Corn closed the week $.27 3/4 lower. Last week, private exporters did not report any private sales. Last week, the USDA reported harvest data of the 2011 U.S. growing season with corn harvest is essentially completed.
The corn market continues to struggle with wheat prices trading lower than corn and sent a message last week by breaking out of a sideways trading pattern to the downside. Weekly support at $6.02 was broken and follow weakness was seen.
Corn has reached many technical downside projections and should rebound.
Strategy and outlook: Producers should have 30 percent of new crop production sold. Producers lifted 660 December puts on 50 percent of the crop and will try to rehedge at a higher level.
Soybeans closed the week $.61 3/4 lower from last week. Last week, private exporters reported no private sales.
Last week, the USDA reported 2011 U.S. soybean harvest was essentially completed.
Soybeans broke key support on the daily charts and the funds will continue to sell rallies in the market until a fundamental change occurs. Weather in South America is becoming increasingly important and will be watched closely by traders.
Strategy and outlook: Producers should have 30 percent of the 2011 crop production sold and 50 percent covered with November 1400 puts.
When soybeans fell to major support, producers lifted the puts and will try to rehedge at a higher level.
For the week, Chicago wheat closed $.23 3/4 lower; Kansas City wheat $.25 lower and Minneapolis wheat $.17 lower. Last week, private exporters did not announce any private sales although Egypt purchased 240,000 metric tons of Russian, Ukraine and Kazakhstan wheat.
Last week’s crop progress report showed winter wheat conditions were unchanged from last week at 50 percent good-to-excellent, slightly better than last year’s 47 percent g/e rating. Kansas is rated 47 percent g/e while Oklahoma is rated 55 percent, Texas is 22 percent and Nebraska is 79 percent.
Wheat is dragging corn lower as wheat broke key support on the daily charts and plunged lower last week.
Wheat, trading below corn, is trying to find a price level that will stimulate export and feed demand.
Strategy and outlook: Producers are now 50 percent sold against the 2011 crop. We would advise another 20 percent sale for the 2011 crop at $9.55 against the Kansas City contract against the weekly resistance and buy at-the-money puts.
LIVE CATTLE ANALYSIS
Live cattle ended the week $1.40 higher, while feeder cattle ended $2.80 lower. Last week, cash cattle trade was reported in the North at mostly $202, $8 higher compared to last week, while trade in the South was $125; $3 higher compared with the previous week.
Watch the weekly uptrend line closely as fund selling will develop if the trendline is broken.
Strategy and outlook: Producers are hedged 50 percent of all production – December at $122.05; February at $124.65; April at $128.62; June at $126.65 and August at $126.45.
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 $.82 higher. The average Iowa-Minnesota hog weight for last week was estimated at 275.0 pounds versus 274.5 pounds the previous week and 275.0 pounds last year. Hogs are desperately holding major weekly support, however a violation of this support should result in a major selloff as funds are holding a large, net long position.
Look for hog futures to bounce off technical support and test the top end of the trading range.
In the monthly cold storage report, the USDA reported frozen pork supplies were down slightly from the previous month, but up 2 percent from last year. Stocks of pork bellies were down 7 percent from last month and down 63 percent from last year.
Strategy and outlook: Producers have extended hedge coverage to 50 percent in all months of production. December is hedged at $89.50; February is hedged at $91.90; April is hedged at $94.55; June is hedged at $100.60; July is hedged at $98.92 and August is hedged at $97.
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. He can be contacted at 605-660-1155.
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