Corn closed the week of March 8 at 8 cents lower. Last week, private exporters announced sale of 100,500 MT of U.S. corn to Columbia and corrected a previous sale of 133,000 MT of U.S. corn to optional origin sale.
U.S. corn export sales were 38.2 MB and solidly lower compared to the previous week's 48.8 MB and were substantially below last year's same-week sales of 73.1 MB. Corn sales will need to average roughly 29.4 MB/week during March-August in order to reach the USDA's export projection, which would be exactly the same as last year's sales from this point forward.
In the monthly WASDE report; the USDA raised 2018-19 carryout by 100 MB thanks to a reduction of 75 MB for demand and ethanol use was reduced by 25 MB. Exports of 2.375 BB now reflect a 63 MB decline from last year’s 2.438 BB. The USDA left corn production unchanged from last month for Brazil at 94.5 MMT (3.72 BB) and 46.0 MMT (1.8 BB) for Argentina. World ending stocks are forecast at 308.5 MMT (12.145 BB).
At the end of February, spring crop insurance prices were set. This year's price for corn is $4.00 vs. $3.96 last year. A study by Merrill Crowley suggests that since 2013, December corn has exceeded the spring crop insurance by an average of 37 cents.
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 March 8, Chicago wheat closed 19 cents lower; Kansas City wheat closed 14 cents lower and Minneapolis wheat 9 cents lower. No private export sales were announced.
U.S. wheat export sales continue to be strong with 22.8 MB sold last week, solidly above the previous week's 17.5 MB and easily beating year ago same-week sales of 14.4 MB. Sales will need to average roughly 10.4 MB per week to reach the USDA's target.
Winter wheat ratings were released and state crop condition ratings show Kansas wheat 48 percent good-to-excellent, down from 53 percent last week; Oklahoma wheat at 53 percent good-to-excellent, up from 38 percent the week prior and Texas wheat at 36 percent good-to-excellent, up from 30 percent last week.
In the World Agricultural Supply and Demand Estimates (WASDE) report; demand has improved recently, however, the USDA lowered their 2018-19 export forecast by 35 MB to 965 MB. They cut HRS exports by 25 MB and lowered white wheat exports by 10 MB and left HRW and SRW exports unchanged. Unfortunately, USDA also bumped imports 5 MB higher and lowered food usage by 5 MB, resulting in a 45 MB increase in stocks to 1.055 BB. This looks to be the third consecutive year that ending stocks are above 1 billion bushels. HRS stocks are estimated at 289 MB vs. 191 MB last year; HRW stocks are estimated at 495 MB vs. 591 MB last year and SRW stocks at 163 MB vs. 205 MB a year ago. World wheat stocks increased to 270.5 metric tons (9.938 billion bushels) vs. 267.5 MT (9.828 billion bushels) last month.
Strategy & outlook
The huge supplies of wheat mandates producers sell out inventory and use options to manage risks on sharp rally attempts.
Soybeans closed the week of March 8 at 15.5 cents lower. Last week, private exporters announced sale of 644,000 MT (23.66 MB) of soybeans to China.
U.S. soybean sales, for the week ended Feb. 28, 2019, were only 11.4 MB, the third lowest weekly total this marketing year. This was down sharply from the previous week's 80.7 MB and well below last year's same-week sales of 92.2 MB. Soybeans will need to average an estimated 18.0 MB/week to be sold through the end of August vs. last year's 15.4 MB/week from this point forward in order to reach the USDA's projection.
In the March WASDE report; the USDA took a cautious, wait and see approach as they left the export projection unchanged at 1.875 BB. Until there is a clear sign in further developments with China, the USDA is justified in being cautious. USDA did increase 2018-19 crush by 10 MB to 2.100 BB. Without any other adjustments, 2018-19 US soybean ending stocks were adjust to 900 MB, which is still more than double last year's stocks of 438 MB. Depending upon what happens with China, U.S. stocks are likely to either increase to 1.00 NN or drop to 800 MB before the end of the marketing year. World ending stocks are estimated 107.2 MT (3.938 BB), up from last month's estimate of 106.7 MT (3.9 BB). USDA lowered Brazil's soybean crop to 116.5 MT (4.28 BB) vs. 117.0 MT (4.299 BB) last month and Argentina's crop was unchanged at 55.0 MT (2.02 BB).
At the end of February, spring crop insurance prices were set. This year's price is $9.54 for soybeans vs. $10.16 last year. A study by Merrill Crowley suggests November soybeans have exceeded the spring crop insurance price by an average of $1.19.
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 17 cents higher while feeder cattle closed $2.67 higher. Last week, Fed cattle trade occurred at $128/cwt. in the South, steady with week prior. Light volumes traded in the North at $128 to $128.50/cwt. live and $205/cwt. dressed, steady to 50 cents higher from the week prior.
The Fed Cattle Exchange online auction was held with 300 head offered on the Exchange from yards in Kansas and Oklahoma. Cattle were offered at $128 and no trade was established.
Steer weights through February 23 were down 5 pounds to 874 pounds vs. 879 pounds the previous week and 883 pounds last year. The February Cattle on Feed report came in near expectations and since it is the January information and the February report will be released in two weeks, the trade may largely ignore the report. On feed supplies came in at 100.4 percent, slightly above estimates of 100.2 percent but the year over year increase is the lowest in 23 months. Placements came in at 94.7 percent, slightly above estimates of 93.7 percent and the lowest January placements since 2016. Marketings were the highest for January in 16 years at 102.8 percent vs. estimates of 102.1 percent.
Strategy & outlook
Producers can manage risk by using the options market.
Lean hogs closed the week of March 8 at $4.22 higher.
The monthly cold storage report noted total red meat supplies in freezers were up 7 percent from the previous month but down 1 percent from last year. Total pounds of beef in freezers were up 3 percent from the previous month and up 2 percent from last year. Frozen pork supplies were up 11 percent from the previous month but down 3 percent from last year. Stocks of pork bellies were up 27 percent from last month and up 23 percent from last year. Weekly hog weights dropped slightly to 285.1 pounds vs. 285.7 pounds last week and 286.4 pounds a year ago.
Strategy & outlook
Producers should have hedged on rallies in the deferred contacts. Producers should remove those summer and fall hedges and carry risk in the cash markets.
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.
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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.