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BRIAN HOOPS

By Staff | Aug 19, 2011

CORN ANALYSIS

Corn closed the week $.08 3/4 higher. Last week, private exporters reported 120,000 metric tons of corn sold to Egypt.

Last week, the USDA reported 2011 U.S. corn good-to-excellent ratings were 60 percent g/e, down 2 percent from last week. Last year, 71 percent of the crop was rated g/e.

The USDA forecast corn production at 12.914 billion bushels, down from 13.47 bb last month with a nationwide average yield of 153 bushels per acre versus 158.7 bpa in July.

Ending stocks are forecast to fall to 714 million bushels from 870 mb last month as usage remains strong at 13.16 bb. The 2011 corn crop is forecast to not be large enough to meet the expected demand base, reducing ending stocks unless the market can rally enough to ration the demand.

Iowa and Illinois corn yields are predicted at 13 and 12 bpa, respectively, above last year’s yields. With poor pollinating weather this summer, its likely the USDA will be forced to lower these yield estimates in future reports.

Strategy and outlook: Producers are now sold/hedged on 90 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 as there appears to be better marketing opportunities ahead. Time is running out for old crop sales. Sold 90 percent old crop corn, make another sale at $7.15 to finish the old crop marketing year.

SOYBEANS ANALYSIS

Soybeans closed the week $.00 1/4 lower from last week. Last week, private exporters reported no private export sales. The USDA reported soybean g/e ratings last week at 61 percent, up 1 percent from the previous week and below last year’s rating of 66 percent.

Soybean production is forecast at 3.056 bb, down from 3.225 bb last month. The national average yield is expected to fall to 41.4 bpa from 42.8 bpa in July. Ending stocks are also expected to tighten to 155 mb from 175 mb. As with the corn market, soybean demand outpaces soybean production. Soybean demand is forecast at 3.146 bb.

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 30 percent old crop corn at $14.02 against the September contract.

WHEAT ANALYSIS

For the week, Chicago wheat closed $.23 1/2 higher; Kansas City wheat $.15 3/4 higher and Minneapolis wheat $.33 1/4 higher.

Last week’s U.S. crop progress report showed that 85 percent of the winter wheat crop has now been harvested, slightly behind the average of 91 percent.

The USDA also reported 66 percent of the spring wheat crop is rated g/e, down 4 percent from the previous week’s 70 percent g/e rating. Last year, 82 percent of the crop was rated g/e.

USDA forecast all wheat production, at 2.08 billion bushels, is down 1 percent from the July forecast and down 6 percent from 2010. Based on Aug. 1 conditions, the U.S. average yield is forecast at 45.2 bpa, up 0.6 bushel from last month, but down 1.2 bushels from last year.

Other spring wheat production is forecast at 522 million bushels, down 5 percent from last month and down 15 percent from last year. The expected area to be harvested for grain totals 12.3 million acres, down 7 percent from last month and down 8 percent from last year.

Strategy and outlook: Commercials have become very bullish to wheat while the public is decidedly bearish. This promises a rally is in store for the wheat market as soon as the technicals turn more bullish.

Producers should now be 50 percent sold of the 2011 crop and are advised to make another a 10 percent sale for the 2011 crop at $8.23 and another 10 percent at $8.56 against the Kansas City contract.

LIVE CATTLE ANALYSIS

Live cattle ended the week $1.85 higher while feeder cattle ended $2.55 higher. Last week, cash cattle trade was reported in the North at $185, $4 higher compared to last week. Trade in the South was $116, $5 higher compared with the previous week.

Strategy and outlook: Producers are advised to hedge 50 percent of their third quarter production at $126 against the October 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 $2.37 lower.

The average Iowa-Minnesota hog weight for last week was estimated at 260.9 pounds versus 263.7 pounds the previous week and 267.0 pounds last year. A run to the old contract highs should find hedging pressure.

Strategy and outlook: Producers should look to extend hedge coverage to 50 percent at $96.50. 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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