Pro Report Online
Winter Seasonal
Hours
Regular Hours (M-F)
Volume 5, Issue 11
7:30 a.m. to 4:00 p.m.
Newsletter Date: Dec 24, 2016
——————–——–— Headline News —————––————
Sat/Sun - Closed
Car Care Centers
The Bottom Line Up Front (BLUF)
Monday - Friday
Lets Talk About Risk - Risk is just the nature of the business we are in. We are constantly trying
to manage all aspects of risk to make a result more known. From my perspective, marketing risk in most
operations is one of the most difficult risks to address. Why is that? I hear a lot of producers talk about the
potential for dryness or a drought nearly EVERY year - yet they still plant the crop. If we are that concerned
about that production risk, why should we even plant the crop? Because nearly every year - we still get a
crop despite what Mother Nature throws at us (i.e. we take a calculated risk). We face that production risk
head on. Yet that same producer refuses to sell or market a single bushel of that crop until its in the bin. So
we face production risk head on but we avoid marketing risk at all costs (Despite the fact that we know at
some point we HAVE to market this crop). If you are in this mindset, I’d challenge you to change it. There
are other farmers, fund traders and many others currently in this market - taking on risk in order to achieve
potential rewards. The farmer takes on production risk in order to achieve potential rewards later. They
need to take on marketing risk to achieve potential rewards later as well (we will help you to calculate and
address the amount of risk you are willing to take for your operation). Farmers understand production risk
but seem less educated in marketing risk and I believe that is where the apprehension to marketing risk
comes from. No worries. Pro Cooperative has made a dedicated effort to assist. We have the tools, we
have the personnel, we will take the time to educate both you and your lender, and WE WILL COME TO
YOU ON YOUR FARM and learn from you about your operation. We will be your DECISION POWER.
We will discuss global, regional and local topics that may impact your operations bottom line. We will provide recommendations of what tools work best for you. We will help you manage risk. No more heads in
the sand - lets deal with marketing risk HEAD ON just like you do with production risk. If you haven't yet
met or talked to any of our 4 country originators - Jamie O’Hearn, David Storm, Chris Pohl, or
Jeff Elbert just reply to this email with the word VISIT in the subject area along with a phone
number to contact you and we will line up an appointment to discuss marketing with you.
7:30 a.m. to 5:30 p.m.
Saturday
7:30 a.m. to 12:00 p.m.
“Go with the Pro!”
Inside this issue:
Market Highlights
2
Bull/Bear Bubble Charts 2
Cash Sales Targets
3
Technical Thoughts
3
Merchants Plus
4
Bird Flu
4
Cattle on Feed
5
Hogs & Pigs Report
5
Exports
5
Wishing you a Merry Christmas and Happy New Year!!
Pro Coop’s MISSION:
PRO-viding a serviceoriented, unified, cooperative to enhance owners
profitability.
___________________________________________________
_____________________________________________
PRO’s motto:
P - Professional
R - Reliable
O - Outstanding
MARK YOUR CALENDARS!!!
Plan to attend
Pro Coop’s Winter Market Outlook
Monday January 23rd at the Wild Rose in Emmetsburg, IA
8:30-8:45
8:45- 9:00
Registration & Coffee
Decision Power for Farmers - Pro Coop’s Value Proposition
Kyle Kuepker - CEO Pro Cooperative
9:00-9:45 Energy Market Outlook
Tony Emerson & Matt Mlynarczk - CHS Inc.
9:45-10:30 Agronomy Solutions
Steve Barnhart - Winfield Solutions
10:30-11:45 Grain Market Outlook
Matt Campbell - INTL FCStone Financial Inc.
11:45
Conclude with Lunch
Please RSVP by replying to this email with the word ATTEND if you plan to be there.
Page 2
Pro Report Online
Market Highlights
General Comments - The bulls had
Thanksgiving so the bears get Christmas as
the old adage goes. Argentina’s forecast
and the recent past week has alleviated
much of the crop concerns there for now.
The Trump administration so far has not
shaped up to be pro-agriculture or probiofuels. Still a lot of unknowns here but
biggest short term concern is if the retroactive biodiesel credit gets approved. If not,
the biodiesel industry is on shaky ground
with negative returns from last year.
Markets are closed next Monday due
to the Christmas holiday.
