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Midwest Marketing Solutions

By Brian Hoops - Columnist | Jan 19, 2021

CHS net income

CHS is reporting net income of nearly $70 million for the first quarter of the fiscal year. That’s down from $178 million in the same quarter last year. The cooperative got a boost from good harvest weather, increasing volumes and margins across its agriculture segment. The global grain sector and feed business also experienced growth. Propane demand was down due to the warm, dry fall. COVID-19 also hurt the CHS refined fuels business.

ED&F Man Holdings Ltd. sells part of business

ED&F Man Holdings Ltd. agreed to sell a part of its brokerage unit as the commodities trader sheds assets to focus on its core business. The London-based company, best known for hauling sugar and coffee across the globe, is selling the structured commodities business of ED&F Man Capital Markets, its brokerage unit. Investment firms Albright Capital and De Jong Capital will take over the business, which will be renamed as HedgePoint.

Corn analysis

Corn closed the week $.33 3/4 higher. Last week, private exporters announced an export sale of 318 mts to an unknown destination; 108,500 mts of corn to Columbia and 110,000 mts of corn to Mexico.

In the weekly export inspections report; U.S. corn exports last week were 44.5 million bushels while continuing to run strongly above last year’s pace with 19.0 mil bu shipped this week. Cumulative export inspections of 638 million bushels are up 79% from last year’s 358 million, leaving exports needing to average roughly 56.2 million bushels/week through the end of August in order to reach the USDA’s 2.650 billion bushel export projection versus last year’s 38.4 million/week average from this point forward.

In the supply/demand report, the USDA lowered corn yields to 172 bpa from 175.8 bpa in the last report. However, part of the reduction was offset from reductions in feed/residual of 50 mb; ethanol usage of 100 mb and exports of 100 mb. This resulted in a net ending stocks of 150 mb with a stocks to usage ratio of 10.6%, the tightest since 2013/14. Argentina corn production was reported at 47.5 mmt, down from 49.0 mmt in December while Brazil corn production was reported at 109.0 mmt, down from 110.0 mmt in December. Quarterly stocks fell to 11.322 bb, implying record corn usage for the September-December quarter.

In the weekly EIA report; ethanol production rose to 941,000 bpd versus 935,000 bpd the prior week and down from last year’s 1,095,000 bpd. Ethanol stocks rose to an eight month high at 23.7 mb for week ending January 8 versus 23.3 mb the week prior and up from 23.0 mb last year.

Strategy and outlook

As we enter into the key growing period of South American production, producers should maintain their re-ownership of sold inventory with futures and options. As values approach key overhead resistance, producers should consider accepting profits on long positions and beginning to hedge 2021 production.

Soybeans analysis

Soybeans closed the week $.38 higher. Last week, private exporters announced sales of 902,300 mts of soybeans to an unknown destination and 132,000 mts of soybeans to China.

In the weekly export inspections report; U.S. soybean exports, for the week ended 01/07/21, were 65.4 million bushels, which were significantly above last year’s same-week exports of 42.3 mil bu. Cumulative export inspections of 1.500 billion bushels are up 78% from last year’s 844 million bushels, leaving exports needing to average roughly 18.6 million bushels/week through the end of 2020/21 in order to reach the USDA’s 2.200 billion bushel export projection vs last year’s 22.6 million/week average from this point forward.

In the monthly supply/demand report; the USDA only slightly lowered U,S, production from 50.5 bpa to 50.2 bpa, only a 35 mb reduction in supply. However, the 2020/21 U.S. ending stocks were reduced to 140 mb from a 5 mb increase in crush and a 30 mb increase to exports. Soybeans moved sharply higher as the stocks to usage ratio is the 2nd tightest in history at 3.9%, trailing only the 2013/14 marketing year. Argentine soybean production was lowered to 48 mmts from 50 mmts previously while Brazil’s soybean crop was left unchanged at 133 mts.

NOPA soybean crush for December has December crush at 183.159 mb, below estimates of 185.2 mb but a new record for the month. The December crush of 183.159 mb was larger than last month’s 181.0 mb and considerably larger than last year’s 174.8 mb crush.

Soybean oil stocks came in at 1.699 billion pounds versus estimates of 1.712 bp and is larger than last month’s 1.558 bp although down from last year’s 1.757 bp.

Strategy and outlook

Producers should have sold soybeans off the combine and should have re-owned production using futures and options in deferred contracts. As values approach key overhead resistance, producers should consider accepting profits on long positions and beginning to hedge 2021 production.

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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