be aggressively covering their positions.

The month of May is too early to make annual highs if weather conditions are adverse as prices should peak during the June through August growing season. With the uncertainty of the upcoming growing season, funds and commercials should look to buy weakness ahead of the key pollination timeframe in late June, just in case weather conditions become adverse.

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 $.25 3/4 lower. Last week, private exporters announced sale of 293,922 metric tons of soybeans for delivery to Mexico during the 2019/2020 marketing year.

U.S. soybean exports last week were 18.1 million bushels, up from the previous week’s 14.2 mb, but were well below last year’s same-week exports of 25.5 mb and were again solidly below the roughly 34.2 million bushels/week the soybean market will need to average on a weekly basis in order to reach the USDA’s 1.875 billion bushel export projection.

China already has around 7.6 mmts of unshipped U.S. soybeans on the books and only loaded 136,000 mts for shipment this week and 67,000 mts and 130,000 mts in each of the prior two weeks, as well.

U.S. soybean planting is now only 3 percent complete versus 4 percent expected, up from 1 percent last week versus 5 percent last year and 6 perccent average.

The month of May is when U.S. producers begin to aggressively seed the 2019 soybean crop.

Weather will become the number one pricing influence once 30 percent to 50 percent of the crop has been planted. Prices will become very sensitive to weather issues during the summer as speculative shorts will look to cover aggressively if weather problems develop. As a result, the commodity funds and commercial entities will use weakness in prices during the planting season to buy September and November futures in anticipation of weather premiums being added as planting progress reaches the 50 percent pace.

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.