Corn closed the week $.12 higher. Last week, private exporters announced private sales of 120,000 metric tons to Egypt, 110,000 mt to South Korea and 154,700 mt to Mexico. In the weekly export sales report, corn sales were 29.9 million bushels vs. 19.6 mb needed weekly to hit the USDA forecast of 1.65 billion bushels.
It is clear following the January supply/demand report that corn will need outside help if it will produce a rally that farmers are hoping for. Dry weather in South America and in the U.S. are the type of influences that could spark a fundamental rally.
If normal weather occurs in the U.S. and production returns to trendline, we can expect ending stocks to swell from current estimates of 848 mb to possibly over 1.5 bb. Ending stocks of this level, do no support current corn prices.
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 closed the week $.28 3/4 higher from last week. Last week, private exporters reported a sale of 110,000 mt of soybeans to China. In the weekly export sales report, soybean sales were 36.4 mb vs. 11.0 mb needed to reach the USDA forecast of 1.275 bb.
NOPA December soybean crush was reported at 145.4 mb, solidly above market expectations of 141.4 mb and up from November crush of 141.3 mb. 2011/12 marketing year-to-date NOPA crush is now at 538.2 mb, down 6 percent from last year’s 571.2 mb.
Demand is likely to continue to improve as South American production decreases yield potential and export business shifts back to the US.
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.
LIVE CATTLE ANALYSIS
Live cattle ended the week $2.07 higher while feeder cattle ended $1.47 higher. Last week, cash cattle trade was reported in the North at mostly $203, $5 higher compared to last week while trade in the South was $126; $3 higher compared with the previous week.
In the monthly COF report, USDA reported cattle and calves on feed for U.S. slaughter market on feedlots with capacity of 1,000 or more head totaled 11.9 million head on Jan. 1, 3 percent above Jan. 1, 2011. The inventory included 7.28 million steers and steer calves, up 1 percent from the previous year. This group accounted for 61 percent of the total inventory.
Heifers and heifer calves accounted for 4.50 million head, up 6 percent from 2011. Placements in feedlots during December totaled 1.68 million, 6 percent below 2010. Net placements were 1.59 million head. During December, placements of cattle and calves weighing less than 600 pounds were 550,000, 600-699 pounds were 390,000, 700-799 pounds were 365,000, and 800 pounds and greater were 378,000.
Marketing of fed cattle during December totaled 1.8 million, 2 percent below 2010.
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,
LEAN HOGS ANALYSIS
Lean hogs closed the week $.27 lower. The average Iowa-Minnesota hog weight for last week was estimated at 276.4 pounds versus 278.0 pounds previous week and 274.8 pounds last year. It is interesting that hog weights are declining despite the warm winter and cheaper corn prices.
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, USDA reported total red meat supplies in freezers were down 1 percent from the previous month, but up 1 percent from last year. Total pounds of beef in freezers were up 2 percent from the previous month and up 1 percent from last year.
Frozen pork supplies were down 3 percent from the previous month, but up 1 percent from last year. Stocks of pork bellies were up 55 percent from last month but down 19 percent from last year.
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.
For the week, Chicago wheat closed $.08 1/4 higher; Kansas City wheat $.03 lower and Minneapolis wheat
$.04 1/4 higher. Last week, private exporters did not announce any private sales. Egypt purchased 180,000
mts of Russian and French wheat.
In the weekly export sales report, wheat sales were 21.6 mb vs. 10.3 mb needed to reach the USDA forecast of
950 mb. Wheat export sales have remained seasonally slow and look to remain weak through the winter
months as the US is not competitive with the world in terms of export price. Wheat’s best hope for a rally occurs
with corn and soybean rallying and pulling wheat higher. Of course a freeze after wheat breaks from dormancy
would ignite a fundamental rally.
Strategy and outlook: Producers are now 40% 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% of the 2011/12 crop year with another 10% sale at $7.93.
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