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BRIAN HOOPS

By Staff | May 4, 2012

CORN ANALYSIS

In a very volatile week, corn closed the week $.40 1/2 higher.

Private sales last week were one of the largest private sales weeks in history. Private exporters announced sale of 2.46 million metric tons of corn sold to an unknown destination and 382,500 metric tons of corn sold to China.

In the weekly export sales report, corn sales were 32.5 million bushels versus 15.5 mb needed weekly to hit the USDA forecast of 1.7 billion bushels.

In the weekly crop progress report Corn planting progress came in slightly above estimates at 28 percent completed.

Trade was looking for between 20 percent and 25 percent complete. The record pace is 37 percent completed, which occurred in 2010. However the average pace is only 15 percent completed.

Strong private sales drove prices higher last week in the old crop, while new crop prices languished as U.S. farmers hit the fields and began seeding the 2012 crop. The pace will not be a record, but is much faster than the average.

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 ANALYSIS

Soybeans closed the week $.50 higher from last week.

Last week, private exporters reported sales of 281,000 mt of U.S. soybeans to an unknown destination and 110,000 mt of soybeans to China. In the weekly export sales report, soybean sales were 51.7 mb vs. 4.7 mb needed to reach the USDA forecast of 1.29 bb.

Soybean planting progress is at 6 percent completed vs. 2 percent on average.

Technically, soybeans and meal traded and closed above major weekly resistance levels and at the highest levels since 2008.

This technical breakout should attract additional speculative buying, while commercials are selling against the rally.

Very heavy commercial selling will eventually be bearish for prices. Once the technical trend breaks, prices will retreat exceptionally fast as the large funds unwind long positions.

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 $2.60 lower, while feeder cattle ended $3.12 lower.

Last week, cash cattle trade was reported in the north at mostly $192, $2 lower, compared to last week, while trade in the south was $119, $3

lower compared with the previous week.

Total U.S. commercial cattle slaughter in March was 2.751 million head, 208,000 head, or 7 percent smaller than a year ago.

Adjusting for Leap Day, March slaughter (using head slaughtered per day) was down 2.8 percent from a year ago.

Fed cattle slaughter was lower for the month, but the magnitude was skewed by the number of slaughter days.

Steer slaughter for the month was down 106,700 head, or 7.6 percent (daily slaughter down 3.4 percent), while heifer slaughter was down 64,700 head or 7.2 percent (daily down 2.9 percent).

Strategy and outlook: Producers are hedged 50 percent of all production month with 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 $2 lower. The average Iowa-Minnesota hog weight for last week was estimated at 276.1 pounds vs. 277.3 lbs the previous week and 273.1 lbs last year.

Hog slaughter in March was down 350,900 head (-3.6 percent) than a year ago. However, daily slaughter was up 0.8 percent from last year, in line with the increases in the pig crop from the hog inventory survey.

For the first quarter, which has the same number of slaughter days, hog slaughter was 28.103 million head, 2.3 percent higher than a year ago. This increase in the number of hogs coming to market combined with heavier carcass weights caused U.S. pork production in Q1 to be 2.4 percent higher than a year ago.

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.

Producers 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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