Corn closed the week $.28 higher. Last week, private exporters announced a sale of 240,000 metric tons of U.S. corn to South Korea. In the weekly export sales report, corn sales were 32.9 million bushels versus 17.5 mb needed weekly to hit the USDA forecast of 1.7 billion bushels.
Corn, on the weekly charts, had been trapped between a sideways trading range since the end of September. However, last week, front month corn futures broke above resistance of $6.65, igniting significant trade interest. Fund buying pushed prices higher on increasing open interest, a technical bullish signal.
Prices were able to rally to our long held target and allow a sale of old crop corn at $6.73. This brings our sales total to 80 percent completed for the 2011/12 marketing year. While old crop values have rallied into new highs, the new crop has failed to follow through as the end of the month acreage report is expected to be bearish, keeping a lid on rally attempts.
Strategy and outlook: Producers should have 80 percent of 2011/12 crop production sold. Producers made a 30 percent sale at $6.73 last week.
New crop sales should begin at $6.05 with a 20 percent sale and buy the December 6.00 strike puts at around $.50. If inclined, sell the December 8.00 strike calls.
Soybeans closed the week $.36 higher from last week. Last week, private exporters did not report any private sales.
In the weekly export sales report, soybean sales were 51.2 mb vs. 6.8 mb needed to reach the USDA forecast of 1.275 bb. Soybeans had an extremely strong week last week, gaining over $.35 cents on strong fund buying despite being overbought technically.
Open interest levels continue to rise as the funds are buying fresh positions while the commercials are aggressively selling into the rally. Front month soybeans are rallying close to the major weekly resistance, which occurs at $14.54.
With the large scale selling in soybeans and meal, it appears that this current rally will stall at this resistance. Producers are heavily advised to use this rally to transfer risk and market their production.
Strategy and outlook: Producers should have 80 percent of the 2011/12 crop production sold. Prroducers have been making incremental sales on rallies.
Producers should finish up 2011/12 sales on a rally into resistance at $14.12 by selling the final 20 percent of their inventory. Producers should sell 20 percent of the 2012/13 production at $13. 65 on a hedge to arrive contract against the November contract.
LIVE CATTLE ANALYSIS
Live cattle ended the week $.72 lower while feeder cattle ended $1.55 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 $126, $1 lower compared with the previous week.
USDA forecast U.S. beef exports to increase over the forecast period, gaining 14.2 percent from their levels of 2011. That increase would be more impressive if the U.S. industry did not have to backfill a projected significant reduction in beef exports in 2013 when lower cattle numbers will limit the amount of product available for both domestic consumption and export.
Strategy and outlook: Producers are hedged 50 percent of all production month. 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. Producers can lift April hedges at the open gap area of $122.
LEAN HOGS ANALYSIS
Lean hogs closed the week $1.95 lower. The average Iowa-Minnesota hog weight for last week was estimated at 276 pounds versus 275.9 lbs the previous week and 273.1 lbs last year. USDA said the projected increase of 503,000 metric tons for U.S. pork exports is more than twice the increase of the other five listed exporters combined.
The U.S. accounted for 35.6 percent of the total exports of the six listed exporters in 2011. That share increases to 39.2 percent by 2021 in the USDA forecasts.
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. Remove April hedges at $83.05.
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.