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Midwest Marketing Solutions
January 3, 2020

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Argentina increases tax rates

Argentina's new president has increased the tax rate on key farm commodities. The rate for soybeans, soyoil and soymeal will go from 25 percent to 30 percent. The tax rate on corn and wheat goes from seven percent to 12 percent. Argentina's federal debt has gone over $100 billion and the new government is looking for ways to bring in more resources.

Red meat supplies down

The cold storage report showed total red meat supplies in freezers were down 2 percent from the previous month but up 2 percent from last year. Total pounds of beef in freezers were up 3 percent from the previous month but down 7 percent from last year.

Frozen pork supplies were down 6 percent from the previous month but up 13 percent from last year. Stocks of pork bellies were up 14 percent from last month and up 40 percent from last year.

Corn analysis

Corn closed the week $.02 higher. Last week, private exporters did announce any export sales.

In the weekly export inspections report; corn inspections totaled only 15.2 million bushels (mb) for the week ending Thursday, December 19, 2019, below the 42.3 mb needed each week to reach USDA's export estimate of 1.850 billion bushels (bb). This was the third lowest sales week of the current marketing year.

Inspections for 2019-20 now total 300 mb, down 55 percent from the previous year. In the weekly EIA report, ethanol production surged to a 28 week high at 1,083/barrels per day. Year over year production increase was the highest since early June at 318 million gallons.

The January supply/demand report will be released on January 10 and traders are hoping the USDA will decrease their final 2019 corn production estimate and increase their demand estimates, slowly tightening the balance sheets.

Farmer selling should increase after the first of the year as farmers will need to move some corn to maintain the quality of the stored crop, but basis levels should narrow through the winter months.

Strategy and outlook

The bullish weekly reversal has put to an end the fund selling that drove prices near contract lows. The new trade agreement will limit the downside risk for prices with the markets slowly rallying as fresh demand becomes apparent.

Soybeans analysis

Soybeans closed the week $.06 1/2 higher. Last week, private exporters did not announce any private sales.

In the weekly export inspections report; soybean inspections totaled 39.8 mb for the week ending Thursday, December 19, 2019, above the 29.5 mb needed weekly to reach USDA's export estimate of 1.775 bb.

Inspections for 2019-20 now total 727 mb, up 25 percent from the previous year.

The market has been 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. The January 10 supply/demand report has the potential to be a major market mover as the USDA will issue the final production forecast for the 2019 crop and update the demand figures.

Export forecasts could increase substantially given the Chinese trade agreement. Traders are going to look for the USDA to decrease their final 2019 soybean production estimate and to increase their demand estimates, slowly tightening the balance sheets. Farmer selling looks to be a minimum this winter as producers are more interested in selling corn and holding onto their soybeans in case another weather problem develops in South America and Chinese demand dramatically improves and prices move higher.

Strategy and outlook

Futures bounced off long term support with strong end user buying supporting values. Prices are likely to probe weekly resistance amid the new trade agreement. The timing of Chinese purchases will prove interesting and indicative of how the balance sheets will be affected.

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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