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Midwest Marketing Solutions

By Staff | Jan 20, 2020

Glacial Lakes Energy acquires two Advanced BioEnergy plants

Glacial Lakes Energy has completed its acquisition of the Advanced BioEnergy ethanol plants in Aberdeen and Huron.

This deal, which was announced in August, is valued at $47.5 million. Glacial Lakes Energy already has ethanol plants in Watertown and Mina, South Dakota.

Empirical to built new ground beef facility

South Dakota-based Empirical will build a new ground beef facility in Garden City, Kansas.

The new building will bring 300 jobs to the area. Construction will begin in early 2020 and be completed in two-to-three years. According to a company news release, the Garden City facility will supplement existing production at its South Sioux City, Nebraska location.

MGEX sees second best year

MGEX reported 2019 concluded as the second-best calendar year in history with a total of 2,357,996 contracts traded.

Accompanied by this achievement, it was also the second-best calendar year for electronic volume with a total of 2,075,531 contracts. MGEX also completed the third-best December in its history, reporting a total of 162,254 contracts from the month. This past month saw a 16 percent increase in total volume compared to December 2018.

Corn analysis

Corn closed the week $.04 1/4 lower. Last week, private exporters did announce any export sales.

In the weekly export inspections report; for the week ending December 26, 2019, USDA reported inspections of 16.099 million bushels (mb) of corn versus 39.7 mb that is needed to reach the current USDA export projection.

U.S. ethanol production, for the week ended 12/27/19, fell to 1.066 million barrels/day (313 million gallons/week) from 1.083 mbpd (318 mil gal/week) the week prior, but was 5.4 percent above last year’s same-week production of 1.011 mbpd (297 mil gal/week), the largest year-over-year percentage increase of the 2019/20 corn marketing year so far.

U.S. ethanol stocks last week declined to 883 million gallons (21.034 mil barrels) from 902 million gallons (21.469 mil barrels) the week prior and were 89 million gallons below year ago same-week stocks of 973 million gallons.

U.S. ethanol stocks have declined for three consecutive weeks and are at risk of declining to the lowest level, on a same-week basis, in five years with additional declines over the next two weeks.

The January supply/demand report will be released on January 10 and traders are hoping the USDA will decrease their final 2019 corn production estimate and increase their demand estimates, slowly tightening the balance sheets. Farmer selling should increase after the first of the year as farmers will need to move some corn to maintain the quality of the stored crop, but basis levels should narrow through the winter months.

Strategy and outlook

After corn scored a bullish weekly reversal, a three week rally unfolded. Now a bearish technical reversal and overall bearish fundamentals could put an end to that rally.

Soybean analysis

Soybeans closed the week $.01 lower. Last week, private exporters did not announce any private sales.

In the weekly export inspections report; the USDA reported soybean inspections of 33.491 million bushels versus 27.3 mb that is needed weekly to reach the USDA export projection. The USDA reported November U.S. soybean crush was 174.6 million bushels, below average market expectations of 175.9 million bushels (175.0-177.0 million range of ideas) and down from 187.0 million in October and 1.9 percent below last year’s record November crush of 178.1 million bushels.

For the first quarter of 2019/20, crush of 524.0 million bushels was down 1.3 percent from last year’s 530.9 million bushels.

The January 10 supply/demand report has the potential to be a major market mover as the USDA will issue the final production forecast for the 2019 crop and update the demand figures.

Export forecasts could increase substantially given the Chinese trade agreement. Traders are going to look for the USDA to decrease their final 2019 soybean production estimate and to increase their demand estimates, slowly tightening the balance sheets. Farmer selling looks to be a minimum this winter as producers are more interested in selling corn and holding onto their soybeans in case another weather problem develops in South America and Chinese demand dramatically improves and prices move higher.

Strategy and outlook

Futures bounced off long term support with strong end user buying supporting values. Prices are likely to probe weekly resistance amid the new trade agreement. The timing of Chinese purchases will prove interesting and indicative of how the balance sheets will be affected.

