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BRIAN HOOPS

By Staff | Jun 24, 2011

CORN ANALYSIS

Corn closed the week $.86 3/4 lower. Last week, private exporters did not report any private sales. Last week, the USDA reported 2011 U.S. corn good-to-excellent ratings were 69 percent, up 2 percent from last week. Last year, 77 percent of the crop was rated g/e.

The USDA reported weekly export net sales of 295,800 metric tons were down 8 percent from the previous week and 50 percent from the prior four-week average. Exports of 820,300 MT were down 18 percent from the previous week and 14 percent from the prior four-week average. The primary destinations were Japan.

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.

Look to exit these options this week. Producers should have 30 percent of new crop production sold. Make another old and new crop 10 percent sale at $8.47.

From a time stand point, producers are advised to buy downside protection with put options prior to the June acreage report.

SOYBEANS ANALYSIS

Soybeans closed the week $.54 1/4 lower from last week. Last week, private exporters did not report any private sales. The USDA reported the first U.S. g/e soybean ratings of the season with soybeans rated last week at 67 percent compared to last year’s rating of 73 percent.

NOPA May soybean crush was reported at 120.3 million bushels, down from last month’s 121.3 mb and down a “reported” 6 percent from last year.

However, current NOPA data reflects the loss of around 4 mb per month in crush activity due to a change in membership in April, including that estimated level of crush, May crush would actually be down nearly 9 percent from last year.

The USDA reported weekly export net sales of 179,400 MT were up 49 percent from the previous week and 35 percent from the prior four-week average. Exports of 143,200 MT were down 17 percent from the previous week and 41 percent from the prior four-week average.

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. Look to exit these calls next week as they are close to expiration.

Producers should have 30 percent of new crop production sold. Make another 10 percent sale of old and new crop at $15.07.

LIVE CATTLE ANALYSIS

Live cattle ended the week $6.72 higher while feeder cattle ended $9.02 higher. Last week, cash cattle trade was reported in the North at $178, $5 higher compared to last week, while trade in the South was $109, $4 higher compared with the previous week..

The monthly cattle on feed report indicated cattle and calves on feed for slaughter market in the United States for feedlots with capacity of 1,000 or more head totaled 10.9 million head on June 1.

The inventory was 4 percent above June 1, 2010. Placements in feedlots during May totaled 1.81 million, 11 percent below 2010. Net placements were 1.73 million head.

During May, placements of cattle and calves weighing less than 600 pounds were 415,000; 600-699 pounds were 355,000; 700-799 pounds were 480,000; and 800 pounds and greater were 560,000.

Marketing of fed cattle during May totaled 2 million, 7 percent above 2010.

Strategy and outlook: Producers were advised to make their first round of 2011 inventory hedges when the market advanced to the $108 and $113. Target of $122 was nearly achieved against the June contract.

Producers were also advised to make hedges in feeder cattle at that time as well. 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 $2.42 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 268.8 pounds versus 270.6 pounds previous week and 271.0 pounds last year. Commercials are becoming very bullish to the hog market, exceeding their bullish positions that ignited a rally that started in November and December of last year.

Strategy and outlook: Producers have extended hedges against the June contract to 50 percent coverage at $101.25. All feed costs should be locked in as well.

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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