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BRIAN HOOPS
November 2, 2018

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Large ranch up for auction

A ranch totaling more than 37,000 acres in West Texas is going on the auction block with sealed bids after a federal bankruptcy court ordered the ranch sale. The KC7 Ranch near Balmorhea located amongst the Davis Mountain range is being sold with all of its assets by Icon Global Group, the same Texas realtor that sold the Waggoner Ranch for $725 million.

Offers are being accepted until Nov. 30 at 5 pm CDT. The ranch was previously listed for sale at $52 million and is owned by Thomas Darden, a former petroleum executive, who according to the Fort Worth Star-Telegram filed for Chapter 11 bankruptcy.

KC7 Ranch filed for bankruptcy on Dec. 28, 2017, and the rest of Darden's companies filed on Jan. 1, 2018. The stocking rate for the 37,759 acre property is listed at one animal unit per 50 acres. A reasonable stocking rate of approximately 500 cows with calves could graze the KC7 Ranch.According to Uechtritz, realistic offers for the ranch will have to start around $35-40 million and will likely go up from there.

African swine fever spreads in China

China's three-month old outbreak of African swine fever has spread for the first time to the country's south, its major pork-consuming region, signaling how deeply the deadly disease has permeated the country's pig herd, the world's largest.

Two new cases reported in the southwestern province of Yunnan on Sunday came as China enters its peak pig production period ahead of the country's most important festival, the New Year holiday, which will be held in early February 2019. China has reported more than 40 outbreaks of the highly contagious disease in 11 provinces and municipalities, culling an estimated 200,000 pigs. All outbreaks had been in the north and eastern provinces until the first case in Yunnan.

Agriculture loans on the rise

The volume of non-real estate farm loans rose sharply in the third quarter. According to the Federal Reserve's Agricultural Finance Book, the total loan volume was up 30 percent from one year ago.

Nathan Kauffman, who is a vice president with the Kansas City Fed, says the loan volume is due to the current market environment.

"Cash flows are still relatively weak; producers need financing and some seem to be needing it in larger amounts," he said.

The number of loans larger than $1 million nearly doubled and accounted for nearly 40 percent of non-real estate lending during the quarter. Loan delinquency rates on farm loans at commercial banks remained low. Kauffman says the big test for agriculture will be in this fourth quarter. Trade concerns were seen in the second and third quarters, but this is the time of the year when soybean exports typically happen.

Corn analysis

Corn closed the week $.02 1/4 higher. Last week, private exporters did not announce any private sales.

For the week ending October 18, USDA reported 13.8 mb (349,500 mt) of corn export sales for 2018-19 and 1.1 mb (28,000 mt) for 2019-20.

There are 844 million bushels of total commitments in 2018-19, up 32 percent from a year ago.

In the weekly crop progress and conditions report; NASS reported U.S. corn crop conditions at 68 percent good/excellent versus 67 percent expected, 68 percent last week and 66 percent last year.

U.S. corn harvest advanced to 49 percent complete versus 51 percent expected, 39 percent last week, 37 percent last year and 47 percent average.

In the weekly EIA report; U.S. ethanol production, for the week ended 10/19/18, ticked higher to 1.024 million barrels/day (301 million gallons/week) from 1.011 mbpd (297 mil gal/week) the week prior, and was 1.4 percent below last year's same-week production of 1.039 mbpd. Crude oil stocks again saw an increase larger than expected at 6.3 million barrels versus expectations of an 3.7 mb increase.

Producers should combine the bulk of the U.S. corn over the next three weeks. The November supply/demand report will likely show a slightly smaller corn crop compared to a month ago. Farmer selling will slow now that harvest is complete, basis levels will likely improve and the cash market should rally as it will be the only way to pry cash crop out of farmers hands with stronger basis levels throughout the winter. The huge demand base is the largest on record. With the huge demand base and corn now locked away in farmer storage, the corn market will need to bid for acres this spring to rebuild the ending stocks at a more comfortable level.

Strategy and outlook

Plan on storing as much crop as possible this fall. Now look to sell the carry for spring or summer months.

Soybeans analysis

Soybeans closed the week $.11 1/2 lower. Last week, private exporters announced sale of 260,000 mts of soybeans to an unknown destination.

The USDA reported 7.8 mb (212,700 mt) of weekly soybean export sales for 2018-19 and 37,000 bushels (1,000 mt) for 2019-20.

There are 774 mb of total commitments in 2018-19, down 26 percent from a year ago.

In the weekly crop progress and conditions report, U.S. soybean crop conditions are 66 percent good/excellent versus 65 percent expected and 66 percent last week.

U.S. soybean harvest is now 53 percent complete versus 52 percent expected, 38 percent last week, 67 percent last year and 69 percent average.

The November supply/demand report will likely show a slightly smaller soybean crop compared to a month ago. Farmer selling will slow now that harvest is nearly complete, basis levels will likely improve and the cash market should rally as it will be the only way to pry cash crop out of farmers hands with stronger basis levels throughout the winter. The market will be anticipating a record soybean crop in South America and updates on this year's production from South America will be a major driving force for prices throughout the winter. Weather during the South American growing season will be closely watched as well as negotiations with China.

Strategy and outlook

Plan on storing as much crop as possible this fall. Now look to sell the carry for spring or summer months.

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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