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BRIAN HOOPS

By Staff | Feb 17, 2012

CORN ANALYSIS

Corn closed the week $.12 3/4 lower. Last week, private exporters announced a private sale of 240,000 metric tons to Egypt.

In the weekly export sales report, corn sales were 29.8 million bushels versus 19.8 mb needed weekly to hit the USDA forecast of 1.7 billion bushels. In the monthly USDA supply/demand report, U.S. corn ending stocks were lowered to 801 mb from 846 mb last month and slightly above the average trade guess.

USDA increased exports by 50 mb to 1.7 bb. World carryout levels came in at 125.35 mt, down from 128.14 mb in January with Argentine corn production estimated at 22 mt and Brazil at 61 mt. The Brazil estimate is unchanged from last month while Argentina’s estimate is down 4 mt.

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 $6.59 should mark the next selling opportunity of 10 percent of the 2011/12 crop year, with another 10 percent sale at $6.73.

SOYBEANS ANALYSIS

Soybeans closed the week $.03 1/2 lower from last week. Last week, private exporters reported a sale of 120,000 mt of soybeans sold to China and 20,000 mt bean oil to Morocco.

In the weekly export sales report, soybean sales were 24.2 mb versus 9.9 mb needed to reach the USDA forecast of 1.275 bb. In the monthly USDA supply/demand report, U.S. soybean stocks were unchanged from last month at 275 mb with world carryout levels at 60.28 mt, down from 63.43 mt in January. Argentina’s soybean production estimate was 48 mt, down from 49 mt last month, while Brazil’s production estimate was 72 mt, down from 75.5 mt last month.

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 $12.54 should mark the next selling opportunity of 10 percent of the 2011/12 crop year with another 10 percent sale at $12.92.

WHEAT ANALYSIS

For the week, Chicago wheat closed $.30 3/4 lower; Kansas City wheat $.39 3/4 lower and Minneapolis wheat $.10 3/4 higher. Last week, private exporters reported a sale of 200,000 mt of U.S. wheat to Spain.

In the weekly export sales report, wheat sales were 26.0 mb versus 9.9 mb needed to reach the USDA forecast of 975 mb. In the monthly supply/demand report, the USDA forecast U.S. wheat ending stocks down to 845 mb from 870 mb as the USDA increased exports by 25 mb to 975 mb. World wheat carryout levels increased to 213.10 mt from 210.02 mt last month.

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 $7.43 against the KC contract, should mark the next selling opportunity of 20 percent of the 2011/12 crop year with another 20 percent sale at $7.80.

LIVE CATTLE ANALYSIS

Live cattle ended the week $.60 lower while feeder cattle ended $.82 lower. Last week, cash cattle trade was reported in the North at mostly $197, $1 lower compared to last week while trade in the South was $123; steady compared with the previous week.

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.

Beef production was increased by 150 million pounds, but still it is expected to be about 1.1 billion pounds (-4.1 percent) smaller than the previous year.

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 $.62 lower. The average Iowa-Minnesota hog weight for last week was estimated at 275.4 pounds versus 275.5 pounds previous week and 273.8 pounds last year. U.S. pork production in 2012 is currently forecast at 23.254 billion pounds, about 475 million pounds or 2.1 percent, higher than a year ago.

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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