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Midwest Marketing Solutions

By Staff | Apr 16, 2020

USMCA delayed

The U.S.-Mexico-Canada Agreement will not go into effect on June 1 as anticipated.

Officials from the three countries failed to exchange letters by last Wednesday to certify the obligations outlined in the deal. Now, July 1 is the earliest the deal could go into effect.

Purchase of Dean Foods approved

The U.S. Bankruptcy Court has approved the purchase of 44 Dean Foods manufacturing facilities to Dairy Farmers of America. The deal still needs approval from the Justice Department, which should happen in time for the closing at the end of the month.

Corn analysis

Corn closed the week $.1 3/4 higher. Last week, private exporters did not announce any sales.

In the weekly export inspections report; U.S. corn exports, for the week ended 4/02/20, were solid at 50.1 million bushels and set a new high for the 2019/20 marketing year. This week’s export exceeded the average “needed” pace of roughly 40 million bushels/week in order for the USDA’s 1.725 billion bushel export projection to be reached for the 2nd consecutive week.

Last year’s exports from this point forward averaged 30.8 million bushels/week so the shipment pace will need to remain solid, but the overall sales pace of late has been enough to support the USDA’s export projection heading into Thursday’s WASDE report. Cumulative export inspections of 761 million bushels are still down 37% from last year’s 1.210 billion bushels.

In the weekly EIA report; U.S. ethanol production, for the week ended 4/03/20, plunged again to a new all-time low of 672k barrels/day (198 million gallons/week) from 840k bpd (247 million gallons/week) the previous week and was a massive 32.9% below last year’s same-week production of 1.002 million bpd (295 mil gal/week).

The previous record low production since EIA began providing weekly data in June 2010 was 770k bpd (226 mil gal/week) in the week of 01/25/2013. U.S. ethanol stocks continue to surge, hitting another new record last week of 1.138 billion gallons (27.091 million barrels), jumping 58 million gallons from the previous week and now reflecting a 164 million gallon (17%) increase in stocks from this point last year. -Thanks to Randy Middelstadt

In the USDA supply/demand report; the USDA raised U.S. corn ending stocks to 2.092 billion bushels versus 1.892 billion bushels in March as they increased feed usage by 150 mb but lowered ethanol demand by 350 mb.

Feed usage was raised due to better than expected feed/residual usage amid feeding lower quality corn. Feed usage will decline going forward feed margins slide while ethanol demand will continue to slow as plants continue to sit idle amid slow demand and increasing stocks. This will increase old crop stocks further and the carryin figures for the 2020/21 balance sheets. A major yield loss will be needed to reduce the swelling of corn stocks for the 2020/21 marketing year.

Strategy and outlook

The loss of ethanol production will hurt US corn demand as ethanol usage accounts for 43% of total demand for corn. Any weather related rallies should be used as selling opportunities.

Soybean analysis

Soybeans closed the week $.09 3/4 higher. Last week, private exporters announced sales of 120,000 mts of soybeans to an unknown destination.

In the weekly export inspections report; U.S. soybean exports last week were just 11.0 million bushels and now have set a new marketing year low for two consecutive weeks now. Year ago exports this week were 32.7 million bushels and soybean exports will need to average roughly 27.6 million bushels/week, vs last year’s 27.2 million/week average, in order to reach the USDA’s annual export estimate of 1.825 billion bushels.

In the monthly supply/demand report; the USDA increased the 2019/20 U.S. soybean ending stocks figure to 480 million bushels, a 55 mb increase from last month as the USDA lowered their forecast of soybean exports by 50 mb. US soybean crush was raised by 20 mb amid strong exports and feed demand while the USDA cut the seed/residual use by 26 mb. Without late season Chinese demand, US exports could slip further and expanding ending stocks. The USDA did lower Argentine production by 2 mmts to 52 mmts and the Brazilian soybean production estimate was also lowed by 1.5 mmts to 124.5 mmts.

Strategy and outlook

The soybean 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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