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BRIAN HOOPS

By Staff | Apr 1, 2011

CORN ANALYSIS

Corn closed the week $.06 higher. Last week, private exporters reported a 116,000 metric tons of corn to an unknown destination and 1.25 million MT of corn to an unknown destination.

The weekly export sales report showed net sales of 895,000 MT were down 14 percent from the previous week and 13 percent from the prior four-week average. Increases were reported for South Korea (290,100 MT), Japan (221,700 MT, including 126,600 MT switched from unknown destinations and decreases of 3,900 MT), Colombia (120,500 MT, including 15,000 MT switched from unknown destinations and decreases of 22,300 MT), Venezuela (77,000 MT), Israel (63,300 MT, including 60,000 MT switched from unknown destinations and decreases of 1,000 MT) and Mexico (56,700 MT). This year’s net export profile is now at 1.397 billion bushels versus the USDA forecast of 1.950 bb.

Strategy and outlook: Only limited selling is expected from now until more is known about the 2011 growing season of both old and new crop inventories.

Producers and are now sold/hedged on 80 percent of the 2010 crop and re-owned 35 percent of sales/hedges with at-the-money May call options after rolling up March $5.20 calls. Producers should have 30% of new crop production sold. Make another old and new crop 10 percent sale at $7.59.

SOYBEANS ANALYSIS

Soybeans closed the week $.04 1/4 lower from last week. Last week, private exporters reported 105,000 MT of soybeans sold to an unknown destination.

Census Bureau February soybean crush was reported at 129.4 million bushels, slightly below the average trade estimate of 130.6 mb and compares to January crush of 149.2 mb. The crush was the lowest for a February in eight years.

Marketing year-to-date crush is now at 874 mb, down 7 percent from last year, while the USDA’s 2010/11 total crush estimate of 1.655 bb represents a 5.5 percent decline from last year.

The weekly export sales report showed net sales of 264,500 MT were up 80 percent from the previous week and unchanged from the prior four-week average. Increases were reported for Mexico (144,900 MT), Japan (32,500 MT, including 27,000 MT switched from unknown destinations and decrease of 900 MT), Indonesia (30,400 MT), China (20,800 MT), and Taiwan (20,100 MT). This year’s export pace stands at 1.468 bb versus the USDA forecast of 1.59 bb.

Strategy and outlook: Only limited U.S. selling is expected from now until more is known about the 2011 growing season of both old and new crop inventories. South American producers will become active hedgers if forecasts turn wetter.

Producers have sold/hedged 70 percent of the 2010 crop and re-owned 35 percent of sales/hedges with at the money May call options after rolling up March calls. Producers should have 30 percent of new crop production sold. Make another 10 percent sale of old and new crop at $14.85.

LIVE CATTLE ANALYSIS

Live cattle ended the week $6.95 higher while feeder cattle ended $5.67 higher. Cash trade was $115 in Kansas and in Texas, $2 higher compared to the previous week and $192 in the North, $7 higher compared to the previous week. The USDA reported beef sales 14,400 MT for delivery in 2011 were primarily for Japan (3,900 MT), Mexico (3,400 MT), South Korea (2,700 MT), Russia (1,800 MT), and Canada (1,700 MT). Exports of 15,300 MT were mainly to South Korea (3,500 MT), Mexico (3,400 MT), Japan (1,900 MT), Canada (1,800 MT), and Vietnam (1,500 MT).

Strategy and outlook: Producers were advised to make their first round of 2011 inventory hedges when the market advanced to the $108 major weekly resistance level. Next hedge target was $113 and achieved against the April contract.

Producers can look to make hedges in feeder cattle at this time as well. I would recommend 50 percent of inventory to be hedged at this time and remaining risk carried in the cash market. Feed costs should be covered in corn futures/options or cash product through the 2011 growing season.

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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