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DTN Early Word Grains 02/23 05:53

DTN Early Word Grains 02/23 05:53 Back to Green March corn was 1 cent higher, March soybeans were 4 cents higher, and July Kansas City (HRW) wheat was 3 cents higher. By Darin Newsom DTN Senior Analyst 6:00 a.m. CME Globex: March corn was 1 cent higher, March soybeans were 4 cents higher, and July Kansas City (HRW) wheat was 3 cents higher. CME Globex Recap: The grain and oilseed complex was higher early Friday while energies and metals traded lower. Meanwhile, the U.S. dollar firmed again overnight while DJIA futures added to Thursday's solid rally. OUTSIDE MARKETS: The Dow Jones Industrial Average closed 164.70 points (0.7%) higher at 24,962.48, the NASDAQ Composite lost 8.14 points (0.1%) to 7,219.09, and the S&P 500 gained 2.63 points (0.1%) to 2,703.96 Thursday. DJIA futures were 76 points higher early Friday morning. Asian markets closed higher with Japan's Nikkei 225 up 156.34 points (0.7%), Hong Kong's Hang Seng adding 301.49 points (1.0%), and China's Shanghai Composite up 20.47 points (0.6%). European markets were trading mostly lower with London's FTSE 100 down 22.46 points (0.3%), Germany's DAX losing 12.55 points (0.1%), and France's CAC 40 off 12.33 points (0.2%). The euro was 0.0065 higher at 1.2297 while the U.S. dollar index added 0.23 to 89.95. March 30-year T-Bonds were 14/32 higher at 143'18 while April gold lost $1.90 to $1,330.80. Crude oil was $0.37 lower at $62.40 and Brent crude dropped $0.46 to $65.93. China's Dalian soybean and Malaysian palm oil futures were higher overnight.

DTN Early Word Opening Livestock 02/23 06:15

DTN Early Word Opening Livestock 02/23 06:15 Mixed Livestock Trade Expected The combination of end-of-week positioning and the upcoming cattle on feed report that will be released Friday afternoon is expected to bring additional market volatility to the entire livestock complex. By Rick Kment DTN Analyst Cattle: $2 Lower Futures: $1 Lower Live Equiv $146.26 +0.40* Hogs: Steady to $1 Lower Futures: Mixed Lean Equiv $83.78 -0.03** * based on formula estimating live cattle equivalent of gross packer revenue ** based on formula estimating lean hog equivalent of gross packer revenue GENERAL COMMENTS: Light trade activity is expected to be seen early Friday morning, although the tone of the market continues to be focused on the previous market pullback that may add even more softness to trade through the morning. There is also expected to be some pre-report positioning ahead of the cattle on feed report in both live cattle and feeder cattle trade. Cash markets appear to be well established with prices steady to $2 per cwt lower. It appears that more cattle will likely still need to be sold given the trickle of trade over the last few days. But unless something major is seen across the complex or in the cattle on feed report, prices appear to be set.

DTN Midday Grain Comments 02/23 11:46

DTN Midday Grain Comments 02/23 11:46 Grains Mixed at Midday Mixed trade at midday with soybeans firmer and corn/wheat lower. March option expiration is today. By David Fiala DTN Contributing Analyst General Comments The U.S. stock market indices are higher at midday with the Dow futures up 160 points. The interest rate products are lower. The dollar index is 15 lower. Energies are higher with crude up 0.60. Livestock trade is lower. Precious metals are lower with gold down $2.50. CORN Corn trade is fractionally lower at midday; we have been mixed with less than a 3 cent trading range. Ethanol margins are steady this morning with ethanol futures flat to lower. U.S. export values should remain pretty competitive. There was a 115,000 metric tons sold to Egypt daily report and the weekly sales remaining strong at 1.56 million metric tons. Double-crop areas in Brazil look to build some moisture in the coming days, but that is slowing planting progress. The USDA outlook forum pegged corn acres at 90 million. On the March chart support is at the 10-day at $3.66 with the 20-day at 3.63 below that, with the 200-day moving average at $3.76 the highest moving average and major resistance with March option expiration putting the $3.70 area in play for today. SOYBEANS Soybean trade is 2 to 5 cents higher at midday with two-sided trade seen so far with weather and export cancellations battling so far. Meal is $1 to $2 higher and oil is 25 to 35 points higher. The weather pattern looks to keep Argentina dry, and Brazil wet in the near term that is limiting downside, with podfill season fast approaching for Argentina. Volatility should continue here in the near term with overbought conditions persisting in the near term. Early Brazilian harvest will continue despite being slowed by rains, causing some crop losses. The USDA outlook forum put soybean acres at 90 million. An export sale of 106,000 metric tons was announced to unknown with weekly sales disappointing with -101,900 metric tons of old crop, 221,100 of new, meal 131,600 metric tons, and oil 42,900 of oil. On the March, support is the 10-day moving average at $10.19, with resistance the $10.39, which is the six-month high scored Tuesday, and we traded within a quarter of a cent of this morning. WHEAT Wheat trade is fractionally to 2 cents lower at midday with trade backing off the early session highs. The extended forecast continues to be short on moisture for the SW Plains with more action east and north. The dollar is higher again today, but remains below 90 on the index. The Russian crop will continue to be watched with less cover than usual, with Black Sea values continuing to edge higher with export offers in the $206-a-ton range for the most part. The outlook forum put wheat acres at 46.5 million. Weekly export sales were in line with recent weeks at 328,900 metric tons. On the March Kansas City wheat support is at the 200-day at $4.72 which we keep chopping around, with resistance the recent highs at $4.84. David Fiala is a DTN contributing analyst and the President of FuturesOne and a registered Advisor. He can be reached at dfiala@futuresone.com Follow him on Twitter @davidfiala (BAS) Copyright 2018 DTN/The Progressive Farmer. All rights reserved.

