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Markets: Grains mixed after USDA report

Wheat

Wheat started last week with solid gains, but later traded with losses. Technical buying helped support wheat early in the week, but the lack of follow-through paying caused wheat to drift the rest of the week. For the week ending Sept. 17, December Minneapolis wheat dropped 1.25 cents, December Chicago slipped 3.5 cents and December Kansas City gave back 3 cents.

The Sept. 14 session had wheat trading with strong gains. Early support came from technical buying, as many wheat contracts have traded to five-year lows. Additional support came from rumors Russia is hinting of changing its export tax and substituting it with a higher price for wheat, but the trade seemed to ignore that news for now. The biggest stumbling block for wheat has been, and continues to be, the lack of demand. The U.S. continues to be the supplier of last resort for wheat, because of higher prices and quality concerns.

The rest of the week had wheat trading with loses. On Sept. 15, wheat gave back a portion of the previous day’s gains. Trade volume was light, and commercial buying interest was lacking. The Sept. 14 crop progress report showed the spring wheat harvest ahead of the five-year average and nearing completion, while winter wheat planting is on pace with the average. Exports are hard to come by for wheat, and a rally in the U.S. dollar did nothing to ease that situation.

As of Sept. 13, 97 percent of the nation’s spring wheat crop was harvested, compared with 94 percent the previous week and 86 percent for the five-year average. Nine percent of the nation’s winter wheat crop was planted, compared with 3 percent the previous week and 9 percent for the five-year average.

Corn

The corn market lost ground last week, even after a U.S. Department of Agriculture report that was viewed as friendly. Selling came into the trade from talk corn is being sold to the U.S. and no adjustment in interest rates from the Federal Reserve. Harvest pressure and sluggish demand is limiting buying interest. As of the Sept. 17 close, December corn was down 7.25 cents for the week.

The corn futures were firm Sept. 14, and closed with 6-cent gains. Early support came from follow-through buying from USDA’s September World Agricultural Supply and Demand Estimates report, which lowered the corn yield, production number and smaller global stocks. This report has now pushed the market above the 100-day moving average at $3.91. Traders also were looking ahead to the crop progress report, and expected to see a 2 percent decline in the conditions.

The futures closed slightly lower Sept. 15 after six days with green numbers. Profit-taking on a light volume day was also noted. The crop condition ratings also came in better than expected. They remained steady at 68 percent good to excellent, well ahead of the five-year average and above estimates. Corn struggled on Sept. 16 with follow-through profit-taking after touching resistance Sept. 15. Traders also were looking ahead to the Federal Reserve meeting to see if there will be an increase in interest rates. Early yield reports are starting to surface, and are better than expected in the western Corn Belt. The corn futures lost another 6 cents on Sept. 17 with talk that 10 Brazil corn cargoes have been sold to the U.S. China is also trimming its price paid to its farmers by 10 percent for its reserves, which could slow their import demand. The Federal Reserve also decided not to change interest rates, which added pressure to the outside markets and the grains.

For the week ending Sept. 13, corn was rated 68 percent good to excellent, 22 percent fair and 10 percent poor or very poor. Corn that was dented was 87 percent, compared with 80 percent one year ago and 86 percent for the five-year average. Mature corn was 35 percent, compared with 25 percent one year ago and 40 percent for the five-year average. Harvested corn was 5 percent, compared with 4 percent one year ago and 9 percent for the five-year average.

Soybeans

The soybean market traded back and forth last week. Grains started the week with gains, but losses returned to trim the week’s gains. For the week ending Sept. 17, November soybeans gained 10.25 cents.

Soybeans pushed higher to start the week. Most of the push came from technical buying after trading to a new recent low Sept. 11. Soybeans, like wheat, have taken a beating, and had nowhere to go but up after the release of USDA’s bearish September crop production report. The report was bearish, as it put stocks at much higher levels than the trade expected. In the end, technical buying pushed soybeans higher, as traders try to correct an oversold market condition.

Grains were the main focus of trader’s attention Sept. 15. Strength came from the Sept. 14 crop progress report that showed a 2 percent decline in good to excellent ratings, to 61 percent. Soybeans dropping leaves were at 35 percent, ahead of the 31 percent average. The National Oilseeds Processors Association released its monthly crush numbers, pegging soybeans crushed in August at 135.1 million bushels, more than expected. Soybean exports are off to a quiet start. Sept. 16 trade was quiet for small grains, but they eventually closed lower.

