Corn closed the week $.10 lower. Last week, private exporters did not report any private export sales.
In the weekly export sales report, corn sales were 43.4 million bushels, but only 6.9 mb slated for 2011/12. This is below the 10.5 mb needed to reach the USDA forecast of 1.6 billion bushels. This was the 12th consecutive week for sales below 10 mb and 13 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 1 percent to 23 percent good-to-excellent.
This year’s rating is well below last year’s 60 percent. This is the lowest-rated corn crop since 1988.
Iowa is rated at 16 percent, Nebraska at 35 percent, Minnesota at 52 percent, Illinois at 4 percent, Indiana at 7 percent and Ohio at 14 percent.
Corn production is forecast at 10.8 billion bushels, down 13 percent from 2011 and the lowest production since 2006.
Based on conditions as of Aug. 1, yields are expected to average 123.4 bushels per acre, down 23.8 bushels from 2011.
If realized, this will be the lowest average yield since 1995. Area harvested for grain is forecast at 87.4 million acres, down 2 percent from the June forecast, but up 4 percent from 2011.
Strategy and outlook: Producers are now 60% 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 closed the week $.37 1/2 higher from last week. Last week private exporters reported a total of 561,000 metric tons of U.S. soybeans sold to China and 140,000 mt of U.S. soybeans sold to an unknown destination. In the weekly export sales report, soybean sales were 16.5 mb, this puts year-to-date sales at 1.418 bb, above the current USDA forecast of 1.34 bb.
USDA’s crop progress and conditions report showed the soybean crop at 29 percent g/e, unchanged from a week ago. This is well below last year’s 61 percent rating.
Iowa is at 24 percent, Minnesota at 56 percent, Nebraska at 22 percent, Illinois is at 10 percent and Indiana is at 15 percent.
Soybean production is forecast at 2.69 billion bushels, down 12 percent from last year. Based on Aug. 1 conditions, yields are expected to average 36.1 bushels per acre, down 5.4 bushels from last year. If realized, the average yield will be the lowest since 2003.
Area for harvest is forecast at 74.6 million acres, down 1 percent from June, but up 1 percent from 2011.
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 at $13.30 against November. Make another 10 percent sale at $13.50.
LIVE CATTLE ANALYSIS
Live cattle ended the week $1.15 higher, while feeder cattle ended $.77 higher.
Last week, cash trade developed in the South at $120, $2 higher compared with a week ago. In Nebraska, trade developed at $188, $2 to $4 higher compared with last week. 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.
Two weeks ago, live cattle futures posted a bullish technical breakout and followed through on the breakout last week.
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 $.32 higher.
The average Iowa-Minnesota hog weight for last week was estimated at 265.7 poundss versus 265.5 lbs the previous week and 260.8 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.
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