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Volume 5, Issue 7
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“Go with the Pro!”
Inside this issue:
Market Highlights
2
New Logo!
2
Cash Sales Targets
3
Technical Thoughts
3
What’s New at Pro?
4
Grain Projects
4
USDA Report Info
5
Marketing Meetings
5
Pro Coop’s MISSION:
PRO-viding a serviceoriented, unified, cooperative to enhance owners
profitability.
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PRO’s motto:
P - Professional
R - Reliable
O - Outstanding
Newsletter Date: Aug 13, 2016
Two words describe the Bottom Line Up Front - PRICES STINK. But markets are in the
continual process of price discovery. Sometimes they create higher highs than what one may think are
necessarily justified based on current market information, sometimes lower lows and sometimes we
sit in a range waiting for something to happen. I would say currently the market is stuck waiting for
something else to appear in the market to give it more direction.
The USDA once again surprised the trade by upping its estimate on corn yields to 175.1 bpa.
They are clearly following their good/excellent crop condition ratings that have shown strong, steady
ratings most of the season. Questions abound as to what affect the early June heat and moisture deficit had on corn but July rains greened things back up. Field reports of tipped back ears still have to be
factored in at some point and this may be the largest USDA yield number all year. The adage - “it
takes a bearish report to put in a low” may be the case this year. If so, I would anticipate a preharvest lows in corn in the next 30-45 days. That doesn’t mean I’m thinking big rallies anytime soon
either though.
Brazil’s currency has been moving higher recently causing foreign buyers to reach back to US
for new purchases on both old and new crop. Our corn and soybean products are some of the most
competitive (cheap) currently. We also have extremely reliable logistics and maintain quality fairly
well. Because of this, our corn exports are up 61 mbu from this time last year and are expected to be
an additional 250 mbu higher by this time next year! Soybeans are the same way with exports 37 mbu
higher than last year’s Aug number and anticipated to be 70 mbu higher again next year.
The cure for lower prices………...is lower prices. Feed buyers have shown interest recently
by attempting to bottom pick this market and will probably continue this over the next couple of
months. They are looking for 3-6 month strips to buy corn. When buyers start to enter the market
(with no sellers present), we can expect small pops in the market (15-25 cents). The USDA feed usage jumped 175 mbu in this last report for next year and we are already 300 mbu higher than last year.
When corn is cheap, feeders buy their needs.
Brazilian corn production is DOWN 8.5 MMT (330 mbu). Their safrinha corn crop (second
crop) has suffered greatly from lack of moisture. Their domestic corn prices continue to soar higher.
This could result in limited exports or potentially even imports into Brazil to help feed their livestock
industry. Either way, it limits their competitiveness with US exports. Despite Brazil’s struggles, world
corn carryout still jumped 12.5 MMT (487 mbu). This could limit any legitimate upside potential in
corn until after the first of the year when the market starts talking (again) about whether to plant corn
or beans and any spring/summer weather issues. Ultimately, the market has to figure out how NOT
to expand corn acres next year…….and some of the way they do that is in the price.
The USDA bean yield was HUGE at 48.9. This is rather aggressive both in timing and scope.
They are typically reactive not proactive in making yield adjustments (especially considering beans are
made in August and their yield survey went out Aug 1). Despite the large number, new crop carryout
is only up 40 mbu to a very moderate 330 mbu. I feel this is supportive to the market. Putting a lot of
bushels on the supply side of the market and being able to compensate for most of them shows that
any little hiccups in demand (increases) or production (slightly lower yields) means beans have better
potential down the road. Old crop carryout this past MARCH was projected at a burdensome 465
mbu and now stands at 255 mbu! Exports have helped us chew through these bushels again. And
world stocks are DOWN 1.7 MMT (66 mbu) as well for the second consecutive year. If this dramatic
drop in carryout were to happen again next year with a projected carryout of 330 mbu, we could see
a dramatic price run in beans next spring - similar to this past spring. But that’s quite a ways away.
What will be interesting again will be the acreage make up heading into 2017. The US does
not need corn, it does not need wheat and it could use some beans.
Page 2
Pro Report Online
Market Highlights
and this year we are running nearly 125 mln
bu above the USDA’s projections. This isn’t just
confined to old crop, new crop sales have
been on a torrid pace over the past two
weeks, as well.
