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Midwest Marketing Solutions

By Staff | Aug 19, 2020

Pork packing plants not back to capacity

Pork packing plants are operating at five-to-seven percent below capacity. Kerns and Associates Economist Steve Meyer doesn’t expect the numbers to get much better than that.

“At the beginning, I thought we’d be lucky to get back to ten percent of our previous capacity and I think we’ll get to five now,” he said.

COVID-19 related protocols like line spacing are factors. There is still a massive backlog of hogs in the system. If packers cannot operate at full capacity, the industry will be in “big trouble.”

Green Plains Inc., sues Archer Daniels Midland Co.,

(Reuters) – Green Plains Inc, one of the biggest U.S. ethanol producers, sued Archer Daniels Midland Co, accusing the global grain trader of manipulating the price of the biofuel to profit from its positions in the derivatives market. According to the complaint, ADM was aggressively selling ethanol on the cash market at the Argo terminal just outside of Chicago – and timing such selling 30 minutes ahead of the close of the trading day. Green Plains also said ADM flooded the terminal with its barges, to choke off competitors’ supplies and influence the price of spot and futures ethanol markets.

Corn analysis

Corn closed the week $.02 3/4 lower. Last week, private exporters announced sales totaling 1,894,000 mts of corn to China.

In the weekly export inspections report; U.S. corn exports, for the week ended 7/09/20 were 35.5 million bushels and were the lowest in 12 weeks. Last week’s exports were also below the roughly 38.0 million bushels/week they will need to run through the end of August in order to reach the USDA’s 1.775 billion bushel export projection. Cumulative export inspections of 1.385 billion bushels are still down 18.5% from last year’s 1.700 billion, but continually gaining, while the USDA’s 1.775 billion bushel annual export projection reflects an expected 14% from last year.

In the weekly crop progress and conditions report; U.S. corn crop conditions fell 2% to 69% g/e vs 70% expected, 71% last week and 58% last year. Iowa lost 2% to 83%; Nebraska lost 4% to 70% and North Dakota lost 2% to 70%; while Missouri gained 2% to 71% and South Dakota was unchanged at 82%, Illinois unchanged at 61% and Minnesota also unchanged at 85%.

In the weekly EIA report: U.S. ethanol production, for the week ended 7/10/20, posted the 11th consecutive weekly increase, at 931,000 bpd (274 million gallons/week) from 914,000 bpd (269 mil gal/week) the week prior. Ethanol stocks held steady last week at 866 million gallons (20.608 million barrels/20.620 mil the week prior) in a continuing sign of stabilization after the plunge from mid-April through late June. Ethanol stocks are still 11.8% (116 million gallons) below year ago stocks.

Strategy and outlook

Producers should have sold the latest rally, including multiple years of production. At a minimum, put options should have been purchased to lock in a minimum price level. Exports have improved but supplies look to be increasing due to improved growing conditions.

Soybeans analysis

Soybeans closed the week $.06 1/4 higher. Last week, private exporters announced sales totaling 1,040,000 mts of soybeans to China and 477,000 mts of soybeans to an unknown destination.

In the weekly export inspections report; U.S. soybean exports last week of 17.8 million bushels were once again were below the roughly 25.2 million bushels/week soybean exports will need to average over the remaining 7 full weeks of 2019/20 in order to reach the USDA’s 1.650 billion bushel export projection. Soybean exports have failed to reach the average “needed” pace for nine consecutive weeks. Cumulative export inspections of 1.391 billion bushels are now down 2.2% from last year’s 1.423 billion and continuing to slip. The USDA’s 1.650 billion bushel export projection reflects an estimated 5.8% decline in exports from last year.

In the weekly crop progress and conditions report; U.S. soybean crop conditions lost 3% to 68% g/e vs 70% expected, 71% last week and 54% last year. Iowa lost 1% to 83%, South Dakota lost 3% to 77%, Nebraska lost 3% to 73%, North Dakota lost 2% to 67% and Illinois lost 4% to 59% g/e. Minnesota was unchanged at 83% while Missouri improved 2% to 65%. 48% of the crop is blooming and 11% is setting pods.

The monthly NOPA crush report came in at 167.263 mb, above estimates of 162.2 mb but down from last month’s 169.6 mb and well above last year’s 148.8 mb. Soybean oil stocks at 1.778 billion pounds vs. estimates of 1.813, below last month’s 1.880 and well above last year’s 1.536.

Strategy and outlook

Producers should have sold the latest rally or at a minimum, bought put options to lock in a minimum price level protection. Demand has provided a secondary rally but supplies look to increasing due to improving weather conditions.