Corn - Corn closed lower for the week as
even a much larger than expected US Hogs/
Pigs report and a supportive Cattle on Feed
number failed to give support. Weather
maps out of South America remain the
driver with good rains in Argentina keeping
pressure on the board as spec funds increase their short position this week. Export window for US corn is shrinking to
March as cheaper Argentine corn values
will pull export business going forward
from that slot. US farmer selling is quiet and
likely to remain so until after the 1st of the
year (and even probably the first quarter) so
basis could still see some improvement.
Next major support for March corn is $3.41
and then toward $3.30-3.35. With a large
fund short position and virtually all “worst
case” news items already factored into prices, corn could build a supportive case in
2017 once the acre switch shakes out. With
fewer acres and a trend line yield, we could
easily take 6-700 mbu off production next
year. General bias is Neutral corn short
term but supportive into spring/summer.
Soybeans - Soybeans and the products
closed lower for the week as beans were
down 46 cents, down over 200 points on Jan
soyoil and down $8.50 a ton for nearby
soymeal. Rain makes grain was the mantra
this week as the dry areas of Argentina saw
some heavy and much needed rainfall this
week. Interior US soybean basis levels continue to firm Absent a sudden change in the
weather maps over the long holiday weekend, look for further price erosion heading
into the year end. Soybean export shipments averaging over 90 mbu for the last
ten weeks, and exceeding last year over that
time by nearly 165 mbu. Longer term story
still look to the world vegetable oil situation
(see chart lower right). Near 30 year lows
on carryout despite record production the
past three years. Demand is strong and no
one has come up with a real answer to this
tight stocks situation. Any weather event
could cause an explosive reaction to production shortages. Additional planted acres this
spring in the US may hold this discussion at
bay until 2018 but even with 5 million more
bean acres, the long term veg oil situation still
remains tight. Short term it doesn’t appear
the fund positioning in beans is over yet which
is bearish. The past two sessions have seen
nearly 30k contracts liquidated from bean
open interest and the funds are still long over
100k contracts.
Bull/Bear Bubble Charts Update
Review charts to the left. Short term situation is essentially range
bound for both crops. Long term corn market remains quite bearish
with huge US and world stocks. But projected 2017 stocks could shrink
with lower acres and any weather issues changing this chart to a more
friendly picture quickly. Beans held down by last years huge yields but
overall carryout in veg oil and meal keep things well supported. Big
acre switch could pose longer term pressure, We continue to see global stocks/use levels drop despite record production levels. Until we
solve that, bean prices are well supported over the long haul.
Cash Price Comparisons
Corn
Last
Week
$3.10
Dec-13 Dec-14 Dec-15
Current*
$4.29 $3.71 $3.40
$3.01
*As of Close 12/23/16
Soybeans
Last
Dec-13 Dec-14 Dec-15 Week Current*
$12.87 $9.84 $8.24
$9.59
$9.14
*As of Close 12/23/16
Volume 5, Issue 11
Page 3
Technical Thoughts - New Crop Corn
Review the Mar corn chart below - Not much to say here, other than the market appears to be firing all cylinders on a sideways-to-lower trend. A well-defined channel continues to guide values. Moving averages are all virtually sideways. The market appears to be
shaping up for another test of the 340 area, which I would suspect will hold. The bigger
GRAIN MARKETING IDEAS:
question lies on the upside; can the market generate enough firepower to get through the
360 resistance area? It will take some fund buying and conversations about corn acres tran- Nearby “Old” Crop Corn - The bin doors
are locked up and the market is transisitioning to soybeans to get this done.
tioning to more predictable, range bound
and demand focused markets. There are
ample stocks both on farm and in commercial storage. Similar feel to last year
at this time. Grain piles are the focus getting them picked up and then the market will consider opening up free price
later sometime in Jan. Producer selling is
non-existent so basis has started to improve. Better days are ahead with talk of
losing 4 million planted acres of corn this
spring. We are still nearly 30 cents off the
lows we saw in late August. Top range of
the market seems capped at $3.70 Mar
futures. Any move close to that would put
cash values around $3.25. Target sales
there if necessary to generate cash.
Fall 2017 New Crop Corn - Hard to think
about selling new crop with most producer still needing to sell a lot of old crop
stocks. But that market is nearly 30 highTechnical Thoughts - New Crop Soybeans
er in its futures price than nearby futures.
