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Midwest Marketing Solutions

By Staff | Apr 29, 2020

PPP loans

Agriculture enterprises that employ 500 or fewer people are eligible for Paycheck Protection Program loans. These are the small business loans from the latest coronavirus economic stimulus package. In the past, the Small Business Administration hasn’t considered farms as qualified businesses, but this changed with the latest stimulus package. “There’s no revenue limitations for a farmer and also, this program can give farmers enough money to pay payroll for a two month period,” explains Mark Giddings, CEO, Giddings and Associates. “It has to be spent within eight weeks after it’s funded, with 75 percent on payroll and 25 percent for other costs.” The application process is open for small businesses, sole proprietorships and self-employed individuals. Loans are funded by the bank where a farmer applies. Giddings says the government authorized all financial institutions and all farm credit organizations to originate the loans.

Corn analysis

Corn closed the week $.09 1/4 lower. Last week, private exporters did not announce any sales.

In the weekly export inspections report; U.S. corn exports, for the week ended 4/09/20, were 40.5 million bushels and the lowest in three weeks, but still met the 40.0 million bushel/week average that is needed in order for 2019/20 exports to reach the USDA’s 1.725 billion bushel target.

Cumulative export inspections of 802 million bushels are down 36% from last year’s 1.257 billion bushels. The USDA is current estimating marketing year total exports to be down 16.5% from last year.

In the first weekly U.S. crop progress and conditions report of the year; U.S. corn planting is only 3% complete versus 3% expected, 3% last year and 4% average. Most of the progress is in the south with 4% done in Missouri and 1% each in Illinois and Indiana.

In the weekly EIA report; the massive cutback in U.S. ethanol production continued for the week ended 4/10/20, being slashed to 570k barrels/day (168 million gallons/week) from 672k bpd (198 mil gallons/week) the week prior and representing a catastrophic 44% decline from last year’s same-week production of 1.016 million bpd (299 mil gallons/week).

Last week’s production reflected an annualized rate of just 8.7 billion gallons versus the 16.8 billion gallon annualized rate production was running at its peak in mid-January. Despite the plummeting ethanol production, stocks continued to rise to 1.154 billion gallons (27.469 million barrels) from 1.138 billion gallons (27.091 million barrels), with the 16 million gallon weekly stocks increase comparing to the previous two week’s 58 million and 66 million gallon adds. -Thanks to Randy Middelstadt

Strategy and outlook

The loss of ethanol production will hurt U.S. 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 $.30 1/2 lower. 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 of 16.2 million bushels and were considerably below the roughly 25.7 million bushels/week estimated to average through the end of August in order for the USDA’s 1.775 billion bushel export projection to be met. Each of the last six week’s exports fell short of the average “needed” pace. Cumulative export inspections of 1.188 billion bushels are now up just 5.5% from last year’s 1.126 billion, with USDA now estimating 2019/20 soybean exports will be up only 1.5% year-over-year.

The NOPA Crush report posted 181.4 million bushels of soybeans were crushed in March, notably above average market expectations of 175.2 million bushels, a solid 6.7% above last year’s March crush of 170.0 million and easily a new all-time monthly record in surpassing January’s 176.9 million bushels. However, crush margins have been easing of late and have moved below year ago levels over the last week. NOPA reported its members produced 2.096 billion pounds of soybean oil in March vs 1.910 billion in February and 2.000 billion pounds last year March, with the average soybean oil yield moving up to 11.56 pounds/bushel from 11.49 in February.

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. The COT report has turned decidedly bearish to the soybean market.

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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