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BRIAN HOOPS

By Staff | Mar 12, 2010

Corn analysis

Corn closed the week $.05 higher. Commercial buying and some fund short-covering allowed corn to close the week slightly higher. The market is starting to anticipate a delayed start to the planting season as a heavy snow cap and forecasts for a wet spring are providing support.

Limiting the upside potential for corn is a large amount of old crop corn that has quality issues. Export business was quiet this week with no private sales reported by the USDA. Commercials continue to provide support to the market as they are buying back their shorts and are now using price weakness as an opportunity to extend coverage into the summer months, which always brings uncertainty and production concerns.

The weekly export sales report showed net sales of 761,400 metric tons for delivery in 2009/10 were up 90 percent from the previous week and unchanged from the prior four-week average. This year’s export profile is now at 1.26 billion bushels.

Strategy and outlook: Producers should have hedges/cash sales up to the 70 percent level. Producers should have purchased July options on a pullback into a support level. Hedgers have sold a portion of the 2010 crop when December futures traded above $4.50.

Next sales objectives for corn producers are when prices move above last spring’s highs of $4.73. Producers should look at buying new crop put option protection and add to cash sales.

Soybean analysis

Soybeans closed the week $.09 lower from last week. Hedging pressure from U.S. and South American

producers weighed on prices late in the week.

The lack of private export sales, combined with poor weekly export sales, also weighed on prices.

The weekly export sales report showed net sales of 182,400 MT- a marketing-year low – for delivery in 2009/10, down 24 percent from the previous week and 36 percent from the prior four-week average.

This year’s export profile remains well ahead of last year’s record pace at 1.32 bb. Commercials are at their most bullish position since the rally began in March of 2009. Look for major commercial support to limit the downside in soybeans to the $8.92 chart support.

Strategy and outlook: Producers should have hedges/cash sales at the 70 percent level. With the tight basis levels and lack of carry in the market, the market is telling producers to sell the product now and use price weakness to re-own the crop with futures and options. Producers should have purchased July options on a pullback into a support level. Producers have sold 2010 crop when November futures traded above $10.30 and should wait patiently for a rally to make new sales and purchase put options.

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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