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BRIAN HOOPS

By Staff | Dec 15, 2011

CORN ANALYSIS

Corn closed the week $.01 lower. Last week, private exporters did not report any private sales. In the monthly supply/demand report, the USDA put 2011/12 U.S. corn ending stocks at 848 million bushels, up 5 million from last month’s 843 million.

The average trade estimate was 838 million bushels. The only revision was a 5 million bushel reduction in F/S/I usage from last month to 6.405 billion bushels, but corn for ethanol usage was left unchanged from last month at 5.0 billion.

USDA left feed/residual usage unchanged at 4.6 billion and exports at 1.6 billion.

The next fundamental change will not come until the Jan. 12 supply/demand report where the USDA updates yield and production figures.

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 ANALYSIS

Soybeans closed the week $.28 3/4 lower from last week. Last week, private exporters reported no private sales.

In the monthly supply/demand report, the USDA raised U.S. soybean ending stocks by 35 million bushels, an amount larger than the trade anticipated on a combination of a cut of 200 mb in exports; and the crush was lowered by 10 mb to 1.625 bb and would be down from last year’s 1.648 bb. The increase of 35 mb of ending stocks now places stocks at 230 mb compared to 215 mb last year.

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.

WHEAT ANALYSIS

For the week, Chicago wheat closed $.29 1/2 lower; Kansas City wheat $.20 lower and Minneapolis wheat $.18 3/4 lower. Last week, private exporters did not announce any private sales although Egypt purchased 240,000 metric tons of Russia and Argentine wheat.

In the monthly supply/demand report from the USDA, the USDA increased U.S. wheat ending stocks to 878 mb, up 50 mb from last month. The only change to the balance sheets was a lowering of the exports to 925 mb, down 30 percnet from last year and the fourth lowest export profile of the last 25 years. The 878 mb of ending stocks is slightly larger than last year’s 862 mb.

HRW exports were lowered by 25 mb. SRW exports were lowered by 15 mb and white wheat exports were lowered by 10 mb.

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 $7.50 against the Kansas City contract against the weekly resistance and buy at-the-money puts.

LIVE CATTLE ANALYSIS

Live cattle ended the week $4.80 lower, while feeder cattle ended $4.97 lower. Last week, cash cattle trade was reported in the North at mostly $196, $8 lower compared to last week, while trade in the South was $120, $4 lower compared with the previous week. In regards to beef exports, this year’s January-September exports of 2.105 billion pounds is 27.3 percent larger than last year and 8.4 percent larger than the January-September figure for the previous record year, 2003.

Strategy and outlook: Producers are hedged 50 percent of all production month. 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 $2.80 lower. The average Iowa-Minnesota hog weight for last week was estimated at 275 pounds versus 274.5 pounds the previous week and 275.0 lbs 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 regards to year-to-date pork exports, the January-September total of 3.712 billion pounds of pork is 20.6 percent larger than last year and 2.6 percent higher than the January-September total for the previous record year, 2008.

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. 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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