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BRIAN HOOPS

By Staff | May 22, 2012

CORN ANALYSIS

In a very volatile week, corn closed the week $.39 1/4 lower. Private sales last week were one of the largest private sales weeks in history. Private exporters announced sale of 300,000 metric tons of U.S. corn sold to an unknown destination.

In the weekly export sales report, corn sales were 18.6 million bushels versus 12.9 mb needed weekly to hit the USDA forecast of 1.7 billion bushels.

In the weekly crop progress report, corn seedings advanced to 71 percent completed, above estimates and up from last week’s corn planting pace of 47 percent. Emergence was estimated at 32 percent, well above the average pace of 13 percent.

In the monthly supply/demand report, ending stocks for corn came in above pre-report trade estimates at 851 mb for old crop, 90 mb more than the average trade guess and up 50 mb from the previous month.

New crop stocks were pegged at 1.881 bb, well above estimates of 1.686 bb and considerably above the previous USDA estimate of 1.616 bb. The USDA is using a production figure of 14.79 bb, 166 bushels per acre, a figure slightly more than a billion bushels larger than expected usage.

This would bump the stocks to usage ratio from a tight 6.7 percent to a more comfortable 13.7 percent.

Strategy and outlook: Producers should have 80 percent of 2011/12 crop production sold. Finish old crop sales at $6.49 July. Producers own the December 5.40 strike puts on 50 percent of production. If inclined, producers sold the December 7.00 strike calls to help pay for the cost of the puts.

SOYBEANS ANALYSIS

Soybeans closed the week $.72 1/4 lower from last week. Last week, private exporters reported sales of 229,500 mt of U.S. soybeans to an unknown destination, 225,000 mts of soybeans to China and 40,000 mt of bean oil to China.

In the weekly export sales report, soybean sales were 67.1 mb vs. 3.6 mb needed to reach the USDA forecast of 1.29 bb.

Soybean planting progress is at 24 percent done vs. the average of 11 percent.

In the monthly supply/demand report, 2012-13 soybean production is estimated at 3.205 bb, slightly below the usage forecast of 3.285 bb, leaving a

very tight ending stocks number of 145 mb.

Old crop stocks were nearly identical to last month at 210 mb. A 145 mb ending stocks number argues for rationing as this is a 4.4 percent stocks to usage ratio.

Note the USDA is not accounting for double cropping wheat/soybean acres at this time.

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 producers felt inclined, they sold the 1600 calls to cheapen the cost of the puts.

LIVE CATTLE ANALYSIS

Live cattle ended the week $.22 lower, while feeder cattle ended $.62 lower. Last week, cash cattle trade was reported in the North at mostly $194, $1 lower compared to last week while trade in the South was $119, $1 lower compared with the previous week.

Global beef production is currently estimated at some 57 million mt on carcass weight basis, about 0.2 percent higher than the previous year,but still about 1.5 million mt, or 2.5 percent, lower than the record high in 2007.

Beef production in the U.S., the fourth largest beef exporter in the world, has contracted in the past 10 years, in part due to the impact of bovine spongiform encephalitis in December 2003, which limited export markets.

Strategy and outlook: Producers are hedged 50 percent of all production month including 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.

LEAN HOGS ANALYSIS

Lean hogs closed the week $1.57 higher. The average Iowa-Minnesota hog weight for last week was estimated at 276.1 pounds versus 276.9 lbs the previous week and 273.3 lbs last year.

Current world pork production is forecast at 104.4 million metric tons , almost 1 mmt larger than the October forecast for 2012 and 2.7 mmt, or 2.7 percent higher than in 2011.

Chinese pork production in 2012 is currently forecast at 51.6 mmt. By comparison, U.S. pork production is forecast at 10.6 mmt, and EU production is forecast at 22.6 mmt.

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. They 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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