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BRIAN HOOPS

By Staff | Aug 31, 2012

CORN ANALYSIS

Corn closed the week $.03 3/4 higher. Last week, private exporters reported a sale of 121,000 metric tons of U.S. corn to Mexico.

In the weekly export sales report, corn sales were 12.8 million bushels, but only 4.3 mb slated for 2011/12. This brings year-to-date sales to 1.564 billion bushels, slightly above the USDA annual forecasts of 1.55 bb.

The weekly crop progress and conditions report showed U.S. corn conditions were unchanged at 23 percent good to excellent.

This year’s rating is well below last year’s 57 percent. This year’s crop is rated slightly below the crop of 1988 for mid-August.

Iowa is rated at 18 percent, Nebraska at 30 percent, Minnesota at 52 percent, Illinois at 5 percent, Indiana at 9 percent and Ohio at 14 percent.

The Pro Farmer Tour released its yield survey, projecting a national corn yield of 120.25 bushels per acre and production figure of 10.478 bb.

This is below the USDA estimates of 123.4 bpa nationwide average yield and 10.78 bb.

The weekly charts are carving out key support. The July low of $7.66 will be critical technical support for corn.

If this is broken, it will be a strong signal that this corn rally is over.

Strategy and outlook: Producers are now 60 percent of 2012/13 crop sold 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. If technical support is broken, sell another 20 percent of 2012/13 and 2013/14 crop years.

SOYBEANS ANALYSIS

Soybeans closed the week $.66 1/2 higher from last week. Last week private exporters reported a sale of 202,000 mt of soybeans to an unknown destination; 165,000 mt of soybeans to China and 55,000 mt of soybean oil to China.

In the weekly export sales report, soybean sales were 26.4 mb, this puts year-to-date sales at 1.426 bb, above the current USDA forecast of 1.35 bb.

Crop progress and conditions report showed the soybean crop at 25 percent g/e, 1 percent higher compared to a week ago. This is well below last year’s 59 percent rating. Iowa is at 25 percent, Minnesota at 59 percent, Nebraska at 19 percent, Illinois is at 14 percent and Indiana is at 20 percent.

The Pro Farmer Tour has been completed and its results include a national yield average of 34.8 bpa and production of 2.60 bb. This is below the USDA production figure of 2.69 bb and yield of 36.1 bpa.

The July and August lows of $15.75 will be critical technical support for soybeans. If this is broken, it will be a strong signal that this soybean rally is over.

Strategy and outlook: Producers are 60 percent sold of the 2012/13 production and producers own the November 1600 put options on 50 percent of the 2012/13 production. Producers are sold 10 percent of 2013/14 at $13.30 against November. Make another 10 percent sale at $13.50.

Sell another 20 percent of 2012/13 and 2013/14 production if technical support is broken.

LIVE CATTLE ANALYSIS

Live cattle ended the week $.82 lower, while feeder cattle ended $.92 higher.

Last week, cash trade developed in the South at $121, $1 higher compared with a week ago.

In Nebraska, trade developed at $188, $2 lower compared with last week.

Cattle inventories in Canada have declined steadily since BSE was discovered in Canada thus limiting export