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BRIAN HOOPS

By Staff | Mar 2, 2012

CORN ANALYSIS

Corn closed the week $.01 higher. Last week, private exporters announced a sale of 110,744 metric tons of U.S. corn to an unknown destination, 120,000 mt to China and 110,744 mt of U.S. corn to an unknown destination.

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 of 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 oil 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 $.11 1/2 higher from last week. Last week was a strong week for soybean sales. Private exporters reported a sale of 250,000 mt of soybeans to China and 175,000 mt beans to China.

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. Soybeans continue to push higher on strong technical indications as well as strong demand, namely from the world’s number one purchaser, China.

With China continuing to be a force in the export market and production problems in South America limiting supplies, the upside potential for soybeans looks bright.

Strategy and outlook: Producers should have 50 percent of the 2011/12 crop production sold. Prroducers 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.

WHEAT ANALYSIS

For the week, Chicago wheat closed $.03 lower; Kansas City wheat $.08 1/2 lower and Minneapolis wheat $.33 3/4 lower.

Last week, private exporters did not announce any private wheat purchases. In the weekly export sales report, wheat sales were 15.4 mb versus 9 mb needed to reach the USDA forecast of 975 mb.

Wheat traded lower last week without the benefit of any private export sales to help support prices. Wheat will need support from exports or corn prices moving higher if it is to gain any appreciable price movements this winter.

As the calendar turns to March, winter wheat will be exiting dormancy and prices should trade according to the weather.

Strategy and outlook: KC wheat producers are 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. MW wheat producers are 40 percent sold against the 2011 crop. Producers should look to begin making incremental sales on rallies. A rally into resistance of $8.75 against the MW 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 $1.40 lower while feeder cattle ended $.75 lower. 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 $128, unchanged compared with the previous week.

In the monthly USDA report, USDA reported cattle and calves on feed for slaughter market in the U.S. (feedlots with capacity of 1,000 or more head) totaled 11.8 million head on Feb. The inventory was 2 percent above Feb. 1, 2011.

Placements in feedlots during January totaled 1.85 million, 2 percent below 2011. Net placements were 1.77 million head. During January, placements of cattle and calves weighing less than 600 pounds were 445,000; 600-699 pounds were 430,000; 700-799 pounds were 525,000; and 800 pounds and greater were 447,000.

Marketing of fed cattle during January totaled 1.82 million, 2 percent above 2011.

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 $.65 lower. The average Iowa-Minnesota hog weight for last week was estimated at 276 pounds versus 275.9 lbs previous week and 273.1 lbs last year.

Total red meat supplies in freezers were up 13 percent from the previous month and up 7 percent from last year. Total pounds of beef in freezers were up 5 percent from the previous month and up 4 percent from last year.

Frozen pork supplies were up 21 percent from the previous month and up 8 percent from last year. Stocks of pork bellies were up 29 percent from last month and up 5 percent from last year.

Strategy and outlook: Producers have extended hedge coverage to 50 percent in all months of production. April is hedged at $94.55, June at $100.60, July at $98.92 and August at $97.

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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