WHEAT

For the week ending Feb. 8, Chicago wheat closed 6.5 cents lower; Kansas City wheat closed 14.5 cents lower and Minneapolis wheat 7 cents lower. Last week, Egypt bought 300,000 metric tons of wheat; including 120,000 MT of U.S. soft red winter; 120,000 MT of French wheat and 60,000 MT of Ukrainian wheat.

U.S. wheat exports last week of 16.2 million bushels were at the low end of market expectations of 14.7-22.0 MB but were in line with the most-recent four-week average exports of 15.6 MB, as well as last year's same-week exports of 15.8 MB. With only 17 weeks remaining in the 2018-19 marketing year, wheat exports still need to average 24.4 MB/week in order to reach USDA's 1.000-billion-bushel export projection. This would have to be 56 percent stronger than last year's Feb-May average exports of 15.6 MB per week.

 The Stats Canada report forecast stocks of canola at a new record high of 14.553 million metric tons, although this was slightly below estimates of 14.7 MMT and solidly up from last year's 13.9 MMT. Total wheat stocks were 23.233 MMT down slightly from last year's 23.283 MMT and below estimates of 23.4 MMT.

In the World Agricultural Supply and Demand Estimate report, USDA reported Dec. 1 U.S. wheat stocks at 1.999 BB, notably above average trade expectations and up from last year’s 1.874 BB. This is the second highest Dec. 1 stocks of the last 31 years. USDA lowered 2018-19 U.S. wheat total demand by 36 MB and as a result, increased ending stocks by the same amount to 1.010 BB. USDA estimated 2019-20 U.S. winter wheat planted area at 31.290 million acres, down 1.245 million acres from last year’s 32.535 million and was solidly below the average trade estimate of 32.128 million. Moreover, total winter wheat acres at that level are the lowest since 1909’s 29.2 million acres.

Strategy & outlook

The huge supplies of wheat mandates producers sell out inventory and use options to manage risks on sharp rally attempts.

CORN

Corn closed the week ending Feb. 8 at 4 cents lower. Last week, private exporters did not announce any export sales.

U.S. corn exports, for the week ended Jan. 31, 2019, were 35.5 MB and fell right in line with market expectations of 31.5-43.3 MB but were down slightly from the previous week's 38.1 MB. Corn exports will need to average roughly 46.7 MB per week through the end of August to reach the USDA's export projection which would be the second highest ever February-August average weekly exports on record.

U.S. ethanol production, for the week ended Feb. 1, 2019, plunged to 967,000 barrels/day (284 million gallons/week) from 1.012 mbpd (298 million gallons/week) the week prior and reflected the lowest weekly production rate in 121 weeks, going back to early October 2016. Crude oil stocks saw an increase of 1.3 million barrels vs. an expected increase of 1.9 million barrels. Despite the second largest crop reduction in history for the annual report, corn failed to rally as demand was cut more than expected. The USDA lowered the U.S. corn crop by 206 MB from the November estimate to 14.420 BB as yield was lowered 2.5 bushels per acre to 176.4 bushels per acre. USDA reported Dec. 1 U.S. corn stocks at 11.952 BB, which were solidly below the average trade estimate of 12.092 BB. Besides the 125 MB cut in feed/residual usage, the USDA also lowered corn for ethanol usage by 25 MB to 5.575 BB. Exports were left unchanged at 2.450 BB, leaving ending stocks at 1.735 BB and a 11.7 percent stocks/usage ratio. USDA did strongly raise the Argentine crop to 46.0 MMT from 42.5 MMT previously and is up sharply from last year’s 32.0 MMT (Ukraine production/exports both raised 0.5 MMT with the Brazilian crop left at 94.5 MMT and world ending stocks of 309.8 MMT ticking up from 308.8 MMT last month.

Strategy & outlook

Producers should look to sell the carry for spring or summer months and use options to re-own and manage risk. Don't store unpriced crop.

SOYBEANS

Soybeans closed the week of Feb. 8 at 1 penny lower. Last week, private exporters announced sales of 3.801 MMT of soybeans to China and 456,000 MT of soybeans to an unknown destination.

