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BRIAN HOOPS

By Staff | Feb 3, 2012

CORN ANALYSIS

Corn closed the week $.30 1/4 higher. Last week, private exporters announced private sales of 152,900 metric tons to Mexico and a sale of 170,200 mt of corn to Mexico.

In the weekly export sales report, corn sales were 40.9 million bushels versus 19.3 mb needed weekly to hit the USDA forecast of 1.65 billion buyshels It is clear going into the final stages of winter, 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. In fact, production problems in South America have rallied corn off of weekly technical support and near resistance. 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 not 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 ANALYSIS

Soybeans closed the week $.32 higher from last week. Last week, private exporters did not report any private sales.

In the weekly export sales report, soybean sales were 21.7 mb versus 10.2 mb needed to reach the USDA forecast of 1.275 bb. Demand is likely to continue to improve as South American production decreases yield potential and export business shifts back to the U.S.

Soybeans need weather help similar to corn as demand is down over 30 percent from a year ago. One positive technical factor is open interest has not increased during the recent rally, indicating a lot of room remains for speculators to buy into the market.

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 $.36 3/4 higher; Kansas City wheat $.33 higher and Minneapolis wheat $.25 1/2 higher. Last week, private exporters reported a sale of 133,200 mts of U.S. wheat to an unknown destination.

In the weekly export sales report, wheat sales were 21.6 mb versus 9.8 mb needed to reach the USDA forecast of 950 mb. Wheat has found support from news that Russia may curb its exports and the U.S. could step in place of Russia and gain some of the export business.

There is talk of the possibility that Russia would need to replant some wheat acres after a killing frost may harm the current winter wheat crop. The forecasts for Russia call for more moderate temperatures next week, easing stress against their winter wheat crop.

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 $.15 higher, while feeder cattle ended $.75 higher. Last week, cash cattle trade was reported in the North at mostly $200, $3 lower compared to last week, while trade in the South was $123; $3 lower compared with the previous week.

It’s interesting to note that open interest in feeder cattle has increased sharply, a very bearish indication, to the highest level since April 8, 2011, which marked a significant high. In the semi-annual cattle inventory report, the USDA said all cattle and calves in the United States, as of Jan. 1, totaled 90.8 million head, 2 percent below the 92.7 million on Jan. 1, 2011. This is the lowest Jan. 1 inventory of all cattle and calves since the 88.1 million on hand in 1952.

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 $1.35 higher. The average Iowa-Minnesota hog weight for last week was estimated at 276.4 pounds versus 278 pounds the previous week and 274.8 pounds last year. 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.

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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