In a very volatile week, corn closed the week $.27 lower. Private exporters did not announce any private export sales.
In the weekly export sales report, corn sales were 7.4 million bushels versus 13.1 mb needed weekly to hit the USDA forecast of 1.7 billion bushels.
The weekly crop progress/conditions report showed U.S. corn conditions down 5 percent from the previous week to 72 percent good-to-excellent.
This is still higher than last year’s 63 percent. Emergence was reported at 92 percent compared to 59 percent last year and 69 percent on average.
Corn has averaged a rally of $1.25 in three of the last four summers, which, if history repeats itself, would present a major marketing opportunity for producers.
Corn broke out to the downside of a sideways trading pattern it had been in on the weekly charts since last September.
This is a bearish technical development that will only be nullified by a weather rally.
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 in the December contract.
Soybeans closed the week $.37 3/4 lower from last week. Last week, private exporters did not report any private export sales.
In the weekly export sales report, soybean sales were 15.4 mb vs. 1.6 mb needed to reach the USDA forecast of 1.315 bb.
Crop progress/conditions report showed that soybeans plantings are 89 percent complete, with emergence at 61 percent.
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.
This could potentially add 86 mb to 108 mb of ending stocks to the soybean market.
The technicals for soybeans are bearish with an outside month lower during the month of May that can be reversed only through a drought-related weather market.
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 $1.95 higher, while feeder cattle ended $1.12 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 $122, $1 lower compared with the previous week.
On daily charts, live cattle appear to have forged a significant bottom, posting a double bottom and then rallying sharply. The downtrend line has also been broken. Our summer outlook for cattle calls for higher prices into the summer and fall based on increased demand and decreasing supplies.
This is why we have no hedges currently in place.
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 $5.00 to extend coverage through the harvest.
LEAN HOGS ANALYSIS
Lean hogs closed the week $6.37 higher. The average Iowa-Minnesota hog weight for last week was estimated at 274.3 pounds versus 276.1 lbs the previous week, and 269.9 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 continue 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.
Producers should buy December corn calls on a move below $5 to extend coverage through the harvest.
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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