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Commodity moves

By Staff | Jun 28, 2012

CORN ANALYSIS

In a very volatile week, corn closed the week $.11 1/2 higher. Private exporters did not announce any private export sales.

In the weekly export sales report, corn sales were 6.7 million bushels versuss 11 mb needed weekly to hit the USDA forecast of 1.65 billion bushels.

Sales this week were below 10 million bushels for the fifth consecutive week and were below the average weekly sales needed to reach the USDA’s export projection for the seventh consecutive week and eighth out of the last 10 weeks.

The weekly crop progress/conditions report showed U.S. corn conditions down 3 percent from the previous week at 63 percent good-to-excellent. This year’s rating has now slipped below last year’s 70 percent.

This is the second lowest rated corn crop of the last 10 years. Iowa is rated at 67 percent, Nebraska at 62 percent, Minnesota at 82 percent, while eastern states of Illinois are at 52 percent, Indiana at 37 percent and Ohio at 53 percent.

Crop conditions are falling at a critical time for corn. No doubt the size of the corn crop is falling, the question is how big will the crop be at harvest?

Strategy and outlook: Producers should have 100 percent of 2011/12 crop production sold after finishing 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. Sell 20 percent of the 2012/13 crop at $6.04.

SOYBEANS ANALYSIS

Soybeans closed the week $.66 1/2 higher from last week. Last week private exporters reported a sale of 140,000 metric tons to an unknown destination.

In the weekly export sales report, soybean sales were 6 mb, which 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 56 percent g/e, down 4 percent from a week ago.

This is the second lowest rated soybean crop of the last 25 years. Iowa is at 61 percent, Minnesota at 73 percent, Nebraska at 61 percent, Illinois at 47 percent and Indiana at 32 percent.

Crop conditions are falling at a rapid pace. No doubt the size of the soybean crop is falling, the question is how big will the crop be at harvest?

Timely rains in late July and August can return the crop to near maximum yield potential, so look for marketing opportunities on this rally.

Notice there is no carry into the summer months of 2013, making storage unprofitable this year.

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. Sell 10 percent of the 2012/13 crop at $14.46.

LIVE CATTLE ANALYSIS

Live cattle ended the week $.25 higher, while feeder cattle ended $3.22 lower. Last week, cash trade developed in the South at $116, $3 lower compared with a week ago. In Nebraska, trade developed at $188, $3 lower compared with last week.

The monthly cattle on feed report showed cattle and calves on feed for slaughter market in the United States for feedlots with capacity of 1,000 or more head totaled 11.1 million head on June 1. The inventory was 2 percent above June 1, 2011.

Placements in feedlots during May totaled 2.09 million, 15 percent above 2011. Net placements were 1.99 million head.

During May, placements of cattle and calves weighing less than 600 pounds were 520,000, 600-699 pounds were 365,000, 700-799 pounds were 530,000, and 800 pounds and greater were 672,000. Marketings of fed cattle during May totaled 2.02 million, 1 percent above 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 $5.00 to extend coverage through the harvest.

LEAN HOGS ANALYSIS

Lean hogs closed the week $1.90 higher. The average Iowa-Minnesota hog weight for last week was estimated at 272.1 pounds versus 274.4 lbs the previous week and 268.3 lbs last year.

In the monthly cold storage report, USDA reported total red meat supplies in freezers were down 4 percent from the previous month, but up 14 percent from last year.

Total pounds of beef in freezers were down 4 percent from the previous month, but up 11 percent from last year. Frozen pork supplies were down 4 percent from the previous month but up 16 percent from last year.

Stocks of pork bellies were down 13 percent from last month, but up 14 percent from last year.

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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