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Midwest Marketing Solutions

By Staff | Feb 27, 2020

A third MFP unlikely

While President Trump promises additional trade aid to farmers if needed; speaking at the USDA Ag Outlook Forum in Washington, USDA Secretary Sonny Perdue said that a third Market Facilitation Program payment was unlikely.

“The market will handle…the pricing of commodities going forward,” Perdue told reporters at the conference. He said the government might reconsider if there was an unexpected disruption in global trade flows. Perdue said he expected Chinese buying of U.S. agriculture exports to ramp up this spring after the coronavirus outbreak in China abates.

Corn analysis

Corn closed the week $.01 1/4 lower. Last week, private exporters did not announce any export sales.

In the weekly export inspections report; U.S. corn exports, for the week ended 2/13/20, were 31.3 million bushels and did reflect a new marketing year high. However, they were well below the roughly 39.5 million bushels/week estimated corn exports will need to average through the end of August in order to reach the USDA’s 1.725 billion bushel export projection.

Cumulative exports of 485 million bushels are down 49 percent from last year’s 952 million. In the weekly EIA report; U.S. ethanol production, for the week ended 2/14/20, rose modestly to 1.040 million barrels/day (306 million gallons/week) from 1.033 mbpd (304 mil gal/week) the week prior and was 4.4 percent above last year’s same-week production of 996 kbpd (293 mil gal/week).

At the USDA Outlook Conference the UDSA announced corn plantings at 94 million, up 2 million from last year’s conference. They forecast yields at 178.5 bpa with a total production of 15.460 bb versus total usage of 14.740 bb. They did increase exports from 1.725 bb this marketing year to 2.150 bb at the forum. This resulted in ending stocks at a robust 2.637 bb. If realized, this would be a new all time record.

Strategy and outlook

The USDA outlook forecast sheds a bearish light on the corn market. Any weather related rallies need to be sold as producers rid themselves of both old and new crop inventories.

Soybeans analysis

Soybeans closed the week $.05 lower. Last week, private exporters did not announce any export sales.

In the weekly export inspections report, U.S. soybean exports last week of 36.5 million bushels and continued to run above the average “needed” pace of 25.5 million bushels/week for the time being prior to the seasonal ramping up of Brazilian exports. Cumulative exports of 1.039 billion bushels are still up 19 percent from last year’s 875 million, but declining after having been up 26 percent just seven weeks ago.

Soybean exports from this point forward last year averaged 28.7 million bushels/week. The monthly NOPA crush report NOPA reported its members crushed 176.9 million bushels of soybeans in January, well above average market expectations of 173.7 million, up solidly from 174.8 million in December, 3.1 percent above last year’s 171.6 million bushels and reflected a new all-time record NOPA crush for any month. With the record crush, soybean oil production of NOPA members rose to a new all-time record high, regardless of month, of 2.035 billion pounds, up from 2.012 billion in December and compared to year ago Jan production of 1.993 billion pounds – thanks to RJ O’Brien.

At the USDA Ag Outlook Conference, the USDA forecast U.S. soybean acres at 85 million, unchanged from a year ago with yields at 49.8 bpa and a total production at 4.195 bb versus total usage of 4.314 bb as they increased exports from 1.825 bb in the current marketing year to 2.050 bb for 2020/21. This resulted in ending stocks at 320 bb. Which if realized, would be the tightest since the 2016/17 marketing year.

Strategy and outlook

A record South American soybean crop this will surely cut into U.S. exports and limit the upside potential for soybean values. Futures tested key downside support and may try and rally off of it, although the upside is limited until spring planting.

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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