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BRIAN HOOPS

By Staff | Jan 20, 2012

CORN ANALYSIS

Corn closed the week $.44 lower. Last week, private exporters did not announce any private sales. In the weekly export sales report, corn sales were 12.7 millionm bushels versus 17.8 mb needed weekly to hit the USDA forecast.

In the January supply/demand report, the USDA pegged U.S. corn ending stocks in the 2011/12 marketing year at 846 million bushels, above trade estimates for 749 million, and just below its December estimate of 848 million.

It estimated U.S. corn quarterly stocks, as of Dec. 1, at 9.642 billion bushels, above estimates for 9.391 billion. This was the third largest overage compared to expectations in history.

World production saw a 3.0-million metric ton reduction in the Argentine corn crop.

Strategy and outlook: Producers should have 40 percent of 2011/12 crop production sold. Producers should look to begin making incremental sales on rallies. A rally into resistance of $6.73 should mark the next selling opportunity of 10 percent of the 2011/12 crop year with another 10 percent sale at $6.95.

SOYBEANS ANALYSIS

Soybeans closed the week $.38 1/4 lower from last week. Last week, private exporters reported a sale of 559,000 mt of soybeans to an unknown destination.

In the weekly export sales report, soybean sales were 15.9 mb versus 11.8 mb needed to reach the USDA forecast.

In the monthly supply/demand report, the USDA estimated U.S. soybean ending stocks at 275 mb, above trade estimates for 233 million, and above its December estimate of 230 million as a slight increase in production and a decrease in crush and exports resulted in the higher number.

Quarterly soybean stocks were pegged at 2.366 bb, above estimates for 2.324 billion. World production saw decreases in Argentina and Brazil of 1.5 and 1.0 mmt, respectively.

Strategy and outlook: Producers should have 40 percent of the 2011/12 crop production sold. Prroducers should look to begin making incremental sales on rallies. A rally into resistance of $12.74 should mark the next selling opportunity of 10 percent of the 2011/12 crop year, with another 10 percent sale at $13.15.

WHEAT ANALYSIS

For the week, Chicago wheat closed $.22 1/2 lower; Kansas City wheat $.10 lower and Minneapolis wheat $.07 3/4 higher. Last week, private exporters did not announce any private sales. Egypt purchased 180,000 mt of Russian and French wheat.

In the weekly export sales report, wheat sales were 13.4 mb vs. 9.1 mb needed to reach the USDA forecast.

Wheat export sales have remained seasonally slow and look to remain weak through the winter months as the U.S. is not competitive with the world in terms of export price. The USDA forecast that U.S. farmers planted 41.947 million acres of winter wheat for harvest this year, above trade estimates for 40.933 million and compared with 40.646 million last year.

Strategy and outlook: Producers are now 40 percent sold against the 2011 crop. Producers should look to begin making incremental sales on rallies. A rally into resistance of $7.63 against the KC contract, should mark the next selling opportunity of 10 percent of the 2011/12 crop year with another 10 percent sale at $7.93.

LIVE CATTLE ANALYSIS

Live cattle ended the week $2.15 higher while feeder cattle ended $2.47 higher. Last week, cash cattle trade was reported in the North at mostly $198, steady compared to last week while trade in the South was $123; $2 higher compared with the previous week. Looking back at 2011, exports of US beef muscle cuts rose 27 percent compared to the previous year. Four countries, Korea, Japan, Canada and Russia, accounted for about 75 percent of the overall growth in US. beef exports.

Strategy and outlook: Producers are hedged 50 percent of all production month. 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 $1.70 higher. The average Iowa-Minnesota hog weight for last week was estimated at 278.0 pounds versus 277.9 pounds the previous week and 275.8 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.

Strategy and outlook: Producers have extended hedge coverage to 50 percent in all months of production. 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 $97.00. 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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