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BRIAN HOOPS

By Staff | May 28, 2010

On May 21, the USDA released the monthly Cattle on Feed report as well as the monthly cold storage report. The reports were generally as expected, with very little changes from the average trade estimates.

The highlight of the COF report was inventory is 3% lower than a year ago, however this has been known by the market for some time and is already considered to be factored into cattle prices.

In other news, cattle and calves on feed for slaughter market in the United States for feedlots with capacity of 1,000 or more head totaled 10.5 million head on May 1, 2010. The inventory was 3 percent below May 1, 2009.

Placements in feedlots during April totaled 1.63 million, 2 percent above 2009. Net placements were 1.54 million head. During April, placements of cattle and calves weighing less than 600 pounds were 365,000, 600-699 pounds were 300,000, 700-799 pounds were 469,000, and 800 pounds and greater were 495,000.

Fed cattle marketing during April totaled 1.85 million, 1 percent below 2009.

The monthly Cold Storage report indicates frozen food stocks in refrigerated warehouses on April 30 were greater than year earlier levels for eggs and cheese.

Butter stocks were up 6 percent from last month but down 14 percent from a year ago.

Total red meat supplies in freezers were down 5 percent from the previous month and down 16 percent from last year. Frozen pork supplies were down 6 percent from the previous month and down 21 percent from last year. Stocks of pork bellies were down 15 percent from last month and down 37 percent from last year.

Total frozen poultry supplies on April 30, 2010 were up 5 percent from the previous month but down 15 percent from a year ago. Total stocks of chicken were up 1 percent from the previous month but down 5 percent from last year. Total pounds of turkey in freezers were up 11 percent from last month, but down 26 percent from April 30, 2009.

Corn analysis

Corn closed the week $.06 higher. Last week, the USDA announced private sales of 124,000 metric tons of corn to an unknown destination, 118,000 mts of corn to China and another 58,000 mts of corn to an unknown. Last week’s crop progress report showed corn planting progress at 87 percent, well ahead of the five-year average of 78 percent.

Iowa is 96 percent completed with its corn planting, while Illinois is 96 percent, Nebraska 89 percent, Indiana 86 percent and Minnesota 95 percent completed.

The first good-to-excellent ratings of the season were also introduced. Corn ratings are

67 percent g/e nationwide – in Iowa at 55 percent g/e, Nebraska 76 percent, Minnesota 80 percent, Illinois 73 percent and Indiana at 69 percent.

The weekly export sales report showed net sales of 1.35 million metric tons for delivery in 2009/10 were up 65 percent from the previous week and 1 percent from the prior four-week average. Increases were reported for Japan (475,200 MT), China (239,000 MT), unknown destinations (162,000 MT), Egypt (98,000 MT), Costa Rica (68,100 MT), Peru

(61,600 MT, including 55,500 MT switched from unknown destinations), and Colombia (58,900 MT).

Net sales for 239,000 MT for delivery in 2010/11 were for China (130,000 MT), unknown destinations (58,000 MT), Japan (40,000 MT), and Nicaragua (11,000 MT). This year’s export profile is now at 1.717 billion bushels versus the USDA forecast of 1.950 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 is 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 $.12 1/2 lower from last week. Last week, the USDA reported a private sale of 120,000 mts of soybeans to China. The USDA reported only 38 percent of the 2010 soybean crop has been seeded, well above last year’s 23 percent pace and ahead of the five-year average of 35 percent seeded. This is the second fastest soybean

seeding pace on record. Iowa is 53 percent completed, with Illinois at 42 percent, Indiana 46 percent, Nebraska at 44 percent and Minnesota at 47 percent finished.

The weekly export sales report showed net sales of 478,500 MTfor delivery in

2009/10 were up 82 percent from the previous week and double the prior four-week average. Increases were reported for Mexico (122,200 MT), Taiwan (65,500 MT), China (60,000 MT), Japan (54,200 MT), and Indonesia (47,400 MT).

Net sales of 86,000 MT for delivery in 2010/11 were mainly for China (60,000 MT) and unknown destinations (25,000 MT). Exports of 271,100 MT were up 39 percent from the previous week, but down 9 percent from the prior four-week average. The primary destinations were Mexico.

This year’s export profile remains well ahead of last year’s record pace at 1.401 bb versus the USDA forecast of 1.455 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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