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Midwest Marketing Solutions

By Staff | Aug 27, 2019

Wells Fargo fined

NFA has ordered San Francisco, Calif. swap dealer Wells Fargo Bank, N.A. (Wells Fargo Bank) to pay a $2,500,000 fine.

The decision, issued by NFA’s Business Conduct Committee (BCC), is based on a complaint issued by the BCC and a settlement offer submitted by Wells Fargo Bank. The BCC found that Wells Fargo Bank failed to communicate with a counterparty in a fair and balanced manner.

Value of agricultural land is up

The average value of agricultural cropland in the United States is $4,100 per acre, up 1.2 percent from the previous year. That’s according to the USDA 2019 Land Values report released this week.

That value of cropland ties the 2015 record-high and represents a 55 percent increase in values over the last decade. North Dakota cropland values average $1,740 per acre and $2,070 per acre in South Dakota. A higher value of $4,840 per acre is reported in Minnesota. The average cash rent rate is $70 per acre in North Dakota, $119 per acre in South Dakota and $164 per acre in Minnesota. The U.S. pasture value average is $1,400 per acre, up 2.2 percent from 2018.

Corn analysis

Corn closed the week $.36 1/4 lower. Last week, private exporters did not report any export sales.

In the weekly export inspections report; U.S. corn exports, for the week ended 8/08/19, were 27.7 million bushels and were up slightly from the previous week’s 25.4 mb.

Exports exceeded the roughly 19 million bushels/week needed to average over the final three full weeks of the 2018/19 marketing year in order to reach the USDA’s 2.100 billion bushel export projection.

The long awaited August WASDE report saw a bearish blow to grain bulls with an increase in production, the opposite of what the trade was expecting for corn.

The USDA pegged the 2019 corn harvested acres at 82.0 million, yield at 169.5; up 3.5 bpa from last month, resulting total production at 13.901 billion bushels. While this production is down from last year when the U.S. produced a 14.42 bb crop on a yield of 176.4 bpa.

Carryout was expected to be slashed for 2019/20 to 1.613 bb, but was actually increased to 2.181 bb versus 2.010 bb in July. Carryout for 2018/19 was increased to 2.360 bb versus 2.340 bb in July.

Exports for 2019/20 were lowered by 100 mb and ethanol demand by 25 mb.

The corn condition report showed the good/excellent (G/EX) as of August 11th was unchanged at 57 percent and compared to 70 percent last year.

Traders were looking for a 1-2 percent drop in yesterday’s crop conditions.

The corn crop is 90 percent silking compared to 96 percent last year and 39 percent of the crop is in dough stage compared to 71 percent last year.

Of the top 18 states, five reported better, 10 worse, and three unchanged G/EX ratings.

Major producing states with improving conditions were Nebraska 75 percent (+4 percent), Missouri 39 percent (+5 percent).

Declining conditions in major producing states were Iowa 65 percent (-1 percent), Illinois 40 percent (-1 percent), Minnesota 56 percent (-1 percent), Indiana 33 percent (-3 percent), South Dakota 64 percent (- 2 percent), Wisconsin 63 percent (-2 percent), and North Dakota 71 percent (-2 percent).

Strategy and outlook

Producers should use more option strategies this year than in previous years to provide greater marketing flexibility.

Soybeans analysis

Soybeans closed the week $.14 lower. Last week, private exporters announced sale of 296,500 mts of soybeans to an unknown destination for 2019/20.

In the weekly export inspections report, U.S. soybean exports last week were 34.7 million bushels and were just slightly below the previous week’s 38.0 mil bu.

Soybean exports continue at a pace supporting the USDA’s 1.700 billion bushel export projection.

In the weekly crop conditions report; soybean crop conditions showed the good/excellent (G/EX) rating as of August 11th was unchanged at 54 percent and compared to 66 percent last year.

Improving conditions in top producing states were Nebraska 73 percent (+3 percent), Kansas 50 percent (+1percent), Arkansas 59 percent (+6 percent).

Declining conditions in major producing states were Illinois 39 percent (-1 percent), Iowa 63 percent (-2 percent), Minnesota 59 percent (-2 percent), North Dakota 62 percent (-1 percent), Indiana 34 percent (-2 percent), South Dakota 53 percent (-1 percent), Wisconsin 66 percent (-3 percent).

In the WASDE supply/demand report; the USDA pegged the 2019/20 bean harvest acres at 75.9 million; yield at 48.5, unchanged with last month and total production at 3.68 billion bushels versus. 3.845 bb last month.

This acreage total was down a shocking 12.5 million acres from 2018. Despite the sharp drop in planted acres, carryout is projected to be the second largest on record. Carryout for 2019/20 was reduced to 755 mb versus 795 mb in July. Carryout for 2018/19 was increased to 1.070 bb versus 1.050 bb in July.

The exports were lowered by 100 mb for the 2019/20 marketing year while crush was left unchanged. The NOPA crush report for July reported 168.093 mb crushed with meal exports at 879 tons and soyoil stocks at 1.467 billion pounds. The crush was well above trade expectations at 155.826 mb and the oil stocks were well below trade expectations of 1.530 billion pounds. July crush rebounded significantly from 148.8 million in June and actually represented a new all-time crush for the month of July, marginally surpassing last year’s 167.7 million.

Strategy and outlook

Large carryover stocks gives the market some cushion in case of lower yields but August is the most important month for soybean production.

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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