A 25 cent rally gets that market at $4.00+
Review the Jan bean chart below - The market is still working toward the 978 objecfutures. Making that your starting point
tive after a downside breakout from a descending triangle pattern. This would test the
at 5-10% of your production and hoping
November lows. Moving averages are all rolling over this week, and prices back inside the
its your worst sale should certainly be
ever-popular 940-1020 trading range from this Fall. Near term, it seems like we may get
something most need to consider. Considcomfortable with this range again. Longer term, we may ratchet the range upward to the
980-1060 area. Market keying in on “rain makes grain” mentality as the dry areas of Argen- er HTA contracts which locks in futures
but keeps basis open.
tina that were a concern earlier getting much needed rains. Long term veg-oil concerns
Nearby “Old” Crop Beans - Tough week
are still apparent in this market so short term setbacks could still be bought long term.
last week in beans. This goes to show that
with the money flowing in and out of the
markets, it is wise to find a price that
works for your operation and EXECUTE.
Prices back to $9.50 work with the good
yields last year. Sell it, generate cash and
stop storage. Cash is king in today’s market with most producers indicating that
cash is hard to come by.
Fall 2017 New Crop Beans - Well if we
knew we could producer 60+ bushel
beans again, our decisions would be much
easier. Unfortunately we are using more
conservative mid-50’s yield for initial
cash flows. With potentially 5+ million
more bean acres, we have to watch this
closely. The main story is still being at 30
year lows in the world vegetable oil carryout. This will continue to support prices. $9.25 - $9.50 right of the combine is
still a good starting point to be a seller.
Go with the Pro!
Your PRO-fessional Business Partner!
Go with the Pro!
Pro Coop Grain Contract Offerings
Most market risk managers would highly encourage a “diversified” marketing plan. What does that mean? This section of the Pro Report
Online hopes to help answer that by introducing to our patrons the different types of contracts that we offer at Pro Coop, the pros and
cons, risk vs. rewards, and when or why you would use the various types of contracts. We don’t expect to answer all the Questions you
may have on these contracts - only provide some insight and hope you will give us a call to see how these may fit into your marketing plans.
If you have additional questions on these contract types, be sure to reach out to one of Pro’s 4 grain originators (Jamie O’Hearn, David
Storm, Chris Pohl, and Jeff Elbert.
Merchants Plus
Merchants Plus Grain Program (MPGP) is a NEW marketing tool for farmers offered exclusively in this
area by Pro Cooperative. You commit bushels to Pro Cooperative (no minimum amount) and the futures portion of
your risk will be priced by a professional pricing team drawing on years of experience and sophisticated trade exeNEW
cution capabilities by Pro Coop’s commercial marketing advisor INTL FCStone. The program takes the uncertainty
Market
and worry out of pricing a portion of your crop and allows you to participate in OTC and option strategies withTool
out toiling over the mechanics of how they function. Most of the major grain trading companies offer similar programs. The FCStone Merchant Services (FMS) program allows Pro Cooperative to compete and originate bushels and
allows farmers to diversify their pricing and risk management portfolio.
Here are some frequently asked questions:
Is the MPGP difficult or time consuming to manage?
No, farmers can contract to deliver grain with Pro Cooperative as usual. Simply notify Pro Cooperative’s Grain
Origination Team within the signup window that you would like to participate. Pro Cooperative will notify FMS of the total volumes and FMS
will go to work pricing. Regular updates will be available but nothing else is required until the program is completed and you receive your
final futures price.
Why should I work with FCStone Merchant Services, LLC (FMS)?
FMS is an established Agribusiness service provider and part of an INTL FCStone Inc. family of businesses with decades of experience in the
Ag sector from freight to futures brokerage to OTC markets. They pride themselves in knowing their customers’ business and sitting with
them on the same side of the table as they help manage price, volatility, and liquidity risk. FCStone was the first non-bank swap dealer and
has vast knowledge of the global OTC and options space. They have a proven track record of expert execution and insightful analysis - and
have earned a reputation as a trusted and transparent partner. Dealing with the FCStone name provides the confidence that you are dealing
with a stable industry leader and Fortune 500 company.
What strategies will they use and how will I keep track of my pricing?
