Midwest Marketing Solutions
USDA asked to help cattle producers
Lawmakers are asking USDA to help cattle producers as the industry experiences a decline in commodity prices. One option being considered is a bill directing Agriculture Secretary Sonny Perdue to use Commodity Credit Corporation funds to offset the losses cattle producers take in the live and feeder cattle markets.
Frozen meat stocks increase over last month
The Cold Storage report for end of February showed frozen beef stocks at 491 million pounds, up form 488 million pounds in January and 474 million pounds this time last year. Frozen pork stocks were at 662 million pounds at the end of February versus 626 million pounds in January and 616 million pounds this time last year.
Corn closed the week $.03 1/4 higher. Last week, private exporters announced a sale of 252,048 mts of corn sold to an unknown destination, which could prove to be China.
In the weekly export inspections report; U.S. corn exports last week fell to a 5-week low of 32.1 million bushels and were again below the nearly 41 million bushels/week needed to average through the end of August in order for the USDA’s 1.725 billion bushel export projection to be met.
There has still not been a single week’s exports this entire marketing year that met the average “needed” export pace at the time.
Cumulative exports of 659 million bushels are down 41% from last year’s 1.119 billion. Corn exports from this point forward last year averaged 32.1 million bushels/week.
The decline in U.S. ethanol production is underway as 1.005 million barrels/day (295 million gallons/week) were produced in the week ended 3/20/20, down sharply from the previous week’s 1.035 mbpd (304 mil gal/week) and a 21-week low. U.S. ethanol stocks last week declined to 1.014 billion gallons (24.140 mil barrels) from 1.033 billion gallons (24.598 mil barrels) the week prior and slipped below year ago stocks of 1.027 billion gallons for the first time in seven weeks. Overall ethanol stocks, though, are still the 2nd highest on record on a same-week basis. Thanks to Randy Middelstatt
Strategy and outlook
The loss of ethanol production will hurt US corn demand, possibly 200 mb to 300 mb. 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.
Soybeans closed the week $.20 1/4 higher. Last week, private exporters announced sales totaling 163,290 mts of soybeans to Mexico and 20,000 mts of bean oil to South Korea.
In the weekly export inspections report; U.S. soybean exports, for the week ended 3/19/20, of 21.0 million bushels were again below the roughly 26.1 million bushels/week estimated they will need to average through the end of August in order for the USDA’s 1.825 billion bushel export projection to be met.
Five of the last seven weeks’ exports have failed to meet the average “needed” pace. Cumulative exports of 1.147 billion bushels are still up 9.2% from last year’s 1.050 billion, but steadily declining. A rally into resistance needs to be sold as large speculators are chasing the current rally and without sizeable Chinese buying, demand looks to fall short of the USDA forecasts.
Strategy and outlook
The coronavirus is starting to effect South America and may limit their ability to export soybeans. This has rallied US soybeans and soybean meal. The rally in soybeans may draw a few acres away from corn, especially if the month of April proves to be wet across the cornbelt.
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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