In a very volatile week, corn closed the week $.14 1/4 higher. Last week, private exporters did not report any
private export sales.
In the weekly export sales report, corn sales were 44.2 million bushels versus 17.2 mb needed weekly to hit the USDA forecast of 1.7 billions bushels.
In the first weekly crop progress report of the year, corn progress was estimated at only 3 percent completed, lower than many trade estimates.
By the middle of April, corn progress is expected to improve to near record levels as many producers have been active in seed bed preparation.
Seasonal studies are decidedly bearish for corn values during planting timeframe through the end of the month.
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. Buy the December 5.40 strike puts on 50 percent of production.
If inclined, sell the December 7.00 strike calls to help pay for the cost of the puts.
Soybeans closed the week $.31 higher from last week. Private exporters reported sales of 120,000 metric tons of U.S. soybeans to China.
In the weekly export sales report, soybean sales were 40.9 mb vs. 5.4 mb needed to reach the USDA forecast of 1.275 bb. Research firm Informa Economics released its latest South American production estimates, dropping Brazil 1.5 million metric tons to 66.5 mmt, which is 8.8 mmt less than last year.
Informa sees Argentine production at 45 mmt, down 2.5 mmt from last month and 5 mmt from last year.
Informa’s three country total (Paraguay included) is 115.5 mmt vs. the USDA’s latest estimate of 120 mmt on March 9. Heavy commercial selling is noted in soybeans and meal, which will eventually be bearish for prices.
Strategy and outlook: Producers are now sold at 100 percent of the 2011/12 crop and are 30 percent sold of the 2012/13 production. Producers bought the November 1360 put options when November rallied to $13.95 on 50% of the 2012/13 production.
If inclined, sell the 1600 calls to cheapen the cost of the puts.
LIVE CATTLE ANALYSIS
Live cattle ended the week $4.62 lower while feeder cattle ended $.50 lower. Last week, cash cattle trade was reported in the North at mostly $193, $7 lower compared to last week while trade in the South was $123, $2 lower compared from the previous week.
Cattle have seen a sharp drop in the futures during the month of April. This is seasonal and should not be unexpected by traders. The bottom may be more difficult to pick.
There is no doubt cattle are being pulled forward due to great weather, which should further deplete the supply of cattle from April going forward. This is the primary reason why we lifted hedges on a sharp pullback into support.
The weekly charts are at weekly uptrend line support, which needs to, and should, hold given the tight supplies of cattle.
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, 2012. Producers lifted hedges when April fell to the open gap area of $122.
LEAN HOGS ANALYSIS
Lean hogs closed the week $10.80 higher. The average Iowa-Minnesota hog weight for last week was estimated at 277.3 pounds versus 276.6 lbs the previous week and 273.7 lbs last year.
Strategy and outlook: Producers have hedge coverage of 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. Producers also removed all hedges when April futures hit $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.
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