Corn closed the week $.14 1/4 higher. Last week, private exporters announced a sale of 120,000 metric tons of U.S. corn to Mexico.
In the weekly export sales report, corn sales were 28.1 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 50 percent of 2011/12 crop production sold.
Producers sold 10 percent last week at $6.59 and the next selling opportunity occurs at $6.73.
Producers should make a 20 percent sale of the 2011/12 crop year.
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 closed the week $.54 higher from last week. Last week was a strong week for soybean sales. Private exporters reported a sale of 285,000 mt of soybeans to China and 285,000 mt of soybeans to an unknown destination.
In the weekly export sales report, soybean sales were 35.9 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 80 percent of the 2011/12 crop production sold.
Producers have been making incremental sales on rallies. Producers sold 30 percent of their old inventory last week when prices rallied to the 62 percent retracement on the weekly charts at $13.19.
Producers sold 10 percent of the 2012/13 crop at $12.91.
LIVE CATTLE ANALYSIS
Live cattle ended the week $.45 higher while feeder cattle ended $3.65 higher.
Last week, cash cattle trade was reported in the North at mostly $206, $6 higher compared to last week, while trade in the South was $130, $2 higher compared with the previous week.
Overall U.S. exports of beef muscle cuts (does not include cooked beef, or offal) in the first full seven weeks of the year (from Jan 2 to Feb 16) totaled 99,800 mt, 6,244 mt or 7 percent higher than the comparable period a year ago.
The Canadian beef cow herd is down 20 percent from its peak in 2005.
The number of Canadian beef cows on Jan. 1, was down 1 percent from the previous year.
Total Canadian cattle inventories on Jan. 1, were pegged at 12.5 million head, 58,000 head, or 0.5 percent higher than the previous year.
Strategy and outlook: Producers are hedged 50 percent of all production month – February at $124.65, April at $128.6, 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 $.70 higher. The average Iowa-Minnesota hog weight for last week was estimated at 276 pounds versus 275.9 pounds the previous week and 273.1 pounds last year.
According to Stats Canada, the total inventory of hogs and pigs as of Jan. 1, was reported at 12.02 million head, about 125,000 head or 1 percent higher than the previous year, but still some 3 million head, or 20 percent smaller, than on Jan. 1, 2006.
The Canadian sow inventory on Jan. 1 was reported about steady compared to January of the previous year, but it showed some modest improvements from the levels we saw in the July and September survey.
The total inventory was pegged at 1.312 million head, just a few hundred head lower than the previous year but about 1 percent higher than what it was back in July 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.
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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