×
×
homepage logo

BRIAN HOOPS

By Staff | Jul 22, 2011

CORN ANALYSIS

Corn closed the week $.59 higher. Last week, private exporters reported 110,000 mtric tons of corn was sold to South Korea and 233,000 mt sold to an unknown destination.

Last week, the USDA reported 2011 U.S. corn good-to-excellent ratings were 69 percent g/e – unchanged from last week. Last year, 72 percent of the crop was rated g/e.

The July supply/demand report indicated corn stocks will tighten to the smallest levels in 15 years with stocks projected at 880 million bushels, smaller than the trade expected.

A record corn crop of 13.47 billion bushels is projected with new crop stocks at only 870 mb, thanks in part to record demand. Trade had been looking for 2011/12 stocks at 994 mb. The average yield forecast was 158.7 bushels per acre, 6 bpa above last year’s crop size of 152.7 bpa.

Historically, only in summers of cool and wet conditions due yields improve. This year’s summer has been anything but cool and wet.

Strategy and outlook: Producers and are now sold/hedged on 80 percent of the 2010 crop and should have 30 percent of new crop production sold.

Producers were advised to buy downside protection with put options prior to the June acreage report.

Popular options were the $6.40 December puts.

No new crop sales are advised at this time, until more is known about the crop. Time is running out for old crop sales. Sell 10 percent old crop corn at $7.18 against the September contract and another sale at $7.35 to finish the old crop marketing year.

SOYBEANS ANALYSIS

Soybeans closed the week $.39 higher from last week. Last week, private exporters reported 110,000 mt beans sold to China. The USDA reported soybean g/e ratings last week at 66 percent – unchanged from the previous week, but well below last year’s rating of 74 percent.

USDA reported soybean stocks at an estimated 200 mb for old crop stocks with new crop stocks falling to 175 mb. The soybean harvest is expected to grow to 3.225 bb with the USDA using a yield of 43.4 bpa. With extreme hot and dry weather, this too could prove to be challenging for U.S. farmers to grow a crop of that size.

New crop soybean exports were revised lower by 25 mb to 1.495 bb with crush at 1.655 bb.

NOPA reported June crush at 117.7 mb, 7 percent below last year and approximately 1 mb below the mid-point of trade expectations.

End-of-June NOPA soyoil stocks were at 2.588 billion pounds, a 122 million-pounds drawdown versus May expectations for a 60 million-pound drawdown.

Strategy and outlook: Producers have sold/hedged 70 percent of the 2010 crop. Producers should have 30 percent of new crop production sold.

No new crop sales are advised at this time, until more is known about the crop. Time is running out for old crop sales. Sell 15 percent old crop beans at $14.20 and 15 percent at $14.50 against the September contract.

LIVE CATTLE ANALYSIS

Live cattle ended the week $4.05 lower while feeder cattle ended $7.90 lower. Last week, cash cattle trade was reported in the North at $180, $5 lower compared to last week while trade in the South was $111, $4 lower compared with the previous week.

Beef exports in May were pegged at 234.8 million pounds, 15.4 percent higher than a year ago. In the first five months of the year, U.S. beef exports reached 1.1 billion pounds, 232.5 million pounds or 27 percent higher than the comparable period a year ago.

Strategy and outlook: Producers are advised to hedge 50 percent of their third quarter production at $128 against the August contract, near the old contract highs.

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 $2.77 higher. Hog futures continued to rally off of major weekly support.

Commercials are bullish while the funds are caught net short and are covering their shorts.

The average Iowa-Minnesota hog weight for last week was estimated at 268.2 pounds versus 268.3 pounds previous week and 269.7 pounds last year.

Pork exports in May were 408.8 million pounds, 12.7 percent higher than a year ago.

This was the third consecutive month that pork exports have crossed the 400 million threshold, the last time that happened was during the summer of 2008.

A run to the old contract highs should find hedging pressure.

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.

Please Enter Your Facebook App ID. Required for FB Comments. Click here for FB Comments Settings page