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BRIAN HOOPS

By Staff | Jul 27, 2012

CORN ANALYSIS

In a very strong week, corn closed the week $.84 higher. Last week, private exporters did not report any private sales. In the weekly export sales report, corn sales were 7.1 million bushels. This is below the 7.5 mb needed to reach the USDA forecast of 1.6 billion bushels.

This was the eighth consecutive week for sales below 10 mb with nine weeks with sales below the average pace needed to reach the USDA forecast. There are only four weeks of the marketing year remaining.

The weekly crop progress/conditions report showed U.S. corn conditions down 9 percent to 31 percent good-to-excellent. This year’s rating is now well below last year’s 66 percent. It’s the lowest rated corn crop since 1988.

Iowa is rated at 36 percent, Nebraska at 43 percent, Minnesota at 67 percent, while eastern states of Illinois are at 11 percent, Indiana at 8 percent and Ohio at 19 percent.

RJ O’Brien has reduced their estimate for the 2012/13 corn crop to 11.416 bb, 1.554 bb below the current USDA estimate and down 942 mb from last year’s crop. The average corn yield is now at 134.6 bushels per acre versus the USDA estimate of 146.0 bpa and last year’s 147.2 bpa.

This would be the lowest corn yield since 129.3 bpa in 2002/03 and trim carryout levels to 718 mb and a stocks-to-usage ratio of 6.2 percent.

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 640 strike puts on 50 percent of production. Roll these puts to 740 puts. Make another 10 percent sale at $8.10. Producers made a 10 percent sale of 2013/14 crop at $6.30 December, make another 10 percent sale at $6.40.

SOYBEANS ANALYSIS

Soybeans closed the week $1.62 3/4 higher from last week. Last week private exporters reported a private sale of 112,000 metric tons of U.S. soybeans to the United Kingdom.

In the weekly export sales report, soybean sales were 15.0 mb, this puts year-to-date sales at 1.4 bb, above the current USDA forecast of 1.34 bb. Crop progress/conditions report showed the soybean crop at 34 percent g/e, down 6 percent from a week ago.

This is now the lowest rated soybean crop of the last 25 years and only slightly better than 1988. This is well below last year’s 64 percent rating. Iowa is at 38 percent, Minnesota at 65 percent, Nebraska at 34, Illinois at 17 percent and Indiana at 11 percent.

RJ O’Brien lowered their estimate of the 2012/13 soybean crop to 2.934 bb with an average yield of 39 bpa. The USDA is currently at 3.050 bb and a 40.5 bpa yield.

If correct, this would trim ending stocks to an extremely snug 100 mb with a stocks-to-usage ratio of 3.3 percent. NOPA crush for June was 134.2 mb, down slightly from the May crush of 138.2 mb, but was up 14 percent from last year’s 117.7 mb crush.

Strategy and outlook: Producers are 50 percent sold of the 2012/13 production and producers own the November 1500 put options on 50 percent of the 2012/13 production. Roll puts to 1600 level. Make 10 percent sale at $16.95. Producers sold 10 percent of 2013/14 at $13.30 against November. Make another sale at $13.50.

LIVE CATTLE ANALYSIS

Live cattle ended the week $.75 higher, while feeder cattle ended $2.90 lower. Last week, cash trade developed in the South at $113, $2 lower compared with a week ago.

In Nebraska, trade developed at $180, $3 lower compared with last week. Cattle and calves on feed for slaughter market in the U.S. for feedlots with capacity of 1,000 or more head totaled 10.7 million head on July 1. The inventory was 3 percent above July 1, 2011.

The inventory included 6.74 million steers and steer calves, up 4 percent from the previous year. This group accounted for 63 percent of the total inventory.

Heifers and heifer calves accounted for 3.92 million head, up 1 percent from 2011.

Placements in feedlots during June totaled 1.66 million, 2 percent below 2011. Net placements were 1.6 million head.

During June, placements of cattle and calves weighing less than 600 pounds were 460,000, 600-699 pounds were 320,000, 700-799 pounds were 390,000, and 800 pounds and greater were 494,000. Fed cattle marketing during June totaled 1.97 million head, 6 percent below 2011. This is the lowest fed cattle marketings for the month of June since the series began in 1996.

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

LEAN HOGS ANALYSIS

Lean hogs closed the week $3.30 higher. The average Iowa-Minnesota hog weight for last week was estimated at 268.5 pounds versus 269 lbs previous week and 266.6 lbs last year.

In the monthly cold storage report, the USDA reported total red meat supplies in freezers were down 6 percent from the previous month, but up 15 percent from last year.

Total pounds of beef in freezers were down 5 percent from the previous month, but up 9 percent from last year. Frozen pork supplies were down 7 percent from the previous month, but up 20 percent from last year.

Stocks of pork bellies were down 25 percent from last month, but up 1 percent from last year.

Strategy and outlook: Producers currently have no hedges in place. Sell 50 percent of October at $85.85; 50 percent of December at $84.75; 50 percent of February at $85.85.

Brian Hoops is president and senior market analyst of Midwest Market Solutions Inc.He can be contacted at 605-660-1155.

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