Midwest Marketing Solutions
U.S. farm bankrupty rates on the rise
(Reuters) – U.S. farm bankruptcy rates jumped 20 percent in 2019 – to an eight-year high – as financial woes in the U.S. agricultural economy continued in spite of massive federal bail-out funding.
MGEX has prosperous January
MGEX reported January 2020 as the fourth-best January in history with a total Exchange volume of 175,734 contracts.
This past month saw a 47 percent increase in total volume compared to January 2019. Additionally, MGEX achieved the second-best January electronically with a total of 152,663 contracts traded. Total options volume came in at 4,542 contracts. At the close of market on Friday, open interest finished at 73,367, which is 10 percent higher than last month.
China hopes for flexibility
According to a Bloomberg report, Chinese officials are hoping the U.S. will agree to flexibility on pledges in the phase one trade deal.
This comes as the country is working on containing coronavirus outbreaks. There have been more than 17,000 confirmed cases, with more than 360 deaths. The phase one trade agreement between the U.S. and China was signed on January 15 and is expected to take effect in mid-February.
World 2020 corn crop increased
Informa increased world 2020 corn crop by 10 million metric tons (mmt) due to higher China estimate. 2020 crop is 1.147 mmt versus1.109 this year. Informa increased 2orld 2020 wheat crop by 9 mmt due to higher Russia and India estimates. 2020 crop is 763 mmt versus 764 this year. Informa increased world 2020 soybean crop by 900 mt due to higher China estimate. 2020 crop is record 372 mmt versus 341 this year.
Corn closed the week $.01 1/4 higher. Last week, private exporters did not announce any export sales.
In the weekly export inspections report; U.S. corn exports last week of 22.1 mb are well below the roughly 40.6 mil bu/week corn exports will need to average through the end of August if the USDA’s 1.775 billion bushel export projection is to be reached.
Through the first 22 weeks of 2019/20, the largest weekly exports were just 27.5 million bushels and have averaged just 19.4 million bushels/week so far. Cumulative exports of 422 million bushels are down 52 percent from last year’s 886 million at this time.
In the weekly EIA report; U.S. ethanol production, for the week ended 1/31/20, rebounded strongly to 1.081 million barrels/day (318 million gallons/week) from 1.029 mpbd (303 mil gal/week) the week prior and was the third highest production of the last 31 weeks. RJO estimates ethanol production now needs to run only around 0.6 percent above year ago levels through the end of August in order to reach the USDA’s 5.375 billion bushel corn for ethanol usage estimate versus the near 2 percent “needed” gain back in early November when production rates were still consistently running below year ago levels. U.S. ethanol stocks declined to 986 million gallons (23.474 mil barrels) last week from 1.018 billion gallons (24.244 mil barrels) the week prior and slipped back to a 2.0 percent year-over-year decline after two weeks of above year ago levels.
Overall ethanol stocks remain quite comfortable, slightly below last year’s same-week record level and in line with 2018 stocks at this time. 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 $.10 higher. Last week, private exporters announced sale of 130,000 mts of soybeans to Egypt.
In the weekly export inspections report, U.S. soybean exports, for the week ended 1/30/20, were 49.8 million bushels. Cumulative exports of 977 million bushels are up 23 percent from last year’s 793 million at this time, leaving exports needing to average roughly 24.3 million bushels/week in order to reach the USDA’s 1.775 billion bushel export projection versus last year’s 29.5 million/week average from this point forward.
The USDA reported U.S. soybean crush in December was 184.7 million bushels, a new record for the month in surpassing last year’s 183.8 million bushels, but was slightly below average market expectations of 185.7 million bushels (185.0-186.3 million range of ideas). Sept-Dec marketing year to date crush of 709 million bushels is slightly below last year’s 715 million, leaving Jan-Aug crush needing to total 1.396 billion bushels in order to reach the USDA’s annual projection of 2.105 billion, reflecting a modest 1.4 percent increase from last year’s 1.377 billion bushels for the period – thanks to Randy Mittelstaedt.
U.S. exports will likely slow between mid-February and May as 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 by the end of the month 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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