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BRIAN HOOPS

By Staff | Aug 10, 2012

CORN ANALYSIS

Corn closed the week $.11 1/2 higher. Last week, private exporters reported a sale of 1.516 million metric tons of U.S. corn to Mexico.

In the weekly export sales report, corn sales were 7.9 million bushels, which is below the 9.9 mb needed to reach the USDA forecast of 1.6 billion bushels.

This was the 11th consecutive week for sales below 10 mb and 12 weeks with sales below the average pace needed to reach the USDA forecast.

The weekly crop progress and conditions report showed U.S. corn conditions down 2 percent to 24 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 20 percent, Nebraska at 35 percent, Minnesota at 56 percent, Illinois at 5 percent, Indiana at 9 percent and Ohio at 16 percent.

Last week, Informa lowered its estimate for the U.S. harvest to 10.338 bb from its July estimate of 12.49 bb. The firm cut its national yield estimates for the crop to 120.7 bushels an acre from its previous estimate of 142.5 bushels an acre.

By contrast, the U.S. Department of Agriculture in July estimated the U.S. corn crop at 12.970 bb, using a yield of 146 bushels an acre.

Strategy and outlook: Producers are now 60 percent of 2012/13 crop after making a sale at $8.10 against December. Producers own the December 740 strike puts on 50 percent of production. Producers are now 20 percent sold of the 2013/14 crop after making a sale at $6.45 December 2013.

SOYBEANS ANALYSIS

Soybeans closed the week $.48 1/2 lower from last week. Last week private exporters did not report any private sales.

In the weekly export sales report, soybean sales were 9.1 mb, this puts year-to-date sales at 1.414 bb, above the current USDA forecast of 1.34 bb.

Crop progress/conditions report showed the soybean crop at 25 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 60 percent rating. Iowa is at 25 percent, Minnesota at 57 percent, Nebraska at 24 percent, Illinois fell to 9 percent and Indiana improved to 16 percent.

Last week, Informa lowered its estimate for the soybean harvest to 2.791 bb, down from 3.16 bb last month. Informa pegged the average yield at 37.2 bushels an acre, compared with its July estimate of 42 bushels an acre. In July, the USDA estimated a soybean output at 3.05 bb, using a yield of 40.5 bushels an acre.

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 and make 10 percent sale at $16.95.

Producers are sold 10 percent of 2013/14 crop at $13.30 against November. Make another 10v sale at $13.50.

LIVE CATTLE ANALYSIS

Live cattle ended the week 4.77 higher while feeder cattle ended $1.20 higher.

Last week, cash trade developed in the South at $118, $4 higher compared with a week ago.

In Nebraska, trade developed at $184 to $186, $4 to $6 higher 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 costs.

Last week, live cattle futures posted a bullish technical breakout.

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 265.5 pounds versus 267.1 pounds previous week and 260.9 poundss last year.

Hog weights are on the decline as the higher feed costs and hot temperatures will slow growth.

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.

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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