Midwest Marketing Solutions
Labeling on plant-based meat addressed
Bipartisan legislation has been introduced in the U.S. House of Representatives regarding the labeling on plant-based meat. The Marketing Edible Artificial Truthfully, or MEAT, Act aims to establish a federal definition of beef for food labels. In addition, it seeks to eliminate consumer confusion due to misleading labels and boosts the federal government’s ability to enforce misbranding.
Highest net farm income since 2014 projected
USDA is projecting 2019 farm income at $88 billion. That’s the highest net farm income since 2014. Farm debt is projected to be record high at $416 billion.
For the 12-month period ending in September, Chapter 12 farm bankruptcies totaled 580 filings nationwide. Thirty-one of those bankruptcies were in Minnesota, 13 were filed in South Dakota and three in North Dakota.
Reports of Wells Fargo lay offs
Reuters is reporting Wells Fargo has laid off more than 200 bankers in recent months. A large share of those layoffs were in the agriculture business unit. The agriculture group at Wells Fargo reportedly cut 25 percent of its ag bankers. The American Bankers Association lists Wells Fargo as the largest commercial bank in the country for farm sector.
CFTC settles charges
The U.S. Commodity Futures Trading Commission today issued an order filing and settling charges against Tower Research Capital LLC, a proprietary trading firm, arising from a manipulative and deceptive scheme, spanning nearly two years and involving thousands of occasions of spoofing in equity index futures products traded on the Chicago Mercantile Exchange (CME) and Chicago Board of Trade (CBOT). The order finds that Tower, by and through three former Tower traders, engaged in this unlawful activity while placing orders for, and trading futures contracts through, Tower accounts, which benefited Tower financially while causing $32,593,849 million in market losses.
Corn closed the week $.12 lower. Last week, private exporters announced sale of 217,040 mts of corn to an unknown destination for 2019/20.
In the weekly crop progress report; U.S. corn conditions were 58 percent good/excellent versus 58 percent expected and 58 percent last week.
U.S. corn harvest moved to 52 percent complete versus 54 percent expected, 41 percent last week, 74 percent last year and 75 percent average.
North Dakota is only 10 percent harvested with South Dakota 27 percent done, Iowa 43 percent, Minnesota 44 percent, Wisconsin 21 percent and Michigan 25 percent complete.
U.S. corn exports were dismal again at 10.8 million bushels (mb), down from the previous week’s 15.4 mb and massively below last year’s same-week exports of 50.6 mb. They were the second lowest of the first nine weeks of the 2019/20 marketing year.
Cumulative exports of just 148 million bushels are down 62 percent from last year, leaving corn exports needing to average more than 37 million bushels/week through the end of August based on the USDA’s 1.900 billion bushel export projection versus last year’s 34.0 million/week from this point forward.
In the November supply/demand report; the USDA gave traders the last glimpse of yield forecasts until January. The USDA lowered 2019/20 yield to 167.0 bpa from 168.4 bpa in October, left harvested acres unchanged and lowered production to 13.661 billion bushels (bb) from 13.779 bb last month. This was right in line with pre report estimates and partially offset decreases in demand of 100 mb as the USDA lowered feed usage by 25 mb, ethanol usage by 25 mb and exports were reduced by 50 mb. This left ending stocks at 1.910 bb, down 19 mb from last month and plenty large enough to meet expected demand.
Strategy and outlook
Stocks look to remain large with the poor demand pace. Commercial buying has lifted the index to a bullish position. The buy signal is likely premature as there are little other supporting indicators.
Soybeans closed the week $.06 1/2 lower. Last week, private exporters announced sales of 270,000 mts of soybeans to unknown destination and 136,000 mts of soybeans to China for 2019/20. Exporters also announced sales of 133,000 mts of meal to the Philippines.
In the weekly crop progress report, U.S. soybean harvest is now 75 percent complete versus 75 percent expected, 62 percent last week, 81 percent last year and 87 percent average.
North Dakota is the slowest harvest state at only 56 percent done, Wisconsin is 62 percent complete, Michigan is 57 percent complete while Missouri is 54 percent done.
U.S. soybean exports, for the week ended 10/31/19, were solid again at 54.4 million bushels, slightly below last week’s 58.0 mb but up from last year’s same-week exports of 45.8 mb.
Cumulative export inspections of 351 mb are up 11 percent from last year’s 317 million, with exports needing to run almost identical to last year at 31.9 million bushels/week (31.6 last year) over the remained of the marketing year in order to reach the USDA’s current 1.775 billion bushel export projection.
For soybeans, the USDA left the 2019/20 harvested acres at 75.6 million and yield at 46.9 bpa, both unchanged from their October report. This left production at 3.550 bb. They made minimal changes to the balance sheet with only a 15 mb reduction in crush for 2019/20, which raised ending stocks by a like amount to 475 mb for 2019/20. Exports were left unchanged at 1.775 bb, likely due to the uncertainty surrounding a trade agreement with China. This figure represents the minimal amount of soybeans purchased by China with a trade agreement to significantly increase U.S. exports and lower US ending stocks.
Strategy and outlook
The COT report remains bearish for the soybean complex with aggressive commercial selling offsetting the strong fund buying.
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.