DTN Midday Livestock Comments 02/23 11:58

DTN Midday Livestock Comments 02/23 11:58 Light Trade Keeps Futures Weak Friday Light to moderate pressure redeveloped in cattle trade through most of the morning. This lack of buyer support and inability to cover short positions may add longer-term weakness to the complex. Hog markets have turned slightly lower as traders try to square positions following the aggressive market rally over the last few days. By Rick Kment DTN Analyst GENERAL COMMENTS: Light to moderate pressure is seen in most livestock trade as cattle futures continue to erode due to concerns of additional pressure developing in the near future. Hog trade is focusing on end-of-week position squaring, as limited losses are seen Friday morning. Corn prices are steady to lower in light trade. March corn futures are 1/2 cent lower Friday. Stock markets are higher in light trade. The Dow Jones is 137 points higher while Nasdaq is up 59 points. LIVE CATTLE: Moderate to firm losses have quickly developed through the live cattle futures market. Traders are also focusing on the inability to bring additional volume to the market at the end of the week. Some late-day market shifts may continue to develop as traders focus on the upcoming cattle on feed report. This may add even more uncertainty to the complex and spark some early-week market shifts Monday morning. Cash cattle bids have developed at $128 live through the South and $202 dressed in the North through the morning. Although there may still be a few cattle needing to be sold, it appears that for the most part both sides seem comfortable with previous market activity. This could allow for markets to remain at current levels with activity next week focusing on end-of-month needs also. Boxed beef cut-outs at midday are mixed, $0.83 higher (select) and down $0.32 per cwt (choice) with light movement of 39 total loads reported (15 loads of choice cuts, 7 loads of select cuts, no loads of trimmings, 17 loads of ground beef). FEEDER CATTLE: Feeder cattle futures have traded moderately lower through most of the morning, although prices have tried to break out of the lower market moves. This could add even more softness to the complex over the near future, as traders continue to focus on increased activity through the next couple of days. March futures are unchanged in light midday trade as the potential for late-day support may move back into the market. LEAN HOGS: Light pressure is slowly trickling into the lean hog complex Friday morning following a strong market rally over the last two sessions. This overall support seen in the market has quickly pulled prices well off of recent lows, but traders are now starting to focus on end-of-week positioning, which could lead to increased volatility. The strength in the market continues to hold, but could draw additional buyer activity back to the market over the next week. Cash prices are lower on the National Direct morning cash hog report. The weighted average price is down $0.73 at $62.83 per cwt with the range from $57.00 to $63.75 on 3,252 head reported sold. Cash prices are lower on the Iowa/Minnesota Direct morning cash hog report. The weighted average price is down $0.52 at $63.19 per cwt with the range from $62.00 to $63.75 on 492 head reported sold. The National Pork Plant Report posted 135 loads selling with carcass values adding $0.77 per cwt. Lean hog index for 2/21 is at $70.17, down 0.61 with a projected two-day index of $69.78, down 0.39. Rick Kment can be reached at rick.kment@dtn.com (BE) Copyright 2018 DTN/The Progressive Farmer. All rights reserved.

DTN Closing Grain Comments 02/23 13:53

DTN Closing Grain Comments 02/23 13:53 Soybeans Shake Off Bearish News, End Higher May soybeans ended up 4 1/4 cents Friday in spite of news from USDA that China cancelled 12.1 million bushels of soybean export sales last week, resulting in a net sales reduction for the U.S. last week. Corn and winter wheat were steady to slightly lower in quiet trading.

DTN Cattle Close/Trends 02/23 15:40

USDA MARKET NEWS--AFTERNOON CATTLE REPORT 02/23/18 VOLUME USDA TOTAL RANGE DTN PRACTICAL RANGE WT AVG KANSAS CONFIRMED CASH SALES - TODAY: 329 WEEK T0 DATE: 16,346 STEERS 114 128.00-128.00 128.00-128.00 128.00 HEIFERS 67 128.00-128.00 128.00-128.00 128.00 NEBRASKA CONFIRMED CASH SALES - TODAY: 7,166 WEEK TO DATE: 40,126 STEERS 1,616 202.00-205.00 202.00-205.00 204.36 HEIFERS 1,752 202.00-205.00 202.00-205.00 204.06 TEXAS CONFIRMED CASH SALES - TODAY: 591 WEEK TO DATE: 6,903 STEERS 140 128.00-128.00 128.00-128.00 128.00 HEIFERS 451 128.00-128.00 128.00-128.00 128.00 COLORADO CONFIRMED CASH SALES - TODAY: 195 WEEK TO DATE: 6,105 STEERS No reportable trade HEIFERS 195 128.00-128.00 128.00-128.00 128.00 IOWA CONFIRMED CASH SALES - TODAY: 1,942 WEEK TO DATE: 18,034 STEERS 598 204.00-206.00 204.00-206.00 205.08 HEIFERS 125 205.00-205.00 205.00-205.00 205.00 COMMENTS: Mostly just cleanup trade to with prices generally steady with The rest of the week's trade. 5-AREA LV STR AVE PR&WT:$128.29(1468) HIDE&OFFAL: $10.26 -0.01 CARCASS EQV INDEX CHOICE (600-900#) SELECT (600-900#) #OF HD LIVE BASED 192.98 187.06 165,360 BOX BASED 206.37 200.82 36,990 AVE INDEX 199.67 -0.12 193.94 +0.28 202,350 BEEF CUTOUTS CHOICE (600-900#) SELECT (600-900#) 218.37 -0.03 212.82 +0.76 25.49 LDS CH CUTS / 15.14 LDS SEL CUTS / 3.77 LDS TRIM / 29.27 LDS GROUND BOXED BEEF TREND: Stdy on Ch & hr on Sel on mod-frly gd dem & lt offers COMPREHENSIVE WEEKLY CUTOUT VALUE: Week ending 02/16 $206.93 -2.27 CUTTER 90% 350# UP C/O: $170.74 -0.02 NAT'L BONELESS BF TRIM: 11.36 lds / Unevenly stdy on lt dem & offers 90% TRIM: 00 lds: Wtd Avg $No Test/ Unevenly steady FI KILL(WTD) FRI 108(549) WK AGO 115(575) YR AGO 109(554) MIX: THU SH92/CB25 SAT 23(572) WK AGO 21(596) YR AGO 20(574) WEEKLY CANADIAN CATTLE IMPORTS. FEEDERS SLAUGHTER S&H Week Ending: 02/10/18 3,051 4,156 Week Ending: 02/03/18 1,629 4,373 Change from prev week: +1,422 -217

DTN Chart Technical Points 02/23 16:30

DTN Chart Technical Points 02/23 16:30 DTN FUTURES 10 2/23/18 SLOW STOCHASTIC PRICES ARE DECIMAL MOVING AVERAGES RSI'S 5 Day 20 Day CONTRACT CLOSE 4-Day 9-Day 18-Day 45-Day 9Day 14Day 30Day %K %D %K %D CBTWT MAR 452.25 450.00 455.56 453.28 438.49 51.81 53.63 53.50 26 19 63 74 CBTWT MAY 464.25 462.63 468.47 466.18 451.38 50.78 52.98 53.18 25 20 64 75 KC WT MAR 469.00 469.31 472.83 470.81 447.04 52.49 55.70 56.32 30 29 76 81 KC WT MAY 484.75 485.00 488.11 485.86 461.24 53.34 56.48 56.93 32 32 77 82 MN WT MAR 600.75 601.88 603.69 606.15 612.58 41.86 42.86 43.62 29 29 16 20 MN WT MAY 613.25 613.50 615.36 617.65 621.94 43.78 44.43 44.89 38 27 16 19 CORN MAR 366.25 366.06 366.72 364.56 356.79 60.20 61.37 57.27 34 32 81 87 CORN MAY 374.50 374.25 374.58 372.42 364.90 62.36 62.58 57.73 37 36 81 88 CORN JUL 382.25 382.00 382.31 380.13 372.95 62.53 62.52 57.70 39 37 82 88 OATS MAR 260.00 260.56 265.86 267.14 258.15 41.10 45.59 49.14 14 12 23 41 OATS MAY 263.50 263.06 267.58 267.90 259.14 45.71 48.66 50.29 23 25 47 59 BEANS MAR1036.251032.251022.831004.17 983.76 75.57 70.69 62.52 82 79 90 91 BEANS MAY1047.501043.441033.751015.24 994.88 75.66 70.79 62.73 83 79 90 91 BEANS JUL1056.001052.631043.221024.811004.64 75.19 70.51 62.71 83 79 90 92 S MEAL MAR 375.50 376.73 371.87 353.89 335.99 79.29 76.55 69.50 56 64 85 89 S MEAL MAY 378.30 379.55 374.29 356.91 339.11 79.77 77.14 70.13 59 67 86 90 B OIL MAR 32.36 32.08 31.87 32.26 32.73 54.95 49.77 46.25 78 68 30 20 B OIL MAY 32.56 32.28 32.07 32.46 32.92 55.01 49.86 46.30 79 68 29 19 CATTLE FEB 128.00 129.07 128.59 127.16 123.47 55.53 58.15 57.06 43 67 85 92 CATTLE APR 124.85 126.04 126.01 125.26 123.31 46.72 50.47 52.40 26 53 73 80 FEEDER MAR 146.00 147.11 147.90 148.00 145.46 41.26 46.10 49.15 10 31 53 63 FEEDER APR 148.50 149.53 150.25 149.64 146.37 45.55 49.50 51.35 11 36 69 79 HOGS APR 71.38 70.44 70.03 70.78 73.29 53.14 49.10 47.68 80 58 24 17 HOGS MAY 77.60 76.79 76.18 76.65 78.44 56.55 51.79 49.44 84 67 30 22 COTTON MAR 81.45 79.60 77.55 77.22 78.71 74.60 66.24 60.64 93 83 46 21 COTTON MAY 81.34 80.04 78.43 78.23 79.30 67.88 62.18 59.11 90 83 42 21 RICE MAR 11.97 11.95 12.08 12.26 12.13 37.49 40.89 45.25 41 26 15 19 RICE MAY 12.20 12.17 12.30 12.51 12.38 37.71 40.59 45.05 43 26 14 17

