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BRIAN HOOPS

By Staff | Dec 23, 2011

CORN ANALYSIS

Corn closed the week $.11 1/4 lower. Last week, private exporters announced a sale of 205,232 metric tons of U.S. corn sold to Japan.

In the weekly export sales report, corn sales were only 19.9 million bushels versus 21.2 mb needed weekly to hit the USDA forecast. Informa estimated 2012 corn seeding at 94.4 million acres. The firm raised its estimate for corn plantings by 0.4 percent from November to 94.4 million acres. Going into the end of the month, we will look for short-covering to lift grain futures as fund managers will take profits to pay end of the month, end of quarter and end of year bonuses.

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 $.23 higher from last week. Last week, private exporters reported no private sales. In the weekly export sales report, soybean sales were 17.2 mb versus 14.4 mb needed to reach the USDA forecast.

Year-to-date sales are now 33 percent behind a year ago. The NOPA crush report revealed November crush was 141.3 mb, in line with pre-report expectations and unchanged from last month’s 141.2 mb. It was below last year’s 148.9 mb crush.

Crush for the first quarter of the marketing year is at 413.4 mb, down 7 percent from last year’s 442.7 mb.

Private crop forecaster Informa Economics cut its outlook for 2012 soybean plantings by 2 percent from November to 74.6 million acres.

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. With the bullish commercial position in the soy complex, it makes sense to wait for a rally to sell any more production.

WHEAT ANALYSIS

For the week, Chicago wheat closed $.12 1/4 lower; Kansas City wheat $.22 lower and Minneapolis wheat $.14 1/4 lower. Last week, private exporters did not announce any private sales, although Egypt purchased 180,000 mts of Russia, French and Argentine wheat.

Informa estimated 2012 U.S. winter wheat seeding at 39.8 million acres, which is down 2 percent from last year. This was the first actual survey data for winter wheat, and it was a tad bullish amid the expectation that farmers seeded wheat this autumn for the high priced U.S. insurance revenue program. Informa stated that 2012 U.S. HRW wheat seeding fell 255,000 acres from 2011, with SRW down 62,000 at 8 million, while SWW was near par. In the weekly export sales report, wheat sales were only 11.7 mb versus 11.2 mb needed to reach the USDA forecast.

Strategy and outlook: Producers are now 50 percent sold against the 2011 crop. We would advise another 20 percnet 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 $.05 higher while feeder cattle ended $.95 higher. Last week, cash cattle trade was reported in the North at mostly $194, $1 lower compared to last week, while trade in the South was $118; $2 lower compared with the previous week.

The monthly cattle on feed report showed U.S cattle inventory was 4 percent above Dec. 1, 2010. This is the second highest Dec. 1 inventory since the series began in 1996.

Placements in feedlots during November totaled 2.04 million, 4 percent above 2010. Net placements were 1.94 million head. Marketings of fed cattle during November totaled 1.77 million, slightly below 2010.

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 July, 2012.

LEAN HOGS ANALYSIS

Lean hogs closed the week $3.27 lower. The average Iowa-Minnesota hog weight for last week was estimated at 275 pounds versus 274.5 pounds the previous week and 275 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. Total U.S. pork exports in October jumped some 40 million pounds, or 9 percent, compared to the previous month and were 143 million pounds, or 42 percent, larger than a year ago.

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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