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BRIAN HOOPS

By Staff | Apr 30, 2010

On Friday, the USDA reported the monthly cattle on feed report. The USDA report is called neutral to slightly bullish, with the highlight of the report being on feed supplies at 96 percent of a year ago.

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 10.8 million head on April 1.

The inventory was 4 percent below April 1, 2009. The inventory included 6.71 million steers and steer calves, down 4 percent from the previous year.

This group accounted for 62 percent of the total inventory. Heifers and heifer calves accounted for 4.02 million head, down 3 percent from 2009.

Placements in feedlots during March totaled 1.86 million, 3 percent above 2009. Net placements were 1.8 million head. During March, placements of cattle and calves weighing less than 600 pounds were 395,000, 600-699 pounds were 375,000, 700-799 pounds were 602,000, and 800 pounds and greater were 485,000.

Marketing of fed cattle during March totaled 1.90 million, 4 percent above 2009.

Other disappearance totaled 60,000 during March, 20 percent above 2009. This is the second lowest other disappearance for the month of March since the series began in 1996.

On April 22, the USDA announced the monthly cold storage report. In the report, the USDA reported frozen food stocks in refrigerated warehouses on March 31 were greater than year-earlier levels for cheese and eggs.

Butter stocks were down 3 percent from last month and down 7 percent from a year ago.

Total red meat supplies in freezers were down 2 percent from the previous month and down 11 percent from last year.

Frozen pork supplies were down 1 percent from the previous month and down 14 percent from last year. Stocks of pork bellies were up 6 percent from last month but down 19 percent from last year.

Total frozen poultry supplies on March 31 were up 3 percent from the previous month but down 13 percent from a year ago. Total stocks of chicken were down 1 percent from the previous month and down 2 percent from last year. Total pounds of turkey in freezers were up 11 percent from last month but down 26 percent from March 31, 2009.

CORN ANALYSIS

Corn closed the week $.11 lower as producer selling weighed on the market. Farmers got off to one of the fastest planting starts in recent history and with yield potential high, decided to offset some price risk. Last week’s crop progress report showed corn planting progress at 19 percent. This is well ahead of the five-year average of 9 percent and the fastest planting process since 2004. Texas is over 70 percent completed with its corn seeding, while Iowa is only 19 percent, Nebraska 5 percent, Illinois 34 percent and Minnesota 13 percent completed.

Last week, the USDA reported private sales of U.S. corn to South Korea for 110,000 metric tons, 120,000 mts to Egypt and 120,000 mts to an unknown destination.

The weekly export sales report showed net sales of 1.48 million metric tons for delivery in 2009/10 were up 47 percent from the previous week and 56 percent from the prior four-week average. This year’s export profile is now at 1.5 billion bushels versus the USDA forecast of 1.9 bb.

Strategy and outlook: Producers should be 100 percent sold in cash/hedges. Producers should have purchased July options on a pullback into a support level on a portion of their 2009 production. Hedgers have sold a portion of the 2010 crop when December futures traded above $4.50. Next sales objectives for corn producers are the 50 percent retracement level of this last down move. Producers should look at buying new crop put option protection and add to cash sales at this level.

SOYBEANS ANALYSIS

Soybeans closed the week $.14 3/4 higher from last week. The March Census Bureau March soybean crush was reported at 156 million bushels, slightly better than the average estimate of 154.9 mb, but only up fractionally from the February crush of 153.8 mb. March crush was still up 7 percent from last year’s 144.4 mb, with cumulative crush now at 1.096 bb, up 11 percent from last year.

Last week, the USDA reported private export sales of 406,000 mt of soybeans to China for the 2010/11 marketing year as well as a transfer of 165,000 mt of beans from this crop year to the new crop year, also to China.

The weekly export sales report showed net sales of 308,600 mt for delivery in 2009/10 were up 95 percent from the previous week and 51 percent from the prior four-week average. This year’s export profile remains well ahead of last year’s record pace at 1.36 bb versus the USDA forecast of 1.445 bb.

Strategy and outlook: Producers should be 100 percent sold in cash/hedges. Producers should have purchased July options on a pullback into a support level to re-own a portion of their 2009 production. Producers have sold 2010 crop when November futures traded above $10.30 and next sales objectives for producers is the 62 percent retracement level of this last down move.

Producers should look at buying new crop put option protection and add to cash sales at this level.

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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