There will be two pricing strategies for producers to choose from: conservative OR aggressive. Both strategies will provide daily online
price updates. The conservative strategy will be a rules-based program that focuses on downside protection at the expense of upside. This
strategy will allow you to regularly estimate your potential range of price outcomes. The aggressive strategy will be a discretionary strategy
that opportunistically trades around market conditions with a goal of generating the best possible price for producers. The aggressive strategy will provide periodic market updates to share the management team’s insight.
What are the fees associated with the MPGP?
The fee for this program is 10 cents per bushel for corn and 15 cents per bushel for beans, which is deducted from the final established futures price. For example, if final price of $4.40 Dec. Corn is achieved for this program, then the final 10 cent fee will be deducted from price,
In this example, Pro Cooperative would write a HTA contract at $4.30 to the producer or a cash contract of $4.30 MINUS the basis.
How do I get started?
Simply contact your Pro Cooperative Grain Origination Team member for complete details, which will include contract examples and customer sign up requirements.
2016/17 Sign Up & Pricing Dates:
Program
Summer Corn
Summer Beans
New Crop Corn
New Crop Beans
Sign-Up Period
12/19/2016 - 1/31/2017
12/19/2016 - 1/31/2017
12/19/2016 - 1/31/2017
12/19/2016 - 1/31/2017
Avian Influenza Bird Flu Virus
Despite nearly non-existent incidences in the US
currently of avian influenza outbreaks that wreaked
terrible havoc on millions of birds over the past 1824 months, a dramatic uptick in the virus is showing
up in many other areas of the world. Asian and European flocks are feeling the effects of this virus and
even cases of transmission to humans have been
reported. The destruction of these flocks and subsequent shortage of eggs and poultry products could
mean better opportunities for US poultry markets
and subsequently better corn and meal usage numbers in the feed usage category.
Pricing Window and End-date
2/2/2017 - 7/12/2017 Sept Corn Futures
2/2/2017 - 7/12/2017 August Bean Futures
2/2/2017 - 9/29/2017 Dec “New Crop” Corn Futures
2/2/2017 - 9/15/2017 Nov “New Crop” Bean Futures
Go with the Pro!
Your PRO-fessional Business Partner!
Go with the Pro!
USDA Cattle on Feed
Dec 1 Cattle on Feed was in line with expectations, but
lowest in 20 years! November placements was higher than
expected and November marketings was also higher than
expected and the highest in 10 years. Expect a neutral response on Tuesday’s trade. Should support corn numbers.
PRO COOPERATIVE
Main Office
17 3rd Ave. Northeast
Pocahontas, IA 50574
Phone: 712-335-3060
Fax: 712-335-3075
E-mail:
mschon@procooperative.
com
with your comments and
suggestions!
USDA Hogs and Pigs Report
Dec 1 All Hogs and Pigs was sharply higher than expected. Kept for Marketing and Kept
for Breeding was also sharply higher than expected. Expect a bearish response to this
report next Monday. But bigger hog numbers is certainly supportive corn and beans.
We’re on the Web! Visit
us at
www.procooperative.com
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VFD’s Take Effect Jan 1
Please take NOTE that on
Jan 1 all feeds that contain
key drugs are required to
have a VFD - Veterinary
Feed Directive PRIOR to
leaving any Pro Coop location. Unsure what that
means, contact any Pro Coop location for information.
Current US Export
The export program will be a talking point in 2017 but not the way we normally think. Most of the impressiveness of
the of the program year to date has been the lack of competition. A strong US dollar and South American production recovery is very likely to impact things during our second quarter of the calendar year negatively.
Soybean sales commitments so far this marketing year is at 1.724 billion bushels, which is up 27% versus last year.
Soybean sales will need to average roughly 10.2 million bushels/week from this point forward to reach the USDA's
current export projection vs last year's 15.7 million/week average through the end of the marketing year. This seems
very achievable but the US dollar strength and Trumps stance on trade could be a barrier to achieving this number.
Corn sales total commitments of 1.352 billion bushels remain sharply above last year's 767 million, while sales will
need to average roughly 25.6 million bushels/week to reach
the USDA's export projection vs 32.6 million/week average
last year. World corn exports since 1990 are show in the
chart at the lower right. Total world exports are seen
hitting a record at nearly 148 MMT in 2016/17, up from the
previous top at 142 MMT two years ago. The U.S. share of
that number has steadied in the 33-40% range in five of the
last six marketing years—that compares to an average
58.5% share in the decade before that. Of the top four
exporters shown, Ukraine ships the least (though their
share is growing) at 16-20 MMT in the last four years, with
Russia in at #5 at just 3-5 MMT.
