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BRIAN HOOPS

By Staff | Jul 20, 2012

CORN ANALYSIS

In a very strong week, corn closed the week $.45 1/4 higher. Last week, private exporters reported 120,000 metric tons of non-US corn was sold to Mexico. The origin was likely Brazil. In the weekly export sales report, corn sales tallied 6.8 million bushels, this is below the 7.5 mb needed to reach the USDA forecast of 1.6 bb.

This was the eighth consecutive week for sales below 10 mb with 9 weeks of sales below the average pace needed to reach the USDA forecast. The weekly crop progress/conditions report showed U.S. corn conditions down 8 percent to 40 percent good-to-excellent.

This year’s rating is now well below last year’s 69 percent. This is the lowest rated corn crop since 1988. Iowa is rated at 46 percent, Nebraska at 47 percent, Minnesota at 77 percent, Illinois 19v, Indiana 12 percent and Ohio at 28 percent.

In the monthly supply/demand report, the USDA forecast 2012 corn production to 12.97 billion bushels, down 1.82 bb from its June estimate. The yield forecast was lowered by 20 bushelsd to 146 bushels pera. This obviously forced a massive cut in new crop demand ideas as total demand was acre. Demand estimates were slashed 1.055 bb from last month, with 650 mb coming from feed, 300 million from exports and 100 million from ethanol More yield cuts are likely as the 2012 crop continues to deteriorate.

Strategy and outlook: Producers are now 50 percent of 2012/13 crop after making a sale at $7.40 against December. Producers own the December 6.40 strike puts on 50 percent of production. Make a 10 percent sale of 2013/14 crop at $6.30 December.

SOYBEANS ANALYSIS

Soybeans closed the week $.271/2 higher from last week. Last week private exporters reported a sale of 150,000 mt of U.S. soybeans sold to an unknown destination. In the weekly export sales report, soybean sales were 27.9 mb, this puts year-to-date sales at 1.395 bb, above the current USDA forecast of 1.34 bb.

Crop progress/conditions report showed the soybean crop at 45 percent g/e, down 8 percent from a week ago. This is now the lowest-rated soybean crop of the last 25 years. Iowa is at 59 percent, Minnesota at 74 percent, Nebraska at 45 percent, Illinois at 28 percent and Indiana at 20 percent.

The USDA was also aggressive in cutting soybean yields as it slashed it by 3.4 bushels to 40.5 bpa, which is now below last year’s 41.5 bpa. USDA also cut demand estimates by lowering exports 115 mb and crush estimates by 35 mb. With further reductions in yield potential, ending stocks, billed at 130 mb, could slip to the all time lows of 112 mb established in 2003/04.

Strategy and outlook: Producers are 50 percent sold of the 2012/13 production after making a sale at $15.75. Producers rolled up to the November 1500 put options on 50 percent of the 2012/13 production. Make a 10 percent sale of 2013/14 at $13.30 against November.

LIVE CATTLE

Live cattle ended the week $2 lower, while feeder cattle ended $7.52 lower. Last week, cash trade developed in the South at $115, $2 lower compared with a week ago.

In Nebraska, trade developed at $183, $5 lower compared with last week.

Total May beef and veal exports excluding variety meats were 68,699 mt, 13 percent lower than a year ago. So far this year, beef and veal exports are down 10 percent from last year.

Japan remains a growth market for U.S. beef and total beef and veal exports in May were 14,633 mt, 7 percent higher than a year ago and the largest monthly total to this market since December 2003.

Other key markets remain weak, however, with exports to Mexico down 25 percent and Canada down 21 percent.

Strategy and outlook: Producers currently have no hedges in place. Feed costs should be covered in corn futures/options or cash product through December.

LEAN HOGS ANALYSIS

Lean hogs closed the week $2.90 lower. The average Iowa-Minnesota hog weight for last week was estimated at 269 pounds versus 270 lbs the previous week and 266.6 lbs last year. U.S. Census data shows U.S. pork exports in May at 150,235 mt, 8.2 percent larger than a year ago.

Japan and Mexico remain the top two markets for U.S. pork, accounting for some 46 percent of all U.S. pork shipments.

Pork exports to Japan slumped in May, declining 22.5 percent, compared to a year ago. At 34,114 mt, pork exports to Japan were the lowest monthly export volume since October 2010.

Exports to Mexico have been strong so far this year, averaging about 20 percent above year-ago levels.

Total pork exports to China/Hong Kong in May were 22,032 mt, 11,103 mt or 102 percent higher 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 December.

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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