Corn - A USDA corn production number of
General Comments - With China’s talk
15.153 bbu is massive! Yet corn closed
of purchasing Syngenta the future theme
slightly higher on the day on Friday. HUH?
would be the potential yield increases in
The trade analysts are questioning the high
their production. 45% of China’s current
ear weight number and recall last year when
production is Non-GMO. If they chose to
the largest ear weight was seen in Aug but
use Syngenta’s GMO technology to indropped in Sept USDA’s report when more
crease yields, they could potentially reduce
actual weights are taken. There are also
their acres planted by 30% and still have the
expectations at these low price levels that
same total production! This could prove
most farmers will go into “store and hold
taxing on the market. If that happens,
for better days” mode. This also would limit
those 30% of the acres could be planted to
selling pressure. End users peering into
other crops such as soybeans. This could
2017 are wondering if the US can have 4
be devastating to the world export market.
consecutive years of record or near record
Stay tuned. We continue to see an impresyields and therefore have shown some initial
sive amount of export sales on both corn
interest at bottom picking this market beand beans, during a very counter-seasonal
fore harvest. That being said with a 2.4 bbu
time. Normally, we are in the process of
carryover scenario, there is a TON OF
just rolling the unshipped sales into the new
CUSHION to work with. Because of this
crop marketing year’s balance sheet, but
burdensome carryover number, this is still
this year we have seen inspections also rise
room for spec funds to get further short
dramatically. This is encouraging that we
which could pressure Dec futures down to
will finish the next 4 weeks in strong fashthe $3.18 low point. With buyers waiting to
ion. We normally roll about 50-75 mln
pounce, it appears this would be short lived.
bushels of old crop bean exports forward,
Soybeans - The knee jerk response to the
USDA reports’ large soybean yield was to go
lower but by the end of Friday’s session, most
of the losses had already been recouped. Like
in corn, some questions as to whether we
have seen the largest yield of the year in this
report. Lessing the impact was improvements
in the export number. So a projected demand
of 4.016 bbu and an ending stocks number of
330 mln bu, the trade is well aware that a trim
of a mere 0.9 bpa to 48.0 (still a record) would
leave US carryout at 255 mln bu again next
year. Any slight weather hiccup in the South
American crop or spring/summer weather
issues for the US next year and the bean price
runs up DOLLARS not CENTS. Traders will
be watching closely the next 2 weeks to see
how the crop finishes out and if the buying
pace from China remains strong or starts to
cool down. Friday’s Commitment of Traders
report showed the funds long over 110k contracts of beans and if a negative report like
Friday’s USDA report didn’t rattle their cage,
it’s unlikely they will hit the eject button in the
next few weeks either.
Did You Notice Something New?
Our LOGO has changed!! Our motto - Professional, Reliable, Outstanding has not! In an effort to truly modernize and
upgrade your cooperative, we have made many new refreshing changes. Have you stopped by your locations recently?
Things look different, things feel different. Employees and patrons alike are gaining a newly found pride in their cooperative.
This new logo is one of those many changes. It represents our core values: Customer Service, Community, Excellence, Safety and Integrity. It represents a renewed commitment to serving our communities, members and each other.
This new logo is a symbol of our promise to serve you and it is only as good as our ability to deliver on that promise every
day. This commitment to excellence starts now. With our new brand comes a brand new day. Thanks for being a part of
the future - Thanks for being a part of Pro Cooperative.
Cash Price Comparisons
Corn
Last
Week
$2.84
Aug-13 Aug-14 Aug-15
Current*
$5.71 $3.38 $3.36
$2.85
*As of Close 8/12/16
Soybeans
Last
Aug-13 Aug-14 Aug-15 Week Current*
$13.63 $11.86 $9.21
$9.19
$9.32
*As of Close 8/12/16
Volume 5, Issue 7
Page 3
Technical Thoughts - New Crop Corn
Review the Dec corn chart below - We had seen 8 consecutive sessions trade within a
329-338 ½ range heading into a volatile USDA report. Following two weeks of consolidation, Friday's close was certainly interesting. It will encourage longs when the close ended
some 10.5 cents off the daily lows, but we still have not seen the market take out any important resistance areas. To build on Friday’s momentum, it will be important to trade
over the recent resistance at 338 ½. If we fail there, it was all for naught. The end of the
month is when Price Later contracts expire for a lot of commercial elevators potentially
pressuring things near term as producers sell to “be done with this crop” but after that
time, watch for buyers to step in before harvest.
GRAIN MARKETING IDEAS:
Old Crop Corn - Price is not and will not
be at very good levels for the rest of the
old crop season. Opportunities to market
this crop have passed. Better times will
come but not until late this year or next
spring. If you are holding this crop, you
need to consider selling to generate some
cash and reowning with calls or futures.
Ask us about Minimum price or Extended
price contracts. Both contracts keep you
in the market without paying storage and
generate some upfront cash flow.
