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BRIAN HOOPS

By Staff | May 20, 2011

CORN ANALYSIS

Corn closed the week $.04 1/4 lower. Last week, private exporters reported a corn sale of 271,200 metric tons of corn to an unknown destination. Last week, the USDA reported corn plantings as of May 9, have reached only 40 percent complete.

This was more than the trade expected as Iowa seedings jumped from 8 percent to 69 percent completed. Illinois is 34 percent done with Indiana only 4 percent complete while Minnesota is 28 percent done and Nebraska 57 percent finished.

USDA forecast corn ending stocks at 730 million bushels for the old crop marketing year, up from the April crop report predictions. USDA said exports will be less than previously thought – now 1.9 billion bushels, down from 1.95 bb a month ago.

The first estimate of 2011/12 corn production has the USDA forecasting corn production at 13.505 bb and ending stocks at 900 mb. December corn should find good support around $6.20 to $6.30, which represents the lows for the month of April and the key 50-day moving average.

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 $.03 1/2 higher from last week. Last week, private exporters did not report any private export sales. USDA reported soybean seeding progress at 7 percent done, in line with expectations, but well behind last year’s pace of 28 percent.

USDA forecast soybean stocks at 170 mb for the old crop marketing year, up from the April crop report predictions.

USDA said exports will be less than previously thought. USDA reduced soybean exports to 1.55 bb, down from 1.58 bb last month. The first estimate of 2011/12 corn and soybean production has the USDA forecasting corn production at 13.505 bb and ending stocks at 900 mb with soybean production at 3.285 bb and ending stocks at 160 mb.

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 $.31 3/4 lower; Kansas City wheat $.04 1/2 lower and Minneapolis wheat $.03 1/2 lower. Last week, private exporters did not report any private sales.

USDA reported the U.S. winter wheat crop was rated at only 33 percent good-to-excellent, down 1 percent from last week with the poor to very poor rating up to 42 percent. Kansas is now 18 percent g/e; Oklahoma just 4 percent good and 0 percent excellent and Texas is now 8 percent good and 0 percent excellent.

Strategy and outlook: Producers should be sold/hedged on 100 percent of 2010 crop with hedge-to-arrive contracts as basis levels will likely 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 $.85 lower while feeder cattle ended $.32 lower. Last week, cash cattle trade was reported in the North at $181, $4 lower compared to last week while trade in the South was $112, $2 lower compared with the previous week. Feeder cattle in Oklahoma City sold $1 to $3 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. 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 $2.17 higher. 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 271.7 pounds versus 273.3 pounds previous week and 270.1 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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