Midwest Marketing Solutions
American Farm Bureau Federation states “farm economy remains soft.”
Farmers are starting to meet with their bankers as the end of the year approaches. “Currently, the farm economy remains soft,” said American Farm Bureau Federation economist Veronica Nigh.
Just this year alone farm bankruptcies were up 24 percent compared to the same time frame in 2018.
“I get asked a lot ‘Are we back in the 1980s?’ For comparison, during the 80s farm crisis there were 4,800 farms closing per year. Last year we lost 480 due to bankruptcies,” Nigh said adding one underlying driver is farm assets.
The total value of land, buildings and equipment is significantly higher compared to the 1980s.
Farm income forecast increased by USDA
(Reuters) – Nearly one-third of projected U.S. net farm income this year will come from government aid and taxpayer-subsidized commodity insurance payments, according to a forecast issued last Wednesday by the U.S. Department of Agriculture.
The USDA increased its net farm income forecast for 2019 by more than 10 percent, to $92.5 billion, driven largely by the Trump administration’s trade aid payments to farmers and federal insurance indemnities from extreme weather events, USDA Economic Research Service senior economist Carrie Litkowski said in a conference call with reporters. Without those payments, U.S. net farm income this year would have dropped by nearly 8 percent, to $63.6 billion. Total direct payments to the nation’s estimated 2 million farms are expected to surge to $22.4 billion this year, a 64 percent increase over 2018 and the highest rate paid out since 2005, Litkowski said.
Corn closed the week $.02 3/4 higher. Last week, private exporters did not announce any export sales.
In the weekly crop progress and conditions report; corn harvested advanced to 84 percent done versus 96 percent on average.
Producers in North Dakota are only 30 percent harvested while Wisconsin is 57 percent done, Michigan 56 percent complete and South Dakota is 68 percent done.
Corn export inspections totaled 23.8 million bushels (mb), below the 40.3 mb needed each week to reach USDA’s export estimate of 1.850 billion bushels (bb).
Inspections for 2019-20 now total 220 mb, down 57 percent from the previous year. In the weekly EIA report, weekly ethanol production saw its 9th week of increased production. Production was reported at 1,059,000 barrels per day, up 26k barrels per day. The stocks declined to 20.28 million barrels (down 237k barrels).
The USDA supply/demand report on December 10 looks to lend little direction to prices, with no production adjustment and the USDA likely to lower demand forecasts by 15 to 25 mb. The most bullish driving force for prices would be if the funds decide to become buyers with very little farmer hedge pressure until after the first of the year.
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 it is not a timing indicator.
Soybeans closed the week $.19 1/4 lower. Last week, private exporters did not announce any private sales.
In the weekly crop progress report, soybean harvest moved to 94 percent complete with North Dakota 89 percent done, Wisconsin 82 percent complete, Michigan 80 percent complete and Missouri 91 percent finished.
Soybean export inspections totaled 71.4 mb, a marketing year high, which was also above the 32.1 mb needed weekly to reach USDA’s export estimate of 1.775 bb. Inspections for 2019-20 now total 528 mb, up 18 percent from the previous year.
Brazil and Argentina currently are planting their crops at a record pace. With profit margins the highest in 5 years, farmers are expected to seed record large corn and soybean crops. Brazil and Argentina store little to no excess grain, as storage elevators are absent from the countryside, not like here in the U.S. Grain goes from field to port, which means they need to forward contract, or pre-sell their crop before it’s harvested to insure it doesn’t pile up on the farm.
From the start of the U.S. harvest in October until South American soybean harvest in March, the big demand window for U.S. soybeans as South American supplies are unavailable and the U.S. is the only port of origin for the world’s needs.
Strategy and outlook
The forecasted bearish COT report has proved prophetic with values failing at resistance and falling on fund selling.
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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