Soybean meal sales are more disappointing as total commitments are down 11% on the year, while the USDA is estimating exports to be down just 1% from last year. Soybean oil sales also are down wth total commitments of
502k tonnes - down 9% on the year, while the USDA's is
estimating soybean oil exports to be down 4% from last
year.
Go with the Pro!
Your PRO-fessional Business Partner!
Go with the Pro!
Additional Excitement in the Grain Department
Operations Manager - This past week I had the distinct pleasure of showing our new Operations Manager, Chris Kernahan
around to all of our facilities. Most of our patrons won’t see Chris as he is the “behind the scenes” get it done kind of guy
who works with our locations on facility improvements, grain quality and bin management, maintenance and fleet management
and capital projects among many other roles and responsibilities. He brings an elevated level of expertise to Pro Coop that
will allow us to make strategic decisions that have profitability, growth and customer service at its forefront. Help me in welcoming Chris - he will be a great asset to our team.
Two New Grain Originators - Effective Monday Aug 15, the Grain Origination team at Pro Coop will DOUBLE! I’m proud
to announce the addition of Chris Pohl and Jeff Elbert. Their primary focus is service to assist and educate our patrons on
effective and varying contract and risk management options for use in grain marketing. They are solely there for you. They
will assess the needs of your farming operation in regards to contracting, marketing, transportation options, market education
and policies. Most of their time will be spent on your farms and in your fields with you - being that trusted source of timely
market information that is necessary for you to make good marketing decisions.
Chris comes to use from Landus where he served as a Grain Market Advisor. He built some great customer relationships during his tenure at Landus and I’m sure he will do the same here at Pro. Chris and his family have resided in Manson for
several years and he will be staging out of the Manson office. His coverage area will mainly be around the locations of Manson,
Pioneer, Bradgate, Rutland, Gilmore City, Rolfe, Pocahontas, Plover and Havelock.
Jeff is also a local guy living in Marathon for over 30 years. He comes to us from Ag Partners where his role was
Grain Field Marketer. He already has an elevated working knowledge of various contract options and will be an asset to our
Grain Origination team as well. Jeff will have an office based in Ruthven but will be out in the country most of the time covering areas around the locations of Havelock, Plover, Ayrshire, Ruthven, Terril, Wallingford and Graettinger.
David Storm and Jamie O’Hearn are now going on 3 years employed at Pro and continue to fulfill their origination
duties as well. David has built a customer base throughout our entire territory and will continue to travel where needed.
Jamie serves dual roles as originator and as Manager of Cement Plant Futures. She is a licensed broker and assists customers
with full service brokerage of futures and options. She also works closely with me in merchandising our commercial bushels
and monitoring all of our advanced marketing grain contracts.
Help me in welcoming Jeff and Chris to an already strong grain team at Pro Cooperative!
Projects - Each year we develop a strategic plan to analyze the needs of your cooperative. This past year our focus for large
capital projects was to upgrade our Rutland facility with additional dumping, legging and storage capacity. With a new
15,000 bu/hour dump pit and leg and an additional 500k storage, this facility will have its much needed upgrade complete to
handle additional producers bushels this fall.
Some larger projects are just a necessary part of the normal wear and tear of using them. Graettinger patrons don’t have to
worry anymore about the narrow width or short length of their scale. This 80’ x 14’ 160,000 lb capacity new scale will be
commissioned the end of August and will handle any size, weight, length of equipment that is currently allowed on the road.
Rutland 15,000
As with most things in agriculture, Mother Nature gets a say in things. And she didn’t disappoint
in July when she put her fist
bu/hour
into one of our bins at Pioneer. Fortunately we were aggressive in getting bids. The bin,
catwalkdump
and conveyor are already
pit conveyor and be ready to
down and we should start to jack up the new 500k GSI bin as well as a new, faster 18,000 bu/hour
Rutland 90’
receive corn in the fall.
500,000 bu
capacity GSI
grain bin
Pioneer Bin in July
Pioneer Bin Aug 2
Pioneer Bin TODAY
Graettinger Scale