The Farm Service Agency released prevented planting data, pegging soybeans at 2.22 million acres, up from 2.17 million in August. This increase provided support, but the market showed little interest, settling slightly lower. The market is starting to feel pressure from the upcoming soybean harvest.

Soybeans traded lower throughout the day again Sept. 17. The markets were waiting to see what the Federal Reserve would decide about the Fed fund rate. The rate was left unchanged, leading to a sell-off in the U.S. dollar that should have provided support to commodities, but didn’t appear to have much impact.

For the week ending Sept. 13, soybeans dropping leaves was at 35 percent, compared with 18 percent the previous week and the five-year average of 31 percent. Soybean condition ratings dropped 2 percent to 61 percent good to excellent, 27 percent fair and 12 percent poor or very poor.

Margin Protection crop insurance

Based on analysis of the new Margin Protection crop insurance program offered for wheat in North Dakota, Minnesota and South Dakota, Progressive Ag advises that every farmer in these states buy the 70 percent level of margin protection (cost equals about $4 to $5 per acre). We think it will significantly improve farmers’ payout from crop insurance (possibly doubling their total claim dollars in the next 10 years), while a simple adjustment lower of 5 to 10 percent in their base revenue assurance coverage on March 15 will keep their premiums paid about steady. This will provide the maximum coverage for the minimum price, and a better overall risk management program.

Most insurance agents, and even the companies, do not understand the power of this new program, and therefore, in a room of 700 agents at the recent Minnesota crop insurance conference, not one agent intended to sell this program. In our opinion, this will be a huge failure on the part of insurance agents and companies in their service to farmers.

In our analysis, producers buying the 70-percent level of margin protection essentially will be buying a product equivalent to a 85-percent Area Revenue Protection program (the old area-based Group Risk Income Protection program), but at a price about one-third as much. This is a steal, in our opinion. Check it out.

Margin Protection allows farmers to buy up to 90 percent margin protection (that is the wheat price multiplied by county yield minus input costs, including fuel, fertilizer, and interest, which are traded commodities, and subject to price changes, like the wheat price in revenue insurance). You can buy your traditional crop insurance (like 75 percent revenue insurance) and also buy margin protection. With commodity prices sliding in a tailspin right now, this revenue coverage could provide a $50 per acre payment or more in years such as 2015, where prices continually go against the farmer. If agriculture goes into a financial crises like it did the 1980s, this product might save many farms. But the sign-up deadline is Sept. 30.

Syngenta GMO corn litigation

Law firms across the country are working to sign up farmers in the next six months who have been harmed by Syngenta’s premature release of its GMO Agrisure Viptera MIR162 seed into the U.S. corn supply chain, resulting in damages to U.S. farming interests. In 2011, before receiving import approval from China, then a large export market for U.S. corn, Syngenta began marketing its MIR162 seed for U.S. cultivation.

In November 2013, China detected MIR162 in U.S. corn shipments. China enforced its zero-tolerance policy on imports containing the unapproved MIR162 trait and began rejecting U.S. shipments of distillers dried grains, cancelling U.S. contracts. US corn and distillers grains demand plummeted, reducing domestic prices and revenues. By January 2014, U.S. exports of corn and corn products to China had practically ceased.

In April 2014, the National Grain and Feed Association estimated the U.S. corn industry had lost as much as $2.9 billion from the loss of the Chinese export market. In 2014, Syngenta began marketing its Agrisure Duracade 5307 (Duracade) biotech-enhanced corn seed — again, before China granted import approval. In a second economic analysis, the NGFA estimated U.S. corn growers, grain handlers and exporters will face another economic blow during the 2014 to ’15 crop year from premature introduction of Duracade, totaling up to $3.4 billion in additional losses.

Plaintiffs in the Syngenta corn litigation are corn farmers who raised corn (you didn’t have to raise MIR162 to suffer damages). It’s important to note that those involved in the litigation are not anti-GMOs, they just want GMOs released responsibly, and have their release not adversely affect markets. Recall how much the market has dropped since November 2013. Progressive Ag thinks it is possible the NGFA is underestimating the damage at $2.9 billion and $3.4 billion. We also note that NGFA estimates of 11 cents to more than 50 cents per bushel in damage might be low. Some estimates of damages go as high as $1 per bushel.

On Sept. 11, a judge ruled against Syngenta on its motion to dismiss the case, which means it can go forward to a jury trial. That is a huge victory for farmers. For more information on this case, go to www.syngenta-lawsuit.com.

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