DTN Closing Livestock Comment 02/23 16:46

DTN Closing Livestock Comment 02/23 16:46 Mixed Trade at End of Week Light activity was seen in all livestock markets late Friday with prices mixed in a narrow range through most of the complex. Traders continue to focus on the balance between fundamental and technical direction. By Rick Kment DTN Analyst GENERAL COMMENTS From Friday to Friday, livestock futures scored the following changes: Feb LC off $2.10; Apr LC off $2.80; Mar FC off $3.72; May FC off $3.45; Apr LH up $3.22; May LH up $2.68. Cash cattle trade was light to moderate during the day with clean-up activity seen in all areas. Prices were generally steady with the previous week's trade as the tone of the market was set midweek. Live cattle trade held at $128 per cwt while dressed activity was seen from $204 to $206 per cwt, with most sales steady to $1 per cwt lower than the week previous. It is likely that active market trade will not develop until midweek or later next week, which could limit additional market direction. According to the closing report, the national hog base is $0.93 lower compared with the Prior Day settlement ($57.00-$63.75) weighted average $62.63. Corn futures were lower in light activity with March futures down 1/2 cent Friday. The Dow Jones Index is 347 points higher with the Nasdaq up 127 points.


 DTN Headline News


USDA Crops Outlook

By Chris Clayton
DTN Ag Policy Editor

ARLINGTON, Va., (DTN) -- USDA sees corn production down 1% and soybean production down 2% in the 2018-19 crop years as farmers won't quite match the yields they achieved in 2017-18.

USDA released various commodity outlooks on Friday morning as part of the annual Agricultural Outlook Forum. The forecasts give the first look at USDA's projections for crops and livestock in the 2018-19 marketing year.

USDA's initial forecast for the 2018-19 crop also sees a bump in U.S. soybean exports by 200 million bushels while corn exports will fall 150 million bushels and wheat exports will fall by 25 million bushels.


USDA on Friday projected a 2018-19 corn yield of 174 bushels per acre, down 2.6 bushels from 2017-18 record yield. With 90 million acres planted, that projects production at 14.39 billion bushels, down 214 million bushels from the 2017-18 crop.

Ethanol use would reach 5.65 billion bushels of corn and up 125 million bushels from the old crop. USDA cited higher fuel use domestically overall, as well as projected growth in U.S. ethanol exports.

Exports are projected to fall 150 million bushels to 1.9 billion bushels. Total corn use would be 14.52 billion bushels, down 75 million bushels overall. Competition from Argentina, Brazil and Ukraine are expected to limit U.S. export prospects.

That would leave corn ending stocks for the 2018-19 crop at 2.27 billion bushels, down 3% from the 2017-18 crop, with stocks-to-use pegged at 15.6%. The average season farm-gate price is pegged at $3.40 a bushel.


USDA projects soybean yield for 2018-19 at 48.5 bushels an acre, down 0.6 bushels from last year's crop. With 90 million acres planted, production is pegged at 4.32 billion bushels, down 2% from a year ago.

With an old-crop carryover of 530 million bushels projected, USDA stated the combined production and beginning stocks will lead to record supplies of 4.875 billion bushels, 3% higher than 2017-18.

Domestic use is projected up 1% in 2018-19 to 2.115 billion bushels. Domestic crush is projected to increase 30 million bushels to 1.98 billion bushels with an expansion in domestic use and exports of soymeal. Crush margins are expected to grow because of a slight decline in soybean prices while prices for soybean meal and oil remain steady.

Soybean exports are projected at 2.3 billion bushels, up 200 million bushels from the 2017-18 crop. Rising global demand, along with a decline in the South American harvest, is expected to ease some competition pressures for U.S. soybeans. Global trade will continue to be driven by China, which accounts for about two-thirds of the soybean trade.

Total soybean use is projected at 4.415 billion bushels, up 227 million bushels from the 2017-18 crop. That will lower ending stocks to 460 million bushels for 2018-19 with a stocks-to-use ratio of 10.4%.

The average farm-gate price will drop 5 cents to $9.25 a bushel.


Wheat production will increase by 98 million bushels, or 6% higher than 2017-18. USDA sees a 47.4 bushel-per-acre yield to go with 46.5 million acres seeded, up about 500,000 acres from the old crop.

USDA bumped up overall wheat acres even though the 2018 winter wheat crop was 32.6 million acres, the lowest in 109 years.

Overall production is pegged at 1.839 billion bushels, even though USDA cites the potential of increased abandonment in the Southern Plains because of drought conditions hitting the winter wheat crop.

With 1.009 billion bushels of carry-in from the 2017-18 crop, USDA sees 135 million bushels of imports and total supplies at 2.983 billion bushels for 2018-19, down 93 million bushels from the 2017-18 supplies.

Total domestic use is pegged at 1.127 billion bushels while exports for 2018-19 are projected at 925 million bushels, down 25 million bushels from last year. Wheat is expected to face strong international competition for exports as the European Union will have a larger crop and Argentina will expand wheat acres. Both Australia and Canada also are expected to have larger export supplies as well as they rebound from lower 2017-18 yields.

Ending stocks for 2018-19 are expected to decline roughly 8%, or 78 million bushels to 931 million bushels. The average farm-gate price is projected at $4.70 a bushel.


USDA sees that global cotton consumption will exceed production in 2018-19 bringing global stocks down by 6 million bales, more than offsetting the increased production from 2017-18 of 900,000 bales. World production will decline by 3.6%, USDA forecasts.

