In a very volatile week, corn closed the week $.46 1/2 higher. Private exporters did not announce any private export sales.
In the weekly export sales report, corn sales were 15.7 million bushels versus 14 mb needed weekly to hit the USDA forecast of 1.7 billion bushels.
The weekly crop progress/conditions report showed U.S. corn conditions unchanged from the previous week at 72 percent good-to-excellent. This is still higher than last year’s 67 percent. Iowa is rated at 75 percent, Nebraska at 75 percent, Minnesota at 84 percent, while eastern states of Illinois are at 66 percent, Indiana at 59 percent and Ohio at 67 percent.
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 is finding support from dry weather forecasts. This rally could represent the last buying opportunity of the summer.
Strategy and outlook: Producers should have 80 percent of 2011/12 crop production sold. Finish old crop sales at $6.15 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 $.82 higher from last week. Last week soybeans had a huge week of sales as private exporters reported sales of 695,000 metric tons to China and 120,000 mt to Egypt.
In the weekly export sales report, soybean sales were 18.2 mb, which puts year-to-date sales at 1.336 bb, above the current USDA forecast of 1.315 bb.
Crop progress/conditions report showed the first soybeans ratings of the season at 65 percent g/e, with Iowa at 71 percent, Minnesota at 77 percent, Nebraska at 71 percent, Illinois at 60 percent and Indiana at 52 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, which could potentially add 86 mb to 108 mb of ending stocks to the soybean 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 $2 higher.
Last week, cash trade developed in the South on Thursday afternoon with 10,000 head trading in Texas and 14,000 head trading in Kansas.
Trade developed at $122, steady with a week ago. In Nebraska, trade developed at $195, steady with last week with a sale total of 35,000 head. 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 to extend coverage through the harvest.
LEAN HOGS ANALYSIS
Lean hogs closed the week $1.35 higher. The average Iowa-Minnesota hog weight for last week was estimated at 274.9 pounds versus 274.3 lbs the previous week and 270.6 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.
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.
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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