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Midwest Marketing Solutions

By Staff | Mar 24, 2020

Phase one

There is continued progress in implementing phase one of the trade agreement between the U.S. and China.

The most recent actions by China include lifting a ban on beef imports from animals over 30 months of age and updated facilities approved for exporting dairy, seafood and other products. In addition, a new tariff exclusion process went into effect March 2, allowing Chinese importers to apply for exclusion from retaliatory tariffs.

Financial stress

In yet another a sign that the turmoil in financial markets is putting extreme stress on some firms, one of the CME Group’s direct clearing firms was unable to meet its capital requirements, according to sources.

The move forced the exchange to step in and invoke its emergency protocols to auction off the portfolios. Ronin Capital, based in Chicago, was confirmed to be the firm in question, according to sources.

Corn analysis

Corn closed the week $.23 3/4 lower. Last week, private exporters announced a sale of 756,000 mts of corn sold to China.

In the weekly export inspections report; U.S. corn exports last week of 38.5 million bushels (mb) were a new marketing year high, while rising from the previous week’s 32.7 mb and also besting last year’s same-week exports of 32.0 mb.

Despite being the highest of the year so far, this week’s exports still fell short of the roughly 40.6 million bushels/week they will need to average over the coming 24 weeks if the USDA’s 1.725 billion bushel export projection is to be achieved.

Cumulative exports of 627 million bushels are still down 42% from last year’s 1.080 billion. Texas corn planting was last reported at 29% compared to 28% last week and 15% on average.

U.S. ethanol production, for the week ended 3/13/20, declined modestly to 1.035 million barrels/day (304 million gallons/week) from 1.044 mbpd (307 mil gal/week) the week prior, but was still 3.1% above last year’s same-week production of 1.004 mbpd (295 mil gal/week). U.S. ethanol stocks last week rose to 1.033 billion gallons (24.598 million barrels) from 1.022 bil gallons (24.334 mil barrels) the week prior and maintained the same-week record status as has been the case now for six consecutive weeks.

Strategy and outlook

The loss of ethanol production will hurt U.S. corn demand. Ethanol use accounts for 43% of total demand for corn, which will no doubt increase old crop ending stocks. The increase in stocks will further pressure new crop corn values, making rallies selling opportunities.

Soybean analysis

Soybeans closed the week $.15 3/4 higher. Last week, private exporters announced sales totaling 110,000 mts of soybeans to unknown destinations.

In the weekly export inspections report; U.S. soybean exports, for the week ended 3/12/20, were a marketing year low of 16.0 million bushels and fell from the previous week’s 21.8 mb while coming in nearly half of last year’s same-week exports of 31.2 mb.

Cumulative export inspections of 1.123 billion bushels are still up more than 10% from last year’s 1.018 billion, leaving exports needing to average roughly 26.0 million bushels/week through the end of August in order to reach the USDA’s 1.825 billion bushel export projection vs last year’s 27.6 million/week average from this point forward. NOPA reported a crush of 166.3 million bushels of soybeans in February, above average market expectations of 165.0 million and easily establishing a new record for the month in considerably surpassing last February’s 154.5 million.

RJ O’Brien estimates February total soybean crush around 176.6 million bushels vs last year’s 162.8 million and would put 2019/20 marketing year to date (Sept-Feb) crush at 1.074 billion bushels, up 1.3% (13.6 million bushels) from last year’s 1.061 billion. NOPA reported its members produced 1.910 billion pounds of soybean oil in February vs 2.035 billion in January and 1.807 billion pounds last year.

Strategy and outlook

The coronavirus is starting to effect South America and may limit their ability to export soybeans. This could open the door to renewed US exports of soybeans and soybean meal.

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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