2016 New Crop Corn - My true focus on
new crop will be the bushels you haven’t
marketed that are for fall delivery. Better
days will come for the bin stored bushels
so be patient. Fall delivery bushels are in
the same camp as old crop bushels. Sell
off the combine but re-own. We have an
Technical Thoughts - New Crop Soybeans
in-house brokerage called Cement Plant
Futures where you can set up an account
Review the Nov bean chart below - An optimistic close on Friday, but like corn, has
to trade futures and options. Or we have
yet to really break through any resistance at this time. Key set up for next week, as we
contracts that can operate similarly called
need to test the psychological 1000 resistance area soon. The market has found comfort in
Minimum Price and Extended Price which
the value zone of 950-1000 recently, and it will be important to break out sooner than
I will introduce at our marketing meeting
later. A move above 1000 would set up a target toward the 1065-1094 region. Support
next Tues. (see flyer on Page 5 of this
feels well established. The market vibe is that the downtrend is stalling, and attempting to
newsletter for times and details).
reverse in the coming weeks.
Old Crop Beans - There aren’t many
bushels left out in the country and those
that are are in tight hands. Same story as
corn - sell and re-own.
2016 New Crop Beans - Probably the
most intriguing of all the markets (and
potentially the most explosive. Little
yield changes either this year or next have
the potential to impact this market in
DOLLARS per bushels not CENTS. Unfortunately, the futures are inverted. Meaning the farther out months are actually
LOWER than the nearby. So how do you
capture that market effectively? Simple sell cash and buy calls or futures. Otherwise every month you roll forward, cash
becomes cheaper. Prudent risk management and merchandising 101 is to manage that inversion through futures and
options. Let Jamie set up a brokerage
account or come in and see me or one of
my 4 Grain Originators to discuss.
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
Rutland 15,000
commissioned the end of August and will handle any size, weight, length of equipment bu/hour dump
that is currently allowed on the road.
pit
Rutland 90’
As with most things in agriculture, Mother Nature gets a say in things. And she didn’t
500,000 bu
disappoint in July when she put her fist into one of our bins at Pioneer. Fortunately
capacity GSI
we were aggressive in getting bids. The bin, catwalk and conveyor are already down
grain bin
and we should start to jack up the new 500k GSI bin as well as a new, faster 18,000
bu/hour conveyor and be ready to receive corn in the fall.
Pioneer Bin in July
Pioneer Bin Aug 2
Pioneer Bin TODAY
Graettinger Scale
Go with the Pro!
Your PRO-fessional Business Partner!
Go with the Pro!
USDA Aug 12 Crop Report Numbers and Analysis
PRO COOPERATIVE
Main Office
17 3rd Ave. Northeast
Pocahontas, IA 50574
A 16.8% US corn stocks/use is the largest since 2005/06 crop year. When
avg. corn price was $2.00/bu, the stocks/use was 17.5%. The trade will be skeptical of
the 175.1 bpa yield (10% above trend) but even with a smaller yield, the carryout still
swells. Henceforth, the USDA lowered their avg. price range for the 2016/17 crop to a
range of $2.85 - $3.45/bu.
Despite a 10 year high in bean stocks/use ratio of 8.2%, beans still have supportive connotations with uncertainty still in final yield and knee jerk reactions will come with minor yield
adjustments. Export for next year are in record territory with a 1.9 bbu projected export program. But
recent price action still has USDA lowering avg. price forecast for 2016/17 crop to a range of $8.35 - $9.85.
Phone: 712-335-3060
Fax: 712-335-3075
E-mail:
mike@procooperative.
com
with your comments and
suggestions!
We’re on the Web! Visit
us at
www.procooperative.com
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REMINDER
If you have a Price Later contract, it is set to expire on
Aug 26 at 1 p.m. If you have
not indicated what you want
done with that contract by
that time, it is REQUIRED by
our Grain Dealers License to
price it at that days closing
bid. Please reach out to your
nearest Pro location PRIOR
to that date if you want to
roll that contract or put it on
an Extended Price Contract.
A new contract will be issued
and MUST BE SIGNED within 5 days to complete this
transaction. Thanks!
Pro Coop’s Summer Market Outlook
Tuesday August 16
8:30 a.m. to Noon
Wild Rose Casino, 2nd Floor
Emmetsburg, Iowa
Speakers:
- Kyle Kuepker, CEO - Pro Cooperative
- Matt Campbell, INTL FCStone LLC - Grain Outlook
- Tony Emerson, CHS Inc. - Energy Outlook
- Harry Ahrenholtz - Agriculture Clean
Water Alliance
- Michael Schon - Grain Marketing Tools
Please RSVP by calling any
Fall Lender Grain Marketing Forum
Tuesday September 6
9:00 a.m. to Noon - Ruthven Community Center
1:00 p.m. to 4:00p.m. - Pro Coop Headquarters Pocahontas
Speakers:
Matt Campbell - INTL FCStone LLC
Michael Schon - Pro Coop Grain Marketing