U.S. soybean exports last week were 35.9 MB, in line with market expectations of 29.4-40.4 MB and were little-changed from the previous week's 34.7 MB. If the USDA's projection is to be met, weekly exports would need to average roughly 34.7 MB/week from this point forward, 31 percent stronger than last year's Feb-Aug average exports of 26.4 MB/week. In the supply/demand report, USDA lowered the 2018-19 U.S. soybean crop to 4.544 BB from 4.600 BB previously, while the average yield moved down to 51.6 bushels per acre from 52.1 previously. Despite the reduction, the 4.544 BB crop still easily set a new record.

USDA report end of first quarter stocks at 3.736 BB, near market expectations of 3.743 BB and soaring from last year’s 3.161 BB and establishing a new all-time record. USDA did lower 2018-19 U.S. soybean exports by 25 MB to 1.875 BB, USDA raised 2018-19 soybean crush by 10 MB to 2.090 BB and lowered 2018-19 U.S. soybean ending stocks by 45 MB from December to 910 MB. This is more than double last year’s 438 MB. USDA lowered the Brazilian soybean crop to 117 MMT from 122 MMT previously and 120.8 MMT last year while the Argentine soybean crop was ticked lower to 55.0 MMT from 55.5 MMT previously vs. 37.8 MMT last year.

Strategy & outlook

Producers should look to sell the carry for spring or summer months and use options to re-own and manage risk.  Don't store unpriced crops.

LIVE AND FEEDER CATTLE

Last week, live cattle closed $1.42 higher while feeder cattle closed $1.80 higher. Last week, the market undertone was $1 to $2 higher. Prices last week were mostly $124-$125 live vs. $123-$124 last week and $200 vs. $198 to $199 dressed a week ago. Feeder cattle traded uneven, from $2 higher to $2 lower on the week. The Fed Cattle Exchange online auction was held with three lots from Kansas, asking $123-$124. One lot of 93 head sold at $124; one lot of 68 head sold at $124.25. One lot from Nebraska asked $124 and went unsold.

Weekly steer weights, as of Dec. 29, were announced at 896 pounds, up 4 pounds from the week prior and 3 pounds from last year. For week ending Dec. 27, net beef sales of 3,200 MT reported for 2018 were down 77 percent from the previous week and 63 percent from the prior four-week average.

Strategy & outlook

Producers can manage risk by using the options market. 

LEAN HOGS

Lean hogs closed the week of Feb. 8 at $1.90 lower. Weekly hog weights were 285.6 pounds, up 1.5 pounds from last week's 284.1 pounds and slightly higher than last year's 285.5 pounds.

For week ending Dec. 27; net pork sales of 3,800 MT reported for 2018 – a marketing-year low – were down 83 percent from the previous week and 84 percent from the prior four-week average. The USDA is expected to release its next monthly cold storage report on Feb. 22, 2019 and again on March 7. Their annual cold storage report will be delayed until April 2.

Strategy & outlook

Producers should have hedged on rallies in the deferred contacts. 

Midwest Market Solutions is the leading edge in commodity marketing and trading. It was established in March 2002 and is a full-service commodity brokerage and marketing advisory service, clearing through R.J. O’Brien. The firm specializes in individual trading strategies for the investor, personalized marketing programs for individual farm operations as well as full-service and discount broker services. The home office is located in Springfield, Mo., with branch offices in Yankton, S.D.; Storm Lake, Iowa; Alvord, Iowa; Thief River Falls, Minn., Verona, N.D., and Springfield, Neb. Midwest Market Solutions is committed to providing clients with the best information and service as possible. Midwest Market Solutions provides clients with written newsletters, trade research and hedging as well as trading advice.

Brian Hoops is president and senior market analyst of Midwest Market Solutions. Brian can frequently be heard on radio stations across the country including KWMT, KAYL, KKIA, Ag News 890, Red River Farm Network and Commodity Wrap on Sirius XM radio. Brian can also be heard daily on DTN, is seen as a frequent guest on RFD-TV and is heard on the Minneapolis Grain Exchange marketing hotline. Brian also writes several newsletters that are published throughout the Plains and the Midwest, covering the states of Iowa, Minnesota, North and South Dakota, Nebraska, Kansas, Montana, Wisconsin, Wyoming and Idaho. Brian has been quoted in the Wall Street Journal, Bloomberg, Reuters and Dow Jones newswires and U.S. Farm Report.

Daily market commentary and trade recommendations are available at www.midwestmarket-solutions.com or by e-mail at bhoops@midwestmarketsolutions.com. Hoops can be contacted at 417-501-5132. (Copyright 2019 Midwest Market Solutions Inc.)

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.

Field editor for the Midwest Messenger.