Midwest Marketing Solutions
High approval rating for President Trump
According to Farm Journal, President Trump’s approval rating in farm country is at its highest level ever. The monthly survey found 83 percent of farmers and ranchers support the president’s job performance. This poll coincides with trade policy wins with China and USMCA.
Corn closed the week $.02 3/4 lower. Last week, private exporters announced sale of 143,948 mts of corn to Guatemala and 283,428 mts of corn to unknown destinations.
In the weekly export inspections report; U.S. corn exports, for the week ended 01/16/20, were a dismal 13.6 million bushels, the 3rd lowest of the first 20 weeks of the 2019/20 marketing year.
With cumulative exports now at just 371 million bushels, down 54 percent from last year’s 812 million, corn exports will need to average nearly 40 million bushels/week through the end of August in order to reach the USDA’s 1.775 billion bushel export projection.
In the weekly EIA report, ethanol production declined sharply from the previous week’s historically high level and still met the average “needed” outright pace and year-over-year increase pace needed to reach the USDA’s 2019/20 corn for ethanol usage estimate. Ethanol stocks rose sharply again, moving above year ago stocks for the first time in 18 weeks following the surge seen in recent weeks. Ethanol production was 1,049 bpd versus 1,095 bpd last week. Demand is improving for corn and should continue to improve into the end of February until South American supplies become available. Increased number of animals on feed should improve feed demand this quarter.
Strategy and outlook
The bullish weekly reversal should limit the fund and speculative selling interest. The sluggish fundamentals will limit the upside potential and producers should sell inventory on rallies.
Soybeans closed the week $.27 lower. Last week, private exporters did not announce any export sales.
In the weekly export inspections report; U.S. soybean export inspections, for the week ended 1/16/20, were solid again at 44.1 million bushels and were a 5-week high. Cumulative exports of 888 million bushels are up 24 percent from last year’s 718 million, requiring exports through the end of August needing to average roughly 25.6 million bushels/week in order to reach the USDA’s 1.775 billion bushel export projection. Normally, February looks to see slower U.S. export sales as early planted beans in Northern Brazil begin to come to harvest and hit the world market at a price lower than any U.S. posted price. Because Brazil can only store up to 25 percent of their harvest, they are forced to forward sell approximately 75 percent of their early harvested soybeans.
It is the period between mid-February and May that South America over takes the U.S. as the primary port of origin for beans. This will leave weather on late maturing crops as the sole bullish factor for soybean values. February in Brazil and Argentina is like August here as it’s a key yield-developing month for three quarters of the crop.
Strategy and outlook
Futures are anticipating that South America will produce a record soybean crop this will surely cut into U.S. exports and limit the upside potential for soybean values. Futures look to probe key support in February unless South American weather turns adverse.
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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