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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Midwest Marketing Solutions

By Staff | Aug 19, 2020

CME Group settles with a payment

CME Group, the largest U.S. exchange operator, has agreed to pay at least $3.5 million after admitting liability in a case in which two former employees leaked secret trade data to a commodities broker. The Chicago-based group was sued in 2013 by the US Commodity Futures Trading Commission in a rare federal regulatory action against an exchange company that itself has powers to police market misconduct. The commission alleged that between 2008 and 2010, the employees at CME’s Nymex energy and metals exchange disclosed confidential details of trading in crude oil and natural gas options to a broker named Ron Eibschutz, who was later charged with aiding and abetting the scheme.

MGEX July up from 2019

MGEX reported a total exchange volume of 152,619 contracts for the month of July. The total exchange volume is up 7% compared to July of last year. Additionally, the total exchange volume for the calendar year is up 19% compared to this time last year. Electronically, there was a total of 131,984 contracts traded in July. MGEX saw a steady increase in open interest throughout the month. At the close of market in July, open interest was reported at 76,613 contracts which is 16% higher compared to the end of June, and 12% higher than July of last year.

NFA places orders

NFA has ordered Gautam Prakash to not reapply for membership or principal status with any NFA Member for seven years. Prakash was a principal and associated person of former Bethesda, Md. NFA Member commodity trading advisor and commodity pool operator Monsoon Capital LLC (Monsoon). NFA also ordered Monsoon to not reapply for membership or apply for principal status with any NFA Member for two years. The Complaint alleged that Monsoon and Prakash submitted false and inflated reimbursement requests for travel expenses and improperly used pool assets for a personal securities transaction. The Complaint also alleged that Monsoon arranged a $1 million loan from its pools to itself, which proceeds were then transferred to Prakash’s personal bank account for a personal securities transaction.

Corn analysis

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

In the weekly export inspections report; U.S. corn exports last week were 28.2 mb while falling to a 15-week low. As it currently stands, corn exports would need to average roughly 39 million bushels/week over the next four weeks in order to reach the USDA’s projection, a level only reached once in the last four weeks. Cumulative export inspections of 1.494 billion bushels are down nearly 16% from last year, while the USDA is estimating exports down 14.1% from 2018/19.

In the weekly crop progress and conditions report; U.S. corn crop conditions were unchanged at 72% g/e vs. 72% last week and 57% last year. Iowa again retreated while most other states improved slightly. 92% of the crop is silking and 39% is in the dough stage.

In the weekly EIA report, ethanol production slipped for the second consecutive week to 931,000 bpd; down from 958,000 head the week prior. Ethanol stocks were unchanged for the week ending July 31 at 20.3 mb vs. 23.1 mb the same week last year. Corn used for ethanol was down to 93.7 million, down from 96.5 million the week prior and 103.7 million last year.

Strategy and outlook

Producers should remain hedged, including multiple years of production. December corn posted its lowest weekly close on the week ending August 7. Downside risk remains amid increasing production and mounting supplies of corn.

Soybeans analysis

Soybeans closed the week $.23 1/4 lower. Last week, private exporters announced sales totaling 774,000 mts of soybeans to China and 260,000 mts of soybeans to an unknown destination.

In the weekly export inspections report; U.S. soybean exports, for the week ended 7/30/20, were 20.3 million bushels and were the highest in three weeks, but still considerably below the roughly 30 million bushels/week we estimate is needed over the final four full weeks of the 2019/20 marketing year in order to reach the USDA’s 1.650 billion bushel export projection. If soybean exports average around 20 million bushels/week during August, 2019/20 total exports would likely fall 35-40 million bushels short of the USDA’s current projection. Cumulative export inspections of 1.447 billion bushels are currently down 4.9% from last year and falling, while the USDA is projection a 5.8% year-over-year decline in exports.

In the weekly crop progress and conditions report; U.S. soybean crop conditions improved 1% from the prior week to 73% g/e vs 72% expected, 72% last week and 54% last year. This is the highest soybean rating for this week since 1994. Iowa lost 3% while most other states were steady to slightly improved. 85% is blooming while 59% of the crop is setting pods.

The Census Crush report showed U.S. soybean crush for the month of June at 177.3 million bushels. June crush easily reflected a new record for the month in exceeding 2018’s 169.6 million bushels and was 12.5% (19.6 million bushels) above last year’s June crush of 157.6 million bushels. USDA reported June U.S. soybean oil production was 2.035 billion pounds, 5.3% above NOPA-member production of 1.933 billion pounds, and down slightly from 2.058 billion pounds in May, but still solidly above last year’s 1.811 billion pounds given the crush difference. USDA reported 379 million bushels of corn was used for ethanol production in June, reflecting the continuing recovery of the industry from May’s 300 million bushels and the April low of 245 million bushels and was a bit higher than we were anticipating based on the EIA’s weekly ethanol reports.

Strategy and outlook

Producers should have sold the latest rally or at a minimum, bought put options to lock in a minimum price level protection. Funds remain long the market, but look to begin to sell out of longs as the technical trend is changing to a downtrending market. Increasing production looks to weigh on values fundamentally.

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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