In a very strong week, corn closed the week $.26 lower. Last week, private exporters did not report any private sales.
In the weekly export sales report, corn sales were minus5.5 million bushels. This is below the 8.4 mb needed to reach the USDA forecast of 1.6 billion bushels. This was the ninth consecutive week for sales below 10 mb and 10 weeks with sales below the average pace needed to reach the USDA forecast.
The weekly crop progress/conditions report showed U.S. corn conditions down 5 percent to 26 percent good-to-excellent.
This year’s rating is well below last year’s 62 percent. This is the lowest rated corn crop since 1988. Iowa is rated at 23 percent, Nebraska at 37 percent, Minnesota at 61 percent, while eastern states of Illinois are at 7 percent, Indiana at 7 percent and Ohio at 15 percent.
RJ O’Brien has reduced its estimate for the 2012/13 corn crop to 11.096 bb, 1.874 bb below the current USDA estimate.
The average U.S. corn yield is now at 130.8 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.
According to RJ O’Brien, this would trim carryout levels to 723 mb and a stocks/usage ratio of 6.4 percent.
Strategy and outlook: Producers have now sold 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. 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 $6.45.
Soybeans closed the week $.73 1/4 lower from last week. Last week private exporters did not report any private sales.
In the weekly export sales report, soybean sales were 26.1 mb. This puts year-to-date sales at 1.400 bb, above the current USDA forecast of 1.34 bb.
The latest crop conditions report showed the soybean crop at 31 percent g/e, down 3 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 62 percent rating. Iowa is at 28 percent, Minnesota at 60 percent, Nebraska at 28 percent, Illinois at 13 percent and Indiana at 12 percent.
RJ O’Brien lowered its estimate of the 2012/13 U.S. soybean crop to 2.864 bb with an average yield of 38 bpa. The USDA is currently at 3.050 bb and a 40.5 bpa yield.
If RJ O’Brien is correct, this would trim ending stocks to an extremely snug 100 mb with a stocks to usage ratio of 3.4 percent.
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 a 10 percent sale at $16.95. Producers sold 10 percent of 2013/14 crop at $13.30 against November. Make another 10 percent sale at $13.50.
LIVE CATTLE ANALYSIS
Live cattle ended the week $1.65 higher, while feeder cattle ended $1.65 higher. Last week, cash trade developed in the South at $114, $1 higher compared with a week ago.
In Nebraska, trade developed at $180, steady compared with last week. Reportedly, packer-contracted cattle are going to be very short in the upcoming weeks, indicating packers will need to be more aggressive with their bids to secure live inventory.
Feeder cattle have found tremendous selling pressure from producers who have sold their inventory or hedged production, rather than pay for increasingly rising feed costs. Feeders have pulled live cattle futures lower, but futures should be ready for a late-summer rally as the heat has slowed gains and prices should improve to provide an incentive to producers to feed out cattle despite the high feed cots.
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 $1.50 higher. The average Iowa-Minnesota hog weight for last week was estimated at 267.1 pounds versus 268.5 lbs the previous week and 263.7 lbs last year. Hogs weights are on the decline as the higher feed costs and hot temperatures will slow growth of live animals.
The loss of tonnage available to packers will eventually prove to be bullish for the lean hog market. Prices should begin to rally on increased packer demand for hogs with lighter weights and increased feed costs as the fundamental reasons for the rally.
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. 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.
Please Enter Your Facebook App ID. Required for FB Comments. Click here for FB Comments Settings page