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BRIAN HOOPS

By Staff | Jul 6, 2012

CORN ANALYSIS

In a very strong week, corn closed the week $.81 1/2 higher. Private exporters did not announce any private export sales.

In the weekly export sales report, corn sales were 11.5 million bushels versus 11.4 million bushels needed weekly to hit the USDA forecast of 1.65 billion bushels. The weekly crop progress/conditions report showed US corn conditions down 9 percent to 56 percent g/e.

This year’s rating is now well below last year’s 68 percent. This is the second-lowest rated corn crop of the last 10 years. Iowa is rated at 68 ercent, Nebraska at 60 ercent, Minnesota at 83 percent, while eastern states of Illinois are at 37 percent, Indiana at 27 percent and Ohio at 52 percent. The USDA raised its estimates for corn acres this year to 96.4 million acres, topping analysts’ expectations. Farmers planted 5 percent more acres of corn this year than last year, in the highest planted acreage since 1937, when just over 97 million acres of corn were planted, the USDA said. Pre-report estimates had had expected 95.96 million acres of corn planted this year, up from 91.92 million acres last year and higher than the USDA’s March forecast of 95.86 million acres. In the quarterly stocks report, the USDA said corn inventories declined to 3.15 billion bushels, below estimates of of 3.182 billion bushels, but down from 3.67 billion bushels a year earlier.

Strategy and outlook: Producers are 20 percent of 2012/13 crop after making sales at $6.04 against December. Make another 20 percent sale at $6.70 against December. Producers own the December 5.40 strike puts on 50% of production. Roll these puts to $6.40 puts if the cash sale is made.

SOYBEANS ANALYSIS

Soybeans closed the week $.70 1/4 higher from last week. Last week private exporters reported a sale of 110,000 mts to an unknown destination and 120,000 mts of soybeans sold to China. In the weekly export sales report, soybean sales were 29.1 mb, this puts year to date sales at 1.381 bb, above the current USDA forecast of 1.335 bb. Crop progress/conditions report showed the soybean crop at 53 percent g/e, down 3% from a week ago. This is the second-lowest rated soybean crop of the last 25 years. Iowa is at 63 percent, Minnesota at 74 percent, Nebraska at 57 percent, Illinois at 35 percent and Indiana at 24 percent. In the quarterly acreage report, the USDA raised its estimate of planted soybean acreage to 76.1 million acres this year, up from its March forecast of 73.9 million acres. That was above expectations of 75.58 million acres. Soybean stocks of 667 million bushels surpassed estimates of 640 million bushels, up from 619 million bushels a year earlier. Notice there is no carry into the summer months of 2013, making storage unprofitable this year.

Strategy and outlook: Producers are 30% sold of the 2012/13 production. Producers bought the November 1360 put options when November rallied to $13.95 on 50% of the 2012/13 production. Sell 10 percent of the 2012/13 crop at $14.46.

WHEAT ANALYSIS

For the week, Chicago wheat closed $.65 3/4 higher; Kansas City wheat $.52 1/2 higher and Minneapolis wheat $.03 higher. Last week, private exporters did not announce any sales. In the weekly export sales report, wheat sales were 11.9 mb, below the 18.3 mb needed each week to reach the USDA’s forecast of 1.15 bb. The crop progress/conditions report showed spring week crop conditions at 77 percent g/e, up 1% from last year. North Dakota is 89 percent g/e with South Dakota 71 percent, and Minnesota 74 percent. Winter wheat harvest was reported at 59 percent versus 48 percent last year and 27 precent on average. In the acreage report, the USDA estimate of spring-wheat plantings came in at 12.0 million acres, up slightly from its last forecast of 11.98 million acres in March, but below pre-report estimates of 12.66 million acress. Inventories of wheat declined to 743 million bushels, but that was above estimates of 726 million bushels, down from 862 million bushels last year.

Strategy and outlook: KC producers 20 percent sold of the 2012/13 production against the December contract at $7.49 and 20 percent at $7.59. Producers also bought the 700 strike put options on 50 percent of production. Liquidate at $6.00. MW wheat producers sold 20 percent of 2012/13 production against the December MGEX contract at $7.95 and another 20 percent at $8.12 as well as bought the 760 strike put options on 50 percent of production. Liquidate at $7.25.

LIVE CATTLE

ANALYSIS

Live cattle ended the week $3.35 higher while feeder cattle ended $1.35 lower. Last week, cash trade developed in the South at $116, steady compared with a week ago. In Nebraska, trade developed at $188, steady compared with last week. Cattle futures are responding nicely to the COT report which highlighted a bullish setup for the market with the commercials index and the sentiment index in corresponding bullish positions. Supplies of cattle are expected to tighten into the summer which should provide a fundamental backdrop for higher cattle prices, which will also for a long term hedging program as cattle placements are 15 percent more than a year ago.

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

Lean hogs closed the week $1.70 higher. The average Iowa-Minnesota hog weight for last week was estimated at 272.1 lbs versus 274.4 lbs previous week and 268.3 lbs last year. United States inventory of all hogs and pigs on June 1 was 65.8 million head. This was up 1 percent from June 1, 2011, and up 1 percent from March 1. Breeding inventory, at 5.86 million head, was up 1 percent from last year, and up 1 percent from the previous quarter. Market hog inventory, at 60.0 million head, was up 1 percent from last year, and up 1 percent from last quarter. The March-May 2012 pig crop, at 29.4 million head, was up 1 percent from 2011. Sows farrowing during this period totaled 2.92 million head, up slightly from 2011. The sows farrowed during this quarter represented 50 percent of the breeding herd. The average pigs saved per litter was a record high 10.09 for the March-May period, compared to 10.03 last year. Pigs saved per litter by size of operation ranged from 7.50 for operations with 1-99 pigs and pigs to 10.20 for operations with more than 5,000 hogs and pigs. United States hog producers intend to have 2.90 million sows farrow during the June-August 2012 quarter, down 1 percent from the actual farrowings during the same period in 2011, and down 1 percent from 2010. Intended farrowings for September-November 2012, at 2.89 million sows, are down 1 percent from 2011, but up slightly from 2010.

Strategy and outlook: Producers currently have no hedges in place.

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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