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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Midwest Marketing Solutions

By Staff | Jan 20, 2020

Trade agreement is now in effect

The newly approved trade agreement between the U.S. and Japan is now in effect. Tariffs are lifted on more than $7 billion worth of U.S. agricultural goods. This gives 126 million Japanese consumers will have greater access to American beef, pork, nuts, sorghum, sweet corn and others. It also provides a country-specific quota for U.S. wheat. According to the Office of the U.S. Trade Representative, the new terms amount to $55 billion worth of trade.

MFP

There is likely to be a third tranche of Market Facilitation Program payments in January 2020.

“We’re working with the Farm Service Agency to make sure they get the third and final payment out in a timely manner,” said North Dakota Senator John Hoven.

According to North Dakota Farm Service Agency State Executive Director Brad Thykeson, 75 percent of MFP 2.0 is paid out.

“If we finish this deal on MFP 2.0, we’d be at $714 million we’ve put into (North Dakota) producer’s hands in 2019. That’s almost double the first MFP go around. Those are big dollars that have to do with the trade tariffs.”

Corn analysis

Corn closed the week $.00 3/4 higher. Last week, private exporters announced sale of 207,000 mts of corn to an unknown destination for 2020/21.

In the weekly export inspections report; U.S. corn exports last week of 21.7 million bushels were a 3-week high.

Cumulative exports of 339 million bushels are down 53 percent from last year’s 727 million at this time, with corn shipments needing to average roughly 40.2 million bushels/week in order to reach the USDA’s 1.850 billion bushel export projection versus 33.2 million/week from this point forward last year.

The USDA increased corn yields and production while the trade was looking for a small reduction of both. The yields were increased to 168 bushels per acre (bpa), up 1.1 bpa from prior estimates.

Harvested acreage reductions were noted and final production figures are estimated at 13.692 billion bushels (bb). The USDA did indicate they would resurvey farmers that still have unharvested crop, but those changes will have minimal on the balance sheets.

The USDA increased feed usage by 250 million bushels (mb), production by 31 mb and beginning stocks by 107 mb, while lowering exports by 75 mb. This resulted in ending stocks being reduced by a modest 18 mb. This leaves U.S. ending stocks at 1.892 bb with a stocks/usage ratio at 13.4 percent.

This report has to be a disappointment to bulls and bullish farmers that were hoping the USDA would finally lower yield forecasts. USDA reported December 1, 2019 U.S. corn stocks at 11.389 billion bushels, essentially 270 million bushels less than anticipated by the trade.

Strategy and outlook

Overall fundamentals remain bearish and now with the large spec funds holding a net long position, the upside potential appears to be limited unless a weather issue develops in South America.

Soybeans analysis

Soybeans closed the week $.04 1/2 higher. Last week, private exporters did not announce any private sales.

In the weekly export inspections report; U.S. soybean export inspections were a 12-week low of 35.4 million bushels. Cumulative export inspections of 799 million bushels are up 25.6 percent from last year’s 636 million, with shipments needing to average roughly 27.0 million bushels/week in order to reach the USDA’s 1.775 billion bushel export projection vs last year’s 30.6 million/week from this point forward.

The USDA made even less changes to the soybean market than to the corn balance sheets.

Beginning stocks were lowered by a mere 4 mb and yields increased by 1/2 bushel per acre with harvested acres down 600,000. This resulted in a slight 8 mb increase in production to 4.482 bb and usage was left unchanged at 4.008 bb with ending stocks unchanged at 475 mb. The 475 mb is the second largest on record, only trailing last year and the stocks to usage ration is a comfortable 11.8 percent.

December 1 U.S. soybean stocks also were larger than expected at 3.251 billion bushels, coming in 65 million bushels larger than expectations. December 1 U.S. soybean stocks are the 2nd highest on record, with the December 1 stocks/Sept-Nov usage ratio the 2nd highest of the last 11 years.

Production in Argentina and Brazil were left unchanged at 53.0 mmts and 123.0 mmts respectively. This would be new record production if realized.

Strategy and outlook

Futures probed weekly resistance and could test them again if China is a large buyer during the signing ceremony. South America looks to produce a record soybean crop if weather is normal during the next 2-3 weeks. This will surely cut into U.S. exports and limit the upside potential.

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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