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BRIAN HOOPS

By Staff | Jun 1, 2012

CORN ANALYSIS

In a very volatile week, corn closed the week $.57 lower. Private exporters did not announce any private export sales.

In the weekly export sales report, corn sales were 19.0 million bushels versuss. 13.1 mb needed weekly to hit the USDA forecast of 1.7 billion bushels.

The first weekly crop progress and conditions report show U.S. corn conditions at 77 percent good-to-excellent. This is the second highest on record. Planting progress was reported at 96 percent complete versus 75 percent last year and 81 percent on average.

Emergence was reported at 76 percent compared to 38 percent last year and 48 percent on average.

As we highlighted in the Market Insider Trade Alert Newsletter, this market could be explosive this summer as the weather cycle suggests a hotter and drier period of weather during the rest of May and through June. Corn has averaged a rally of $1.25 in three of the last four summers.

Strategy and outlook: Producers should have 80 percent of 2011/12 crop production sold. Finish old crop sales at $6.35 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.

Lift the put/call spreads on a move below $5.00 in the December contract.

SOYBEANS ANALYSIS

Soybeans closed the week $.23 lower from last week. Last week, private exporters did not report any private export sales.

In the weekly export sales report, soybean sales were 35 mb vs 1.6 mb needed to reach the USDA forecast of 1.315 bb.

The crop progress and conditions report showed that 76 percent of U.S. soybeans have been planted versus 35 percent last year and 42 percent on average.

Emergence was reported at 35 percent versus 10 percent last year and 13 percent on average.

Estimates of an increase of 2 to 2.5 million acres of soybeans are being talked about thanks to double-cropping after the winter wheat harvest, which could potentially add 86 mb to 108 mb of ending stocks to the soybean market.

The technicals for soybeans have turned bearish with an outside month lower during the month of May.

Strategy and outlook: Producers are 100 percent sold 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 $1.87 lower, while feeder cattle ended $2.20 lower. Last week, cash cattle trade was reported in the North at mostly $195, steady compared to last week, while trade in the South was $123, $1 lower compared with the previous week.

On daily charts, live cattle appear to have forged a significant bottom as breaking a down trend line and rallying sharply.

Our lookout for cattle, as described in the Market Insider Trade Alert newsletter, calls for higher prices into the summer and fall based on increased demand and decreasing supplies.

Strategy and outlook: Producers currently have no hedges in place. Feed costs should be covered in corn futures/options or cash product through July.

Producers should buy December corn calls on a move below $5 to extend coverage through the harvest.

LEAN HOGS ANALYSIS

Lean hogs closed the week $2.22 lower. The average Iowa-Minnesota hog weight for last week was estimated at 276.5 pounds versus 276.7 lbs the previous week and 270.8 lbs last year.

Hog futures are trying to rally off of weekly support that has held since early 2011.

Commercial accounts continue to add to their bullish expectations as they maintain to accumulate long positions.

Obviously, they are anticipating a strong summer rally.

This should encourage producers to be patient in their marketing efforts until prices have rallied.

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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