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BRIAN HOOPS

By Staff | May 11, 2012

CORN ANALYSIS

In a very volatile week, corn closed the week $.32 3/4 lower. Private sales last week were one of the largest private sales weeks in history.

Private exporters announced sale of 130,000 metric tons of corn sold to an unknown destination, 116,000 mt to South Korea and 240,000 mt of corn sold to Mexico.

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 seedings advanced to 53 percent completed, above estimates and up from last week’s corn planting pace of 28 percent.

Emergence was estimated at 15 percent, well above the average pace of 6 percent, which will fuel talks of an early harvest and better-than-trendline yields.

New crop prices languished as U.S. farmers hit the fields and weather looks good for development. The pace is the second fastest on record, trailing only 2010.

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 $.18 1/2 lower from last week. Last week, private exporters reported sales of 324,000 mt of US. soybeans to an unknown destination, 342,000 mt of soybeans to China and 30,000 mt of bean oil 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 12 percent done versus the average of 5 percent. 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 $2.52 higher, while feeder cattle ended $9.32 higher. Last week, cash cattle trade was reported in the North at mostly $195, $1 higher compared to last week while trade in the South was $120, $1 higher compared with the previous week.

Live cattle have continued to close below the weekly uptrend line, however given the tight supplies of cattle and assuming commercial accounts should begin to buy inventory ahead of the Memorial Day holiday, the downside looks limited.

Strategy and outlook: Producers are hedged 50 percent of all production month. April is at $128.62; June is at $126.65 and August is 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.

LEAN HOGS ANALYSIS

Lean hogs closed the week $1.77 lower. The average Iowa-Minnesota hog weight for last week was estimated at 276.1 poundss versus 276.9 pounds the previous week and 273.3 lbs last year.

Stats Canada released its results of the quarterly survey of Canadian hog and pig operations. The total inventory of hogs and pigs, as of April 1, was reported at 12.040 million head, 210,000 head or 1.8 percent higher than the previous year, but still some 21 percent smaller than then inventory peak in September 2005.

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.

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