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BRIAN HOOPS

By Staff | Nov 27, 2009

On Friday, the USDA released the November Cattle on Feed report. The report is actually a little friendly with placements nearly 2 percent below average trade guess and on feed supplies slightly below the trade guess.

The USDA reported cattle and calves on feed for slaughter market in the U.S. for feedlots with capacity of 1,000 or more head totaled 11.1 million head on Nov.1. The inventory was 1 percent above Nov. 1, 2008.

Placements in feedlots during October totaled 2.47 million, 1 percent above 2008. Net placements were 2.42 million head. During October, placements of cattle and calves weighing less than 600 pounds were 615,000,

600-699 pounds were 645,000, 700-799 pounds were 579,000, and 800 pounds and greater were 635,000.

Marketing of fed cattle during October totaled 1.76 million, 3 percent below 2008.

Other disappearance totaled 59,000 during October, 12 percent below 2008.

The report tells us there are plenty of cattle available on the open market over the next six months. On feed supplies will remain larger than the market will bear and prices are likely to remain weak throughout the winter.

A winter snow storm could be bullish for prices, but with the weak economy, look for premium in the deferred contracts to be removed.

The USDA also released the monthly cold storage report on Nov. 20. Frozen food stocks in refrigerated warehouses on Oct. 31 were greater than year earlier levels for butter and cheese.

Total red meat supplies in freezers were down 1 percent from the previous month and down 6 percent from last year. Frozen pork supplies were down 2 percent from the previous month and down 1 percent from last year.

Stocks of pork bellies were down 4 percent from last month, but up 71 percent from last year.

Total frozen poultry supplies on Oct. 31 were down 8 percent from the previous month and down 16 percent from a year ago.

Total stocks of chicken were down slightly from the previous month and down 20 percent from last year. Total pounds of turkey in freezers were down 17 percent from last month and down 12 percent from Oct. 31, 2008.

Corn analysis

Corn closed the week $.00 1/2 higher. With producers nearly finished with the soybean harvest, corn harvest progress is picking up steam and harvest pressure is increasing.

The USDA estimated the U.S. corn harvest has now reached 54 percent complete versus 37 percent last week, 77 percent last year and 89 percent average.

The states of Iowa at 59 percent complete, Illinois 52 at percent, Minnesota at 43 percent, Indiana at 63 percent and Nebraska at 48 percent, are the largest corn-producing states and are all well behind the normal pace.

With so little corn harvested, the trade has to believe that if farmers can harvest this crop, significant harvest pressure will eventually hit the market. Technically, corn has hit a 62 percent retracement level on harvest delays, which mandates producers increase their marketing efforts.

The weekly export sales report showed net sales of 352,900 metric tons were down 28 percent from the previous week and 15 percent from the prior four-week average. Increases were reported for Japan (187,200 MT), Mexico (30,500 MT), Saudi Arabia (30,300 MT, including 28,000 MT switched from unknown destinations), Colombia (25,300 MT), the Dominican Republic (25,000 MT), Taiwan (19,800 MT), and Jordan (16,900 MT, including 16,000 MT switched from unknown destinations).

So far, this year’s sales are outpacing last year’s figures, 736 million bushels versus 704 mb. The U.S. needs to export 33.7 mb each week to reach the USDA forecast. The sentiment index has reached 100 percent, the highest level since June 2008 when the long-term highs were established.

Soybean analysis

Soybeans closed the week $.57 1/2 higher. With harvest nearly finished, the market focus has turned to demand. Strong demand has underpinned prices with China buying U.S. soybeans two days last week.

The USDA reported U.S. soybean harvest jumped to 89 percent complete versus 75 percent last week, 95 percent last year and 96 percent average.

The largest soybean states, Iowa at 96 percent complete, Illinois at 90 percent and Minnesota at 92 percent, indicate soybean harvest is winding down in the main soybean states.

The weekly export sales report showed net sales of 1,349,700 MT were up 6 percent from the previous week and 58 percent from the prior four-week average. The primary destinations were China (724,700 MT, including 116,000 MT switched from unknown destinations), Mexico (142,200 MT), Indonesia (93,000 MT, including 65,000 MT switched from unknown destinations).

This year’s export profile remains well ahead of last year’s record pace, 957 mb versus 603 mb. The U.S. only needs to export 8.3 mb each week to reach the USDA forecast of 1.305 billion bushels.

Planting season in Brazil is off to a record pace and will be closely monitored throughout the winter. The last two winters have seen drought in South America and higher soybean prices as a result. A record planting acreage in South America and a record crop will no doubt hurt soybean values.

Brian Hoops is president and senior market analyst of Midwest Market Solutions Inc. Midwest Market Solutions is a full-service commodity brokerage and marketing advisory service, clearing through R.J. O’Brien.

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