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BRIAN HOOPS

By Staff | May 6, 2011

CORN ANALYSIS

Corn closed the week $.16 3/4 higher. Last week, private exporters did not report any private corn sales. Last week, the USDA reported corn plantings as of Sunday, April 24, have reached only nine percent complete. This is only two percent more done than the previous week as virtually no progress was made in key states of Illinois, Indiana, Iowa and Ohio.

The weekly export sales report showed net sales of 349,000 metric tons were down 43 percent from the previous week and 65 percent from the prior four-week average. This year’s net export profile is now at 1.603 bb vs. the USDA forecast of 1.950 bb.

Strategy and outlook: 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 July call options after rolling up March and May calls. Producers should have 30 percent of new crop production sold. Make another old and new crop 10 percent sale at $8.24.

SOYBEANS ANALYSIS

Soybeans closed the week $.12 1/4 higher from last week. Private exporters did not report any private export sales. Census March soybean crush was reported at 140.3 million bushels, slightly better than expectations of 139.1 mb and compared to the seasonally-low February crush of 129.4 mb.

However, March crush was still down solidly from last year’s 156.1 mb and represented the lowest crush for the month of March in seven years.

The weekly export sales report showed net sales of 143,500 mt were down 59 percent from the previous week and 18 percent from the prior four-week average. This year’s export pace stands at 1.509 bb vs. the USDA forecast of 1.580 bb.

Strategy and outlook: Producers have sold/hedged 70 percent of the 2010 crop and re-owned 35 percent of sales/hedges with at-the-money July call options after rolling up March and May calls. Producers should have 30 percent of new crop production sold. Make another 10 percent sale of old and new crop at $15.69.

WHEAT ANALYSIS

For the week, Chicago wheat closed $.30 1/4 lower; Kansas City wheat $.39 1/4 lower and Minneapolis wheat $.06 1/4 lower. Private exporters reported 100,000 mt of hard red wheat sold to an unknown destination. In its weekly USDA crop condition report, U.S. winter wheat was rated at only 35 percent good-to-excellent, down 1 percent from last week with the poor/very poor rating up 4 percent to 40 percent.

Kansas fell 2 percent to 23 percent g/e; Oklahoma fell 2 percent just 5 percent g/e and Texas is now 9 percent good and 0 percent excellent. Spring wheat seedings have reached 6 percent versus 39 percent a year ago.

The weekly export sales report showed net sales of 265,000 mt for the 2010/11 marketing year were up 97 percent from the previous week, but down 19 percent from the prior four-week average. This year’s exports stand at 1.275 bb versus the USDA forecast of 1.275 bb.

Strategy and outlook: Producers should be sold/hedged on 100 percent of 2010 crop with hedge to arrive contracts as basis levels will likely to improve during the winter. Producers should now be 50 percent sold of the 2011 crop after making a sale at the $9.54 level against the Kansas City contract. We look to make additional sales on spring and summer rallies.

LIVE CATTLE ANALYSIS

Live cattle ended the week $1.87 lower while feeder cattle ended $1.07 lower. Cash cattle trade was reported in the North at $187, $6 lower compared to last week while trade in the South was $116, or $3 lower compared with the previous week.

Feeder cattle in Oklahoma City sold $31to $2 higher.

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.

Target $122 against the June contract for a sale. 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.

LEAN HOGS ANALYSIS

Lean hogs closed the week $6.77 lower. Futures failed at technical resistance and turned lower, following a softer cash market and following a falling live cattle market. Pork product values are sliding, adding to the idea that futures are overbought. The average Iowa-Minnesota hog weight for last week was estimated at 272.9 pounds versus 272.2 pounds previous week and 269.9 pounds last year.

Strategy and outlook: Producers have extended hedges against the June contract to 50 percent coverage at $101.25.

Next sales target for June hogs is $105.25 where producers can make another 25 percent hedge.

All feed costs should be locked in as well. Commercial accounts are beginning to sell into this rally while the funds cover short positions but are not in a bearish position yet.

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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