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BRIAN HOOPS

By Staff | Oct 21, 2011

CORN ANALYSIS

Corn closed the week $.40 higher. Last week, private exporters announced 900,000 metric tons of U.S. corn has been sold to China, 292,100 mt was sold to an unknown destination and 261,200 mt to Mexico.

Last week, the USDA reported harvest data of the 2011 U.S. growing season with corn harvest at 33 percent complete.

This is below last year’s pace of 50 percent completed and the average of 32 percent. Key growing states show Iowa 27 percent harvested, Illinois 49 percent, with Indiana at 21 percent, Nebraska 19 percent and Minnesota at 20 percent.

Corn production is forecast at 12.4 billion bushels, down 1 percent from the September forecast and down slightly from the 2010 production estimate. If realized, this will be the fourth largest production total on record for the United States. Based on conditions as of Oct. 1, yields are expected to average 148.1 bushels per acre, unchanged from the September forecast, but down 4.7 bushels from 2010. If realized, this will be the lowest average yield since 2005.

Strategy and outlook: Producers should have 30 percent of new crop production sold. Producers lifted $6.60 December puts on 50 percent of the crop and will try to rehedge at a higher level.

SOYBEANS ANALYSIS

Soybeans closed the week $1.11 3/4 higher from last week. Last week, private exporters announced a sale of 110,000 mt of U.S. soybeans to an unknown destination.

Last week, the USDA reported 2011 U.S. soybean harvest was 51 percent completed versus 63 percent last year and the average pace of 46 percent. Key states read like this. Iowa 70 percent harvested, Nebraska 63 percent, Minnesota 83 percent, Illinois 50 percent and Indiana 28 percent.

Soybean production is forecast at 3.06 billion bushels, down 1 percent from September and down 8 percent from last year. Based on Oct. 1 conditions, yields are expected to average 41.5 bushels per acre, down 0.3 bushel from last month and down 2 bushels from last year.

f realized, the average yield will be the second lowest since 2003. Area for harvest is forecast at 73.7 million acres, down slightly from September and down 4 percent from 2010.

Strategy and outlook: Producers should have 30 percent of the 2011 crop production sold and 50 percent covered with November $1.40 puts.

When soybeans fell to major support, producers lifted the puts and will try to rehedge at a higher level.

LIVE CATTLE ANALYSIS

Live cattle ended the week $1.35 higher, while feeder cattle ended $2.07 higher. Last week, cash cattle trade was reported in the North at mostly $191, steady to $1 higher, compared to last week, while trade in the South was $119, $2 lower compared with the previous week. USDA reported weekly beef sales of 13,900 mt for delivery in 2011. USDA currently projects total U.S. beef production for 2012 at 25.135 billion pounds, 1.285 billion pounds or 4.9 percent lower than the previous year.

This projection is about 30 million pounds lower than the September number. The biggest change in the beef balance sheet for next year concerns expectations for trade flows. USDA reduced its forecast for U.S. beef imports in 2012 by a whopping 320 million pounds or 13.2 percent.

Strategy and outlook: Producers are hedged 50 percent of their third quarter production at $121 against the October contract, near the old weekly 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 $3.97 lower as the market rolled from the expiring October contract to the December contract.

The average Iowa-Minnesota hog weight for last week was estimated at 270.5 pounds versus 270.0 pounds the previous week and 270.7 pounds last year.

The USDA forecasts U.S. pork supplies in 2012 will reach 23.074 billion pounds, 110 million pounds larger than the September forecast. Modest increases in sow inventories (and implied farrowings), as well as strong productivity gains in the pork industry, likely prompted these revisions.

The USDA expects pork exports in 2012 to account for 22 percent of all U.S. pork production.

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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