U.S. cotton farmers will increase planted area 5.5% to 13.3 million acres, but USDA forecasts harvested acres will decline 0.4% from last year to 11.3 million acres. The average pounds per acre will fall 7.9% to 828 pounds an acre and the abandonment rate will increase. That will lover overall U.S. cotton production to 19.50 million bales, down 8.3$ from the 2017-18 crop.

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN


Winter Slumber Party


By Emily Unglesbee
DTN Staff Reporter

ROCKVILLE, Md. (DTN) -- If bugs snored, the din from your corn and soybean fields would be deafening right now.

But they don't. So it's easy to forget that those quiet acres are teeming with overwintering insects, from tiny yellow rootworm eggs to the fat, glistening white grubs of the Japanese beetle.

Let's brush up on the most common pests bedding down in your field-wide sleepover this winter:


The western corn rootworm enjoyed a minor population boom in 2017, said University of Illinois entomologist Nick Seiter. That means plenty of eggs are now buried in Midwestern soils.

Don't count on recent rains or cold weather to bother them, either. "They are pretty well adapted to surviving our winters and flooded conditions this time of year," Seiter said. "But a big rain during egg hatch could help." Egg hatch will occur for most Midwestern growers sometime between late May and early June, depending on spring temperatures.

For growers in the Great Plains and Great Lakes region, the western bean cutworm may also be overwintering in the pre-pupa stage, particularly in sandy soils. The moths will lay eggs from late June through August, and the caterpillars will go to work on corn ears from late July into September.

And don't forget about the European corn borer, whose larvae still huddle in corn stubble to survive the winter in some Corn Belt fields.

All three of these pests are targeted by the Bt traits in most corn hybrids, but only the corn borer is still completely controlled by Bt proteins.

The western corn rootworm has evolved widespread resistance to the Bt traits Cry3Bb1 and mCry3A, and even more powerful pyramided Bt products are weakening in hotspots in Iowa and Minnesota. See the DTN story here: http://bit.ly/….

Likewise, the western bean cutworm has eaten through the efficacy of Cry1F, the Herculex trait, in recent years. Only Viptera corn hybrids protect against this pest. See the DTN story here: http://bit.ly/….


Wedged deep in the soil and curled up tightly, those fat, white grubs are as distinctive as they are annoying. Before they develop into their final beetle form -- usually Japanese beetles or May/June bugs -- they can feed on corn and soybean seedlings.

Their skinny little friend, the wireworm, is also a beetle baby -- it develops into click beetles.

Both wireworms and white grubs are usually controlled by the neonicotinoid insecticides on most corn and soybean seed, Seiter noted. But in fields with a history of grassy species, like turf, cover crops, pasture or corn-on-corn, they can become numerous enough to cause real problems, he added.

On a slimier note, slugs have been on the rise in corn and soybean fields in recent years, particularly in the eastern margins of the Corn Belt, in states like Pennsylvania, Ohio and Indiana. Slugs can overwinter under crop residue in all their life stages, from eggs to adults. Expect them to start moving (and eating) in the early spring. They are extremely difficult to control -- see a Penn State article on them here: http://bit.ly/….


The soybean cyst nematode is likely lurking in the soils of most Midwestern soybean fields -- and it's more dangerous than ever. A 25-year study from Iowa State University has found that most SCN-resistant soybean varieties now provide far less protection: http://bit.ly/….

Less commonly, the dectes stem borer might also be tucked inside soybean stubble in the larval stage. They are stubbornly hard to treat, so consider narrow rows and an early harvest to discourage lodging, Seiter said.

Another sporadic but troubling soybean pest is the bean leaf beetle. It overwinters as an adult and can cause damage to beans throughout the growing season. Neonicotinoid seed treatments have proved a good control option for farmers with a history of this pest.


Stink bugs probably won't be bedding down in your fields this winter, but they won't be far away.

"They're more likely to leave the field and seek out leaf litter, tree bark and other plants to overwinter as adults," Seiter said. "The brown marmorated stink bug does it especially visibly, in homes in addition to leaf litter and tree bark."

These smelly nuisances will start creeping into crop fields during the reproductive stages of corn and soybean crop, he added.

Farther south, the redbanded stink bug successfully overwintered as far north as northern Louisiana last year, thanks to a mild winter. The resulting early and heavy populations were extremely damaging to soybean growers in the mid-South. See the DTN story here: http://bit.ly/….

Fortunately, this winter has proven significantly chillier and entomologists are optimistic this difficult pest will have to migrate up from more sub-tropical regions to reach southern soybean fields. See an article from the University of Arkansas here: http://bit.ly/….

Emily Unglesbee can be reached at Emily.unglesbee@dtn.com

Follow Emily Unglesbee on Twitter @Emily_Unglesbee


USDA Outlook: Not So Good

By Chris Clayton
DTN Ag Policy Editor

ARLINGTON, Va. (DTN) -- A lower U.S. dollar value could boost agriculture exports, but the long-term outlook offers no real light at the end of the tunnel for the struggling farm economy, USDA's chief economist said on Thursday.

The USDA Agricultural Outlook Forum, held just outside Washington, D.C., is the first opportunity for USDA economists to change their long-term forecasts for crops and livestock production. The bottom line of all of the spreadsheets and bar graphs is that there is no quick reversal for commodity markets on the horizon.

"The ag sector does continue to face economic stress. Debt is increasing as farm income continues to fall," said Robert Johansson, chief economist and acting deputy undersecretary for farm production and conservation.

As Agriculture Secretary Sonny Perdue put it, "That's not a path to prosperity." Perdue added that various weather disasters and market challenges tested farmers in 2017, and similar conditions are expected over the next crop year. "Once again, these conditions are testing the resiliency of the American farmer."

USDA projected corn and soybean acres will each be 90 million acres (ma), and both are slightly lower than 2017 acres. Corn planted acres would be down 0.2%, and soybean acreage would be down 0.1% from a year ago.

USDA sees a 500,000-acre boost in all-wheat acreage in 2018, going from 46 ma to 46.5 ma.

Cotton acreage is projected at 13.3 ma for 2018-19, up from 12.4 ma in the 2017-18 crop. Cotton acreage will increase even though USDA projects a 63-cent-per-pound price, down 9% from 2017-18.

While USDA right now projects parity this year for corn and soybeans, long-term trade expansion in soybeans will put pressure on corn acreage, but also other crop areas in the future, Johansson said.

"Our latest long-term baseline suggests soybean area will match or exceed corn area for much of the next decade, supported by import demand from China," Johansson said.


USDA releases more detailed forecasts on Friday morning, but based on the acreage forecast and USDA's long-term projections for yields released last week, the production forecast would look like this:

-- Corn: 173.5 bushels per acre (bpa). That's a projected 15.62-billion-bushel (bb) crop.

-- Soybeans: 48.4 bpa. That comes to 3.92 bb.

-- Wheat: 47.4 bpa. The acreage projection would come to a 2.2 bb wheat crop.


Touching briefly on prices, USDA forecasts corn prices for the 2018-19 crop at an average of $3.40 a bushel (bu), up 10 cents from the latest projection for the 2017-18 crop, according to the February World Agricultural Supply and Demand Estimates.

For soybeans, the average 2018-19 price is forecast at $9.25 bu, which is 5 cents below the latest projection for the old-crop.

