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Commodity moves

By Staff | Jun 22, 2012

CORN ANALYSIS

In a very volatile week, corn closed the week $.18 1/2 lower. Private exporters did not announce any private export sales.

In the weekly export sales report, corn sales were 6.7 million bushels versus 10.4 mb needed weekly to hit the USDA forecast of 1.65 billion bushels.

This sales week was a marketing year low. The weekly crop progress/conditions report showed U.S. corn conditions down 6 percent from the previous week at 66 percent good-to-excellent. This year’s rating has now slipped below last year’s 69 percent.

Iowa is rated at 67 percent, Nebraska at 70 percent, Minnesota at 82 percent, while eastern states of Illinois are at 56 percent, Indiana at 49 percent and Ohio at 64 percent.

In the monthly supply/demand report, the USDA left old crop and new crop corn stocks unchanged from the previous month. Stocks of 851 mb for 2011/12 and 1.881 bb for 2012/13 were above trade estimates and weighed on prices.

With crop ratings declining, this could be the largest production figure we see this year.

Strategy and outlook: Producers should have 80 percent of 2011/12 crop production sold. Finish old crop sales at $6.15 for 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 $.50 1/4 lower from last week. Last week soybeans had a huge week of sales as private exporters reported sales of 262,000 metric tons to China, 120,000 mt to an unknown destination, but canceled 147,000 mt sold to China in the 2011/12 marketing year.

In the weekly export sales report, soybean sales were 36.9 mb, this puts year-to-date sales at 1.352 bb, above the current USDA forecast of 1.335 bb. Crop progress/conditions report showed the soybean crop at 60 percent g/e, down 5 percent from a week ago.

Iowa is at 62 percent, Minnesota at 74 percent, Nebraska at 64 percent, Illinois at 50 percent and Indiana at 45 percent.

In the monthly supply/demand report, the USDA lowered old crop soybean stocks to 175 mb from 210 mb the previous month,while only lowering new crop stocks by 5 mb from last month to 140 mb.

World carryout levels rose, however, to 53.36 million metric tons from 53.24 mmt previously. Demand remains strong, but it’s weather that will direct prices for the rest of the summer.

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 $4.17 lower while feeder cattle ended $3.35 lower. Last week, cash trade developed in the South with only 6,500 head trading in Texas and 9,000 head trading in Kansas.

Trade developed at $119, $3 lower compared with a week ago. In Nebraska, trade developed at $191, $4 lower compared with last week.

Beef exports grew, month-on-month, in April to 207.8 million pounds carcass weight. That figure is 6.8 percent larger than the March total, but 6.9 percent lower than one year ago. YTD beef exports now stand at 766.2 million pounds, down 10.5 percent from 2011.

The value of April beef exports was $413.9 million, 9.2 percent higher than last year. YTD beef export value stands at $1.495 billion, 4.7 percent higher than in 2011.

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 $.10 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.

Pork exports dropped from 486.6 million pounds, carcass weight, in March to 450.6 million pounds in April. The April total, however, was 6.9 percent higher than one year ago, breaking a monthly trend toward smaller and smaller year-on-year changes.

April pork production was 2.9 percent higher than one year earlier, so exports actually increased as a share of total production this year.

Japan and Mexico remain the two largest customers for U.S. pork with China/Hong Kong remaining in third position.

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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