In a very volatile week, corn closed the week $.29 lower. For the second consecutive week, private exporters
did not report any private export sales last week.
In the weekly export sales report, corn sales were 38.5 million bushels versus 16.3 mb needed weekly to hit the USDA forecast of 1.70 billion bushels.
In the weekly crop progress report of the year, corn progress was estimated at only 7 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 very active in seed bed preparation. The record planting pace combined with record seeded acres should pressure values through the end of the month.
Strategy and outlook: Producers should have 80 percent of 2011/12 crop production sold. New crop sales should begin at $6.05 with a 20 percent sale. Producers own 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 $.02 3/4 higher from last week. Last week, private exporters reported sales of 165,000 mts of US soybeans to China, 115,000 etric tons of soybeans to China and 165,000 mt of soybeans to China.
In the weekly export sales report, soybean sales were 23.4 mb vs. 5.7 mb needed to reach the USDA forecast of 1.29 bb.
Soybeans continued to climb higher, led by continued buying interest by China and active fund buying demand. Very heavy commercial selling is noted in soybeans and meal, which will eventually be bearish for prices.
The weekly resistance point looks to be a stopping point for prices this time around and prices should pull back until a weather threat this summer drives prices above the weekly resistance.
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 percent 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 $.25 higher, while feeder cattle ended $3.25 higher.
Last week, cash cattle trade was reported in the North at mostly $195, $2 higher compared to last week, while trade in the South was $121, steady compared with the previous week.
Beef and veal exports in February were estimated at 59,990 mt, 8 percent lower than a year ago. Exports to a number of markets registered declines compared to a year ago.
Shipments to Japan were down 9 percent, Mexico was down 10 percent, Canada was down 8 percent and South Korea was down 35 percent.
Live cattle futures found support on the weekly uptrend line and heavy commercial buying was noticed last week in the feeder cattle COT report. This buying should be enough to stop the downward momentum.
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 lifted hedges when April fell to the open gap area of $122.00.
LEAN HOGS ANALYSIS
Lean hogs closed the week $4.10 lower. The average Iowa-Minnesota hog weight for last week was estimated at 276.1 pounds versus 277.3 lbs the previous week and 273.1 lbs last year.
Februarys total pork exports were reported at 151,248 mt, almost 20,000 mt, or 15 percent higher than the same period a year ago. Lean hogs continue to exhibit bottoming action, despite a lower close last week.
Commercials continue to be committed to the long side of the market, indicating the downside risk is limited in this environment.
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. 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.