Corn closed the week of Jan. 11 at 3.75 cents lower. Last week, private exporters did not release any export sales due to the temporary government shutdown. U.S. corn exports inspections, for the week ended Jan. 3, 2019, were just 19.7 MB, well-below market expectations of 25.6-39.4 MB and a marketing year low. The previous marketing year low exports were 27.5 MB during the last week of October.
In the weekly Energy Information Administration report, U.S. ethanol production, for the week ending Jan. 4, 2019, declined to 1.000 million barrels/day (294 million gallons/week) from 1.011 mbpd (297 mil gal/week) the week prior and reflected the third consecutive week of lower production (sixth of last nine weeks), as well as the lowest production in 37 weeks going back to April 2018. Crude oil stocks saw a drawdown of 1.7 million barrels vs a 2.7 million barrels expected drawdown. Gasoline stocks saw an increase of 8.1 million barrels vs. 3.3 million barrels expected increase. Farmer selling increased after the first of the year as producers parted with some inventory to meet cash flow needs. Soybeans have the most upside potential if South American weather turns adverse.
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.
For the week ending Jan. 11, Chicago wheat closed 3.75 cents higher, Kansas City wheat closed 1.5 cents lower, and Minneapolis wheat closed unchanged. Last week, private exporters did not release any export sales due to the temporary government shutdown.
U.S. wheat exports were also at a marketing year low at just 9.6 million bushels, and were well below market expectations. Wheat needs to average 23.0 MB/week during January through May if the USDA's 1 billion bushel export projection is to be met. Egypt purchased 415,000 metric tons (15.247 MB) of Russian wheat in the tender offer. U.S. soft red winter was actually the lowest priced wheat in the tender at $239 FOB, but also had the most expensive freight cost at $28.75, making U.S. wheat the most expensive wheat to be considered in the tender offer. In the early fall, the trade expected winter wheat acres to increase. However, there is a growing sentiment that acres are actually down from a year ago. As wheat prepares to exit dormancy at the end of February, look for the market to become very sensitive to U.S. Plains weather issues. There is a strong seasonal tendency for wheat to rally during the first two weeks of January, before turning lower until wheat begins to break dormancy.
Strategy & outlook
The huge supplies of wheat mandates supply issues to provide rallies. Look to sell out inventory and use options to manage risks on sharp rally attempts.
Soybeans closed the week of Jan. 11 at 11.75 cents lower. Last week, private exporters did not release any export sales due to the temporary government shutdown.
U.S. soybean export inspections were 24.7 MB, within market expectations, but were down from the previous week's 27.8 MB and were sharply below last year's same-week exports of 44.6 MB. This week's inspections were the lowest of the last 13 weeks. Trade has been disappointed with the Chinese soybean purchases so far. China is likely to only buy hand-to-mouth from the U.S. as the trade war continues. South American weather remains a wild card as some private estimates have lowered soybean production estimates for Brazil due to dry conditions. Agroconsult estimated Brazil soybean crop at 117.6 million metric tons down from 122.8 MMT previously in November. CONAB slightly lowered their soybean production for Brazil at 118.8 MMT vs. 120.1 MMT previously while their corn production figure is at 91.2 MMT vs. 91.1 MMT prior.
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 & Feeder Cattle
Last week, live cattle closed $3.50 higher while feeder cattle closed $2.37 higher. Fed cattle trade had a firm undertone of $1-$2 higher from the prior week. Prices traded at $124 live and $198 dressed. Boxed beef traded $1-$2 lower last week due to large inventories and limited demand. Feeder cattle traded steady to $3 lower on the week. The Fed Cattle Exchange online auction was held with 571 head offered in five lots; four from Kansas and one in Nebraska. All lots asked $125 and all went unsold. Weekly steer weights were not released due to the temporary government shutdown. It is expected with the wintery weather, cattle weights will decrease compared to a year ago.
Strategy & outlook
Producers can manage risk by using the options market.
Lean hogs closed the week of Jan. 11 at 82 cents higher. Weekly hog weights increased to 286.6 pounds last week from 285.9 pounds the week prior and up from 285.5 pounds the year prior. Seasonals are higher for the next several weeks, which should allow for a retracement rally. With the commercial accounts presumably showing a heavy bearish slant, producers should hedge rally attempts.
Strategy & outlook
Hedge rallies in the deferred contacts as the market prices in better export forecasts for 2019.
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 firstname.lastname@example.org. 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.