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BRIAN HOOPS

By Staff | Feb 24, 2012

CORN ANALYSIS

Corn closed the week $.10 higher. Last week, private exporters announced a sale of 132,000 metric tons and 210,000 mt of U.S. corn to South Korea in two separate tenders.

In the weekly export sales report, corn sales were 42 million bushels versus 19.5 mb needed weekly to hit the USDA forecast of 1.7 billion bushels. Corn has benefited during the last week by a surging soybean market and higher energy prices.

The corn market closely measures the crude oil market and it has nearly gone unnoticed by the industry that crude oil prices are the highest in history at this time of year. If crude prices were to accelerate higher from this point forward, no doubt corn prices would be forced to follow. Corn, on the weekly charts, is trapped between a sideways trading range since the end of September. A break above resistance of $6.65 should ignite significant trade interest.

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. If corn pulls back to weekly support, look to buy July calls. New crop sales should begin at $6.05 with a 20 percent sale.

SOYBEANS ANALYSIS

Soybeans closed the week $.38 1/2 higher from last week. Last week was a strong week for soybean sales. Private exporters reported a sale of 403,000 mt of soybeans to an unknown destination, 2.9 million mt of U.S. soybeans sold to China and 20,000 mt bean oil to Morocco.

In the weekly export sales report, soybean sales were 22.5 mb versus 9.5 mb needed to reach the USDA forecast of 1.275 bb. January NOPA report revealed lower-than-expected crush activity for the month and higher-than-expected soybean oil stocks. NOPA January soybean crush was reported at 142.8 mb below expectations at 143.3 mb and down from December crush of 145.4 mb. January crush was also slightly below last year’s 144.6 mb and was the lowest January NOPA crush since 2009.

Marketing year-to-date of 681 mb is down 5 percent from last year.

Strategy and outlook: Producers should have 50 percent of the 2011/12 crop production sold. Producers should look to begin making incremental sales on rallies. Producers sold 10 percent of their old inventory last week when prices rallied to $12.54.

The next selling opportunity looks to be the 62 percent retracement on the weekly charts at $13.19. Producers sell 30 percent of the 2011/12 crop year at this level. Producers can begin selling 2012/13 crop with a 10 percent sale at $12.91.

LIVE CATTLE ANALYSIS

Live cattle ended the week $4.10 higher, while feeder cattle ended $4.80 higher. Last week, cash cattle trade was reported in the North at mostly $203, $6 higher compared to last week, while trade in the South was $128, $5 higher compared with the previous week.

It’s interesting to note that open interest in feeder cattle has increased sharply to the highest level since April 8, 2011, which marked a significant high and a very bearish indication.

According to the year-end statistics released by USDA, beef exports finished the year at 1.2 mmt, with a value of $5.4 billion. Total shipments of fresh, frozen and processed beef in November were 76,341 mt, 4 percent higher than a year ago.

Mexico accounted for about 17 percent of all U.S. beef exports in 2011 and December shipments to Mexico were reported at 12,015 mt, down 21 percent from a year ago.

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 $2.07 higher. 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 exports continued its strong growth pace in December, closing the best year on record for the industry. Total pork exports were 165,782 mt, 21 percent higher than a year ago. For the year, pork exports were up 22 percnet from the previous year.

Shipments to China have surged in recent months and they continued to be very strong in December. U.S. pork packers shipped 30,425 mt of pork to China for the month, 205 percent more than in December 2011.

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