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BRIAN HOOPS
May 11, 2018

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U.S. grains merchant Archer Daniels Midland Co reported a 16 percent increase in quarterly profit on higher margins from soybean processing and a significant boost in global trade volumes, sending its stock price to a 52-week high in premarket trading.

ADM has been trying to diversify into higher-margin sectors, such as food ingredients and aquaculture feed, to compensate for the poor returns on their traditional grain handling businesses.

Revenue from its oilseed business, which makes up 36 percent of its overall revenue, rose 7.8 percent to $5.63 billion.

This is the first quarter to reflect the new business segments since ADM completed the restructuring of its business units in March. Net profit attributable to ADM rose to $393 million, or 70 cents per share, in the first quarter, from $339 million, or 59 cents, a year earlier. Total revenue rose 3.6 percent to $15.53 billion.

Corn analysis

Corn closed the week $.07 higher. Last week, private exporters did not announce any private sales.

Weekly export sales of corn showed a total of 42.1 mb (1,069,200 mt) with 40.2 mb (1,019,900 mt) for the 2017-2018 marketing year. This put total marketing year sales at 2.008 bb, 2 percent less than the previous marketing year. In the weekly crop progress report, U.S. corn planting was only 17 percent complete versus 18 percent expected, up from 5 percent last week, but still behind the 32 percent last year and 27 percent average.

In the weekly EIA report, the weekly ethanol report showed production up 47,000 bpd to 1,032 million bpd. Ethanol stocks were up 400,000 to 22.1 million barrels. U.S. producers should finish planting the corn crop by the middle of the month and weather will then be 95 percent of the pricing influence. The monthly USDA monthly crop report looks to leave our old crop carryover stocks number unchanged as our export pace is steady but unspectacular.

After the report, weather will be the only thing left for traders to trade on during the last half of the month. If weather is warm with ample moisture, prices will retreat into the end of the month and the highs for the month should be in by May 10.

However, if weather becomes hot and dry, prices will have no choice but to trade higher in an attempt to ration U.S. ending stocks this spring.

Strategy and outlook

As producers get planters out of their sheds and begin seeding the 2018 crop, look to either make sales and reown with call options or buy puts to establish a price floor.

Soybeans analysis

Soybeans closed the week $.20 1/4 lower. Last week, private exporters announced sale of 120,000 mts of soybeans to Argentina and 30,000 mts of bean oil to Peru.

Weekly export sales of soybeans showed a total of 32.6 mb (886,200 mt) with 15.3 mb (416,300 mt) for the 2017-2018 marketing year. This put total marketing year sales at 2.013 bb, 3 percent less than the previous marketing year. U.S. soybean planting is 5 percent complete versus 7 percent expected, 2 percent last week, 9 percent last year and 5 percent average.

The month of May is when U.S. producers begin to aggressively seed the soybean crop. Weather will become the number one pricing influence once 30 percent to 50 percent of the crop has been planted. During the growing season.

The commodity funds and commercial entities will use weakness in prices during the planting season to buy

September and November futures in anticipation of weather premiums being added as planting progress reaches the 50 percent pace.

The negative scenario of possibility increasing planted soybean acres this spring and of good growing conditions into the last half of the month. If weather conditions are favorable, look for prices to retreat and funds to liquidate long positions if the technical trend turns lower.

Strategy and outlook

As producers get planters out of their sheds and begin seeding the 2018 crop, look to either make sales and reown with call options or buy puts to establish a price floor.

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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