Wheat prices are projected to increase 10 cents bu to $4.70 bu for the 2018-19 crop year. The bump in wheat prices comes because of last year's drought in the Northern Plains and current dry conditions across much of the winter-wheat states.

As Johansson pointed out in his speech, real farm prices -- indexed for inflation going back to 1960 -- have fallen sharply. Corn production is 400% higher than 1960, and real farm prices have fallen by more than 60%. Soybean production is up more than 1,000%, and real farm soybean prices have declined 47%.


USDA projects farm income will fall 6.7% in 2018 down to $59.5 billion. That's less than half of the farm income levels in 2013.

"Looking forward, net farm income is expected to remain flat over the next 10 years, and when accounting for inflation, to fall in real terms," Johansson said.

While farm income is flat, the overall debt-to-asset ratio for farms still remains relatively low at 13%, compared to 22% at its peak in 1985. Still, one-third of poultry farms and 20% of cotton farms are now highly leveraged, meaning debt-to-asset ratios are above 40%.

While these overall ratios remain low, overall farm debt is approaching record levels at more than $400 billion with real-estate debt expected to top the 1981 record of $218 billion. Banks are reporting strong commercial demand and a significant share of loan restructuring going on. Maturity dates on farm loans are being extended as well, "reflecting increased constraints on producer ability to repay," Johansson said.

The more dramatic story overall, Johansson said, is that working capital on farms has dropped by more than 65% since 2012.

What might change that is improved economic growth, and the declining value of the dollar against most global currencies that could boost exports. For countries that buy U.S. agricultural products, the dollar is falling against those currencies, Johansson said. The only major export competitor seeing a more declining currency is Argentina with its peso because of high inflation and policy uncertainties in that country.

Agricultural exports for the U.S. are projected at $139.5 billion for fiscal year 2018, roughly the same as the 2017 export levels. The U.S. agricultural trade surplus will decline slightly to $21 billion from $21.3 billion in 2017.

A lot hinges on the growth of middle-income households in emerging markets. Johansson and Perdue both noted the number of middle-class households in China will double to 370 million by 2026. The number of middle-class households in India will triple over the same period.

Johansson also put stock in the potential that the Trump administration will close some trade deals, citing that trade agreements could open up new markets for U.S. producers. Johansson noted that countries that currently have free-trade agreements with the U.S. -- including Canada, Mexico, South Korea and Latin American countries -- account for roughly 45% of all U.S. agricultural exports.

Where the weather giveth, it also taketh away. Johansson said dryness in Argentina has pulled down the soybean crop there, yet beneficial rains in Brazil have pushed up soybean production estimates.

Johansson and Perdue pointed to potential economic relief coming for producers in the next farm bill, but Perdue also indicated the importance of finding markets for commodity goods.

"I like to say I don't know a farmer or rancher in this country who wouldn't rather have a good crop and a market than a government payment," Perdue said.

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter @Chris.ClaytonDTN


Projected Revenue Insurance Prices


OMAHA (DTN) -- The month of February is important for growers in the key Corn Belt states who purchase revenue-based crop insurance policies. It's when the projected prices for those policies are set.

During February, DTN will post a running tally of the December corn, November soybean and September Minneapolis wheat futures averages in Ag News.

The running average as of 02/21/18: $3.95 per bushel for corn, $10.11 per bushel for soybeans and $6.31 for HRS wheat.

2018 Dec Corn Nov Beans Sep HRS
1-Feb $3.9325 $10.0450 $6.2850
2-Feb $3.9250 $9.9900 $6.2775
5-Feb $3.8950 $9.9150 $6.2525
6-Feb $3.9350 $10.0550 $6.3000
7-Feb $3.9475 $10.0050 $6.3675
8-Feb $3.9500 $10.0450 $6.3775
9-Feb $3.9225 $10.0000 $6.3025
12-Feb $3.9700 $10.1425 $6.3775
13-Feb $3.9600 $10.1925 $6.3200
14-Feb $3.9650 $10.2000 $6.3150
15-Feb $3.9750 $10.2375 $6.3375
16-Feb $3.9700 $10.2200 $6.3100
20-Feb $3.9600 $10.2500 $6.2775
21-Feb $3.9650 $10.2800 $6.2900
AVG $3.95 $10.11 $6.31
2017 $3.96 $10.19 $5.65

You can also check out a running tally of RMA's harvest prices and prices recently in discovery here: http://prodwebnlb.rma.usda.gov/…

Revenue policies with harvest-price protection cover losses caused by a difference in the harvest price (determined in October) from the projected price (determined in February). They also cover revenue losses in the event prices tumble between planting and harvest, as they did for corn in 2008.

For producers in 31 states, the closing price of the December corn contract during each trading day of February is averaged to determine a revenue-insurance-projected price guarantee. The November contract closes are averaged during February for projected price for soybean revenue-based insurance contracts. The September Minneapolis spring wheat closes are averaged for wheat revenue insurance. States with earlier planting have their spring guarantees set at a different time.

"The amount of insurance protection is based on the greater of the projected price or the harvest price," according to the Risk Management Agency's website. "If the harvested plus any appraised production multiplied by the harvest price is less than the amount of insurance protection, the producer is paid an indemnity based on the difference."

Revenue protection policies with harvest price exclusion insure based on the projected price only. "The amount of insurance protection is not increased if the harvest price is greater than the projected price," RMA states.

Send comments to talk@dtn.com


DTN Retail Fertilizer Trends

By Russ Quinn
DTN Staff Reporter

OMAHA (DTN) -- Average retail fertilizer prices continued to inch higher the second week of February 2018, according to retailers surveyed by DTN.

After several weeks of one fertilizer -- potash -- being slightly lower, prices for all eight major fertilizers were higher compared to a month earlier, though none were up by a significant amount.

DAP had an average price of $457 per ton, MAP $495/ton, potash $345/ton, urea $357/ton, 10-34-0 $415/ton, anhydrous $492/ton, UAN28 $230/ton and UAN32 $264/ton.

On a price per pound of nitrogen basis, the average urea price was at $0.39/lb.N, anhydrous $0.30/lb.N, UAN28 $0.41/lb.N and UAN32 $0.41/lb.N.

Fertilizer manufacturers are seeing swings in profits thanks to changes to U.S. tax laws as well as improving sales and prices, according to Dow Jones news service.

CF Industries posted earnings of $465 million in the fourth quarter of 2017, up from a $320 million loss last year, Dow Jones reported recently. The company's performance included a one-time benefit from the nation's new tax law to the tune of $491 million.

Despite the positive quarter for the company, more consolidation is expected to come in the fertilizer sector in the near future, according to CF Industries CEO Tony Will, Dow Jones reported.

"Ongoing consolidation is inevitable," Will said during CF's fourth quarter earnings call, according to Dow Jones.

Will also said the company is working toward a "sustainable amount of leverage, and at that point, it will be open to deals, including companies outside the U.S.

CF will target places it can operate "in ways that are in keeping with our culture and the strict interpretation of the law," he said, according to Dow Jones.

Four fertilizers are now higher compared to last year with prices pushing higher in recent months. Anhydrous is 1% higher, potash is 4% higher, DAP is 6% higher and MAP is 10% higher than last year.

The remaining four fertilizers are still lower in price compared to last year. Urea is 1% less expensive, while both UAN28 and UAN32 are 4% lower, and 10-34-0 is 6% less expensive than last year.

DTN collects roughly 1,700 retail fertilizer bids from 310 retailer locations weekly. Not all fertilizer prices change each week. Prices are subject to change at any time.

DTN Pro Grains subscribers can find current retail fertilizer price in the DTN Fertilizer Index on the Fertilizer page under Farm Business.

Retail fertilizer charts dating back to 2010 are available in the DTN fertilizer segment. The charts included cost of N/lb., DAP, MAP, potash, urea, 10-34-0, anhydrous, UAN28 and UAN32.

DTN's average of retail fertilizer prices from a month earlier ($ per ton):

Feb 13-17 2017 432 450 332 357
Mar 13-17 2017 443 462 337 360
Apr 10-13 2017 437 466 338 353
May 8-12 2017 437 466 340 351
Jun 5-9 2017 438 469 339 338
Jul 3-7 2017 436 467 339 325
Jul 31-Aug 4 2017 434 463 339 311
Aug 28-Sept 1 2017 433 457 338 303
Sep 15-29 2017 432 453 348 321
Oct 23-27 2017 431 453 347 325
Nov 20-24 2017 435 460 342 338
Dec 18-22 2017 445 485 344 348
Jan 15-19 2018 456 491 345 355
Feb 12-16 2018 457 495 345 357
Date Range 10-34-0 ANHYD UAN28 UAN32
Feb 13-17 2017 440 491 240 276
Mar 13-17 2017 441 507 247 280
Apr 10-13 2017 441 505 247 280
May 8-12 2017 437 508 247 280
Jun 5-9 2017 435 503 246 278
Jul 3-7 2017 432 462 236 268
Jul 31-Aug 4 2017 426 418 227 262
Aug 28-Sept 1 2017 418 417 215 248
Sep 15-29 2017 413 396 208 243
Oct 23-27 2017 407 393 205 262
Nov 20-24 2017 403 410 216 272
Dec 18-22 2017 405 461 218 254
Jan 15-19 2018 407 485 226 260
Feb 12-16 2018 415 492 230 264

Russ Quinn can be reached at russ.quinn@dtn.com

Follow Russ Quinn on Twitter @RussQuinnDTN


Smarter Than Weeds

By Jim Patrico
Progressive Farmer Contributing Editor

The Holy Grail of weed control would be a fast system that kills invasive plants, does no harm to crops, and uses a minimum of herbicide. The See & Spray system from Blue River Technology -- while still in a testing phase -- might be as close to that ideal as anything we have seen so far.

See & Spray is based on machine learning, sometimes called artificial intelligence. It is designed to be able to tell the difference between crop and weed. It then squirts a shot of herbicide accurately on only the weed.

Blue River Technology, a Silicon Valley start-up, developed the system and used it in cotton field trials last year in Arkansas, Missouri and Texas. Results were encouraging, CEO Jorge Heraud said. "We project it could produce up to 90% savings in [herbicide] material."

Results in cotton with the hooded sprayer were good enough that Blue River will test See & Spray in cotton again in 2018 and also will do trials in soybeans. John Deere liked what it saw in the 2017 trials and bought Blue River last fall.


The idea of selectively spraying for weeds is not new. About 20 years ago, the Patchen WeedSeeker -- researched at Oklahoma State University -- came onto the market. It used cameras that see infrared portions of the light spectrum to identify chlorophyll, i.e., growing plants. The WeedSeeker then triggered a sprayer to blast away anything green and growing. The device originally was marketed to kill plants along railroad right-of-ways.

See & Spray is generations more sophisticated and uses a different technology to target weeds.

The foundation of the system is a deep-learning algorithm, similar to one used by Facebook to recognize faces. Cameras on the See & Spray toolbar (one camera per row) send images to a computer processor in the tractor cab, which differentiates between cotton plants and anything else in the row. When it sees "anything else" growing in the row, it targets it with a precise spray pattern.

Key to the system is teaching the processor to recognize a crop -- no easy task, Heraud explained. Machine learning of this sort requires a neural network that replicates how a human brain works. That means interconnected artificial neurons -- 50 layers of them in the case of See & Spray.


Blue River collected more than a million photos of cotton plants from all angles and lighting conditions to feed into that neural network so it could learn what to identify. They collected those images using cameras mounted on data carts pulled through cotton fields. They also used prototype See & Spray systems that only "saw" and did not "spray."

"The tricky part is getting each photo labeled as cotton," Heraud said. A small army of 200 people all over the world (part of an Amazon subsidiary) did the labeling. All of those labeled images were fed into the processor so it could learn what to spray and what to save.


Last year's See & Spray model ran at about 5 miles per hour. This year's trials will use a new processor invented for the video gaming industry. It is 50% faster than the previous processor. "Guess what? We can drive faster," Heraud said.

The new processor will allow See & Spray to conduct search-and-destroy missions at 7 to 8 mph. Heraud's long-term goal is 12 to 15 mph.

The system can detect a plant as small as 1/4 inch tall and can be programmed to create a spray buffer around the crop. The current buffer default setting is 1/2 inch, which tells a lot about how accurate the system is. It's like "painting with herbicide," Heraud said.

That accuracy means less herbicide is likely to move off target.


Having this much computing power in a tractor cab will have side benefits, Heraud said. For instance, the system could record the number of times and locations it sprays, which could give a farmer data on the level of his weed infestations. Blue River is planning to teach See & Spray to identify weeds, not just crops, Heraud said. That would provide more sophisticated data on weed populations and help growers develop different weed-control strategies for each field.

Take that a step further. If See & Spray could differentiate between palmer amaranth and foxtail, it could be programmed to select one chemistry for one weed species and a different product for a second weed species. That specificity could increase efficiency and maybe help slow weed resistance.


See & Spray is not perfect. As a technology, it is "still in development," Heraud said. For instance, it is not yet a plug-and-play system. Technicians, not farmers, have operated the prototypes.

"Getting an easy user interface has not yet been our main focus," Heraud said. But as See & Spray comes closer to market, Blue River will concentrate more on that aspect of the technology. The goal is to simplify it for a broad base of users.

How long before trials and tweaking are done, and See & Spray comes to market? "As you can imagine, I have been asked that many times by our investors and now our new company [John Deere]," Heraud said with a laugh. "Honestly, that depends on how testing goes."

This year, for instance, See & Spray prototypes will be running in both cotton and soybeans to work out glitches, make improvements and collect new images for processing. Heraud said he is looking at 2020 or 2021 as possible launch dates.

"The message we are getting from Deere is: 'Make sure you have a machine that works really well for customers before we go to market,'" Heraud said.



Blue River Technology got its start when two Stanford University classmates -- Jorge Heraud, a former head of precision agriculture at Trimble, and Lee Redden, a PhD student and roboticist -- joined forces. The idea was to use artificial intelligence and robotics to help agriculture become more efficient.

An early project was the LettuceBot, a machine that can automatically thin stands of lettuce to increase production. It won a prestigious 2017 AE50 Award from the American Society of Agricultural and Biological Engineers.

John Deere bought Blue River Technology for more than $300 million in September 2017. It is now a Deere subsidiary with Heraud as its CEO.

For More Information:

Blue River Technology: www.bluerivertechnology.com


Todd's Take

By Todd Hultman
DTN Analyst

The previous two Todd's Takes, "Soybeans Remarkably Defiant" and "Soybean Meal Breaks New Highs" should have covered the soy topic fairly well for now, and I apologize for taking it on once again, but darn it, the perplexing riddle took another interesting twist this week and deserves a closer look.

The fundamental narrative for soybeans should sound familiar by now. A sixth-consecutive season of good growing weather and plentiful rains has USDA estimating Brazil's soybean crop at 112.0 million metric tons (mmt) (4.1 billion bushels), more than enough to offer the U.S. a spring and summer of stiff export competition.

While Brazil's big crop was being anticipated, soybean prices broke to new lows in December and looked headed toward a long, downward descent until Argentina came along and captured traders' attention with a stretch of dry weather that hasn't gone away yet. Early in 2018, it was difficult to take the threat in Argentina's crops seriously, believing Brazil, the world's largest soybean exporter, had plenty on the way.

More recently, the dry and bullish La Nina influence persevered to the point that last Wednesday's report from the Buenos Aires Grain Exchange estimated 56% of soybean crops in Argentina were rated either poor or very poor. As Argentina is the world's largest exporter of soybean meal, it was easy to recognize the argument for U.S. meal prices trading higher, but the case for higher soybean prices was not as clear, muddied by Brazil's big crop and China's avoidance of making U.S. purchases.

Just as I was wondering if March soybeans were getting ready for a Saint Valentine's Day massacre, trading near their highest prices in over six months, Argentina's crop ratings mentioned above were released and another unexpected bullish clue emerged. FOB soybean prices in New Orleans broke above their January high and, as of Monday, the New Orleans' price reached $10.70 a bushel, its highest in 11 months.

To understand the significance of a new high in New Orleans' FOB soybean price, keep in mind that this particular price is most sensitive to foreign demand. Futures prices reflect a mix of commercial and speculative activity, DTN's National Soybean Index reflects a domestic perspective of cash prices across the Midwest, and New Orleans' port price gives us insight about demand for soybeans abroad.

When we compare the DTN National Soybean Index to New Orleans' FOB price, we get an interesting comparison of domestic versus foreign attitudes. Given Argentina's dry weather and last week's poor crop rating, it would be reasonable to expect higher domestic cash soybean prices, influenced by speculative buying on the futures board. In fact, DTN's index ended at $9.52 a bushel Friday, up 38 cents on the week.

Because of Brazil's big crop, one would not expect to see a new high in FOB soybean prices at New Orleans, yet that is just what happened with Monday's new 11-month high of $10.70. Even Brazil's FOB price in Paranagua was trading at the equivalent of $10.87 a bushel on Monday, also near its 11-month high.

So on one hand, we have Brazil's big harvest underway and U.S. soybean exports doing poorly. Yet, we also see FOB soybean prices keeping pace with increased speculative buying on the futures board, willing to make significant new highs. These new highs strike the core of the bearish argument for soybeans.

The plainest way to put this is that either soybeans' popular bearish outlook, based largely on estimates from the U.S. and Brazilian governments, is flawed and not as bearish as it appears, or the latest run-up in various soybean prices are temporary blips that won't stand the test of time.

If we are asking the question, "What should U.S. soybean producers do?" strong consideration has to be given to making early cash sales at this week's higher prices for at least part of 2018 production.

If the question is, "What are soybean prices going to do?" the only significant market clue supporting the popular bearish fundamental outlook is the generous level of carry in old-crop futures spreads.

On the other hand, commercial net-longs plus soybean prices themselves, including an unexpected appearance of new highs in New Orleans overwhelmingly suggest stronger-than-expected demand and higher soybean prices ahead.

This market has come a long way from January's early bearishness and there are apt to be more unexpected turns ahead. I understand if this sounds crazy with a big crop on the way from Brazil and a possible record U.S. soybean planting coming this spring, but market clues for soybean prices currently lean bullish.

Todd Hultman can be reached at Todd.Hultman@dtn.com

Follow Todd Hultman on Twitter @ToddHultman1



By Rod Mauszycki
DTN Tax Columnist

With Andy Biebl's retirement, I wanted to take a quick moment to introduce myself. My name is Rod Mauszycki. I'm a principal at CliftonLarsonAllen and my focus is on agribusiness taxation. Although I have big shoes to fill, I hope you find my articles as insightful as Andy's were.


Today I'd like to discuss the changes to depreciation. As you may know, in 2017 you could take up to $510,000 of Section 179 (subject to phase out) on new and used equipment, and 50% bonus depreciation on new equipment. The asset must be placed in service by the end of the tax year.

The Tax Cuts and Jobs Act significantly changed how agribusiness looks at depreciation. Starting with Section 179, the new legislation increased expensing limits to $1 million with the phase-out starting at 2.5 million. It also increased the property eligible for Section 179 to include property used predominantly to furnish lodging, roofs, HVAC, and fire/security systems. One benefit in using Section 179 is the ability to amend and revoke during the period open under the statute of limitations.

Bonus deprecation was one of the few items in the new law that applies retroactively. Bonus depreciation will increase to 100% for property acquired and placed into service after Sept. 27, 2017. Unlike before, bonus now applies to both new and used property. However, used property that was acquired from related parties or a decedent will not be eligible for bonus depreciation. Bonus will be phased out at 20% increments starting in 2023.

Under the new law, annual depreciation limits on passenger autos increase significantly. The first year is $10,000, second year is $16,000, the third year is $9,600, and $5,760 thereafter until fully depreciated. However, if the auto weighs less than 6,000 pounds, the deduction is limited to the lesser of the amounts above or depreciation that would have been computed under normal depreciation. This may result in unforeseen consequences so the IRS has put in place a safe harbor. If the auto weighs more than 6,000 pounds, you can fully depreciate using bonus depreciation.

Farm depreciable lives have been shortened under the Act. Prior, farm equipment typically had a seven-year life. Under the Act, new farm equipment placed in service after Dec. 31, 2017 will have a five-year life. Used farm equipment will continue to have a seven-year life. In addition, 200% declining balance method becomes the default. However, for 15- or 20-year property or upon election, 150% declining balance is still available.

One interesting retirement planning technique that opens up due to the changes in depreciation is the expanded use of Charitable Remainder Trusts (CRT) upon retirement from farming. Using Section 179 limits the ability to contribute assets to a CRT without tax consequences. A farmer could use the expanded bonus depreciation, instead of Section 179 to avoid the adverse tax consequences. This could supersize their CRT and defer additional income for two to 20 years.


Editor's Note: Tax Columnist Rod Mauszycki is a CPA and tax partner with the accounting firm of CliftonLarsonAllen, in Minneapolis, Minnesota. Send questions to taxman@dtn.com


Weighing Possible Huge Merger

By Todd Neeley
DTN Staff Reporter

OMAHA (DTN) -- The possible merger of two of the world's largest grain and oilseed processing companies likely wouldn't move prices for farmers. However, it likely would have a bigger impact on farmers outside the heart of the Corn Belt.

That's the view of at least one land-grant university economist who has been looking at the possibilities.

Speculation has been swirling about reports that Archer Daniels Midland may be in talks to take over Bunge Ltd. Leaders for the two companies have been tight-lipped. So far, there's also been little analysis about a corporate marriage of two major agricultural commodity buyers that combined for about $106 billion in sales last year. ADM reported $60.8 billion in annual net sales in 2017, while Bunge made about $45.8 billion in net sales in 2017.

Chad Hart, associate professor of economics, crop markets specialist and Extension economist at Iowa State University, said it's difficult to say how such a merger among global grain and oilseed giants would affect farmers.

"With tighter margins, companies are looking at how can we wring more out of the system," Hart said. "When I'm looking here at this proposal, to me when I'm looking at the two, what I see is ADM is the stronger company in North America, while Bunge is a little stronger in the South American market. It's creating the marketing arm that reaches all across the Americas and helps streamline how they move product from the farm to the end-user."

ADM's Chief Executive Officer Juan Luciano declined to talk about press reports to that effect during a quarterly earnings call earlier this month. Luciano did say ADM is looking to make strategic acquisitions and mergers to fill holes in the company's business.

Bunge CEO Soren Schroder also declined last week to address market rumors. During Bunge's call with analysts, he focused heavily on tightening margins and cost savings. He also wasn't certain that consolidation in the grain and oilseed industries would automatically lead to higher margins when it comes to a pair of global companies getting together.

"Maybe in some areas, but broadly speaking I'm not so sure," Schroder said in response to an analyst's question. "It's a fairly fragmented business with barriers to entry that aren't all that significant. So, it's more about how you run your assets that determines your profitability. So, there are certainly pockets where that is the case, but on a global scale, I'd say probably not."


If ADM makes the move, Hart said farmers likely are going to see fewer marketing outlets as the companies would combine operations.

However, unlike mergers in the seed business there still is a fair amount of competition in crop marketing. "In the heart of the Corn Belt, there's still plenty of marketing outlets out there that are independent of ADM and Bunge," he said.

"When I'm looking at the state of Iowa, you're talking about 350 to 400 marketing points for corn and soybeans. ADM and Bunge have a lot, but there still would be well over 200 still outside the big four marketing chain. We still have a lot of competition in the marketing of grain."

Hart said producers in regions outside of the Corn Belt, where more marketing outlets are owned by fewer companies, could see a less-competitive marketing situation. "That's when the market power shows up more," he said. "I'd be more concerned about that looking at port of New Orleans and Gulf area where the big four are larger."

For the broader ag economy, Hart said such a combined company could result in improved efficiency in moving commodities from the farm to end-users.

"As far as individual farmers seeing benefits, it's not going to move prices for corn and soybeans enough for farmers to where they would see in their pocketbooks," Hart said.

There should be some concern, he said, about whether such a merger could create opportunities for price manipulation.

"I don't think that's the case," Hart said. "I'm less worried about that here in the marketing segment than I was in seed mergers. Seed mergers, the big three dominate. Here you're talking about two of the big four, but they don't represent 80% of marketing side of things."

On the local level, he said farmers could benefit from marketing ideas shared between ADM and Bunge. That could mean new contract price opportunities, Hart said, including average-price contracting.


Based on DTN's research, ADM would add to its business in a number of segments if a deal can be struck.

ADM currently operates about 500 grain elevators, ports and shipping terminals in 170 countries, including 270 ingredient manufacturing plants, 44 innovation centers, as well as an extensive crop transportation network.

In North America alone, the company operates more than 300 grain elevators, ports and shipping terminals. ADM runs about 70 oilseed operations in the United States, including 25 crushing plants and 27 oilseed refineries. ADM boasts 17 wet and dry mill corn processing plants in the U.S., producing both ethanol and distillers grains.

In addition, Bunge operates 21 ports in the U.S., Canada, South America, Australia, Vietnam, Turkey and Ukraine. ADM owns or leases grain elevators in seven Brazilian states, including 20 in Mato Grosso. ADM owns five soybean processing plants and a biodiesel plant in Brazil, as well as three fertilizer blending plants.

Although ADM already has a significant business in South America, primarily in Brazil, acquiring Bunge would come with key additions in South America.


Perhaps one of Bunge's strong suits in what it could add to ADM comes in its edible oils packaging and refining capabilities.

In its 2017 fourth quarter financials, Bunge reports near-record results in its edible oils business. In addition, the company is undertaking a key acquisition in the space.

Bunge is expected to close its acquisition of oils and fats producer Loders Croklaan in the first quarter of this year, Schroder said in the company's latest financial report.

In its fourth-quarter financials, however, ADM's adjusted operating profit in oilseeds processing decreased by 15.5% from year to year.

Bunge already operates 69 edible oil refineries and packaging plants in North America, South America, Europe, Austria, Hungary, Poland, Romania, Turkey, Ukraine, the Russian Federation, India, Vietnam and China.

Bunge also owns 17 mills in the U.S., China and Mexico, and 52 oilseed facilities in the U.S., Canada, South America, Europe, Austria, Poland, Hungary, Romania, Turkey, Ukraine, the Russian Federation, China and Vietnam.

In Brazil, ADM is Brazil's overall fifth-largest exporter. The company is Brazil's largest soybean meal exporter, and second largest exporter of soybeans. ADM is the country's largest domestic meal supplier, second-largest soybean crusher and second-largest bottled oil producer.

Bunge operates eight sugarcane facilities in Brazil. However, the company said it is in the process of exiting the sugarcane milling and trade business.

There are potential benefits to farmers if ADM expands its grain-handling capabilities. If ADM gained Bunge's 74 grain facilities in North America, its storage capacity in the U.S., for example, would expand to 14 million tons -- making ADM the largest grain handler in the U.S.

If a company has more storage to access, it can use it to move grain volumes to areas of the business where more supplies are needed. This can, in some respects, benefit markets in general.

Such a transaction will be subject to federal antitrust scrutiny.


Neil Harl, Charles F. Curtiss distinguished professor in agriculture, emeritus professor of economics at Iowa State University, has been monitoring and writing about consolidation in agriculture for much of his career.

He said he continues to hope the U.S. government will pay close attention to possible implications of ag concentration.

In particular, Harl said he has been concerned about concentration in the animal slaughter business, seed production, grain handling, farm machinery and equipment, and control of fertilizer supplies worldwide.

"My position has been that the federal agencies monitoring concentration have been less than aggressive, particularly since the 1980s with the change of leadership in Washington, especially with respect to mergers," he said.

During the early years of Barack Obama's administration, Harl said, an attempt was made to "re-energize antitrust." However, he said that ran into resistance.

"It is never too late to right a wrong in government, business or academe," Harl said.

"I am adamantly opposed to any merger or acquisition that moves the level of concentration above 50% and any proposed merger or acquisition should be scrutinized well below that level. The evils of concentration are well known. Healthy and open competition in the long-term continues to be the most important feature of any government and of any economic system."

Todd Neeley can be reached at todd.neeley@dtn.com

Follow him on Twitter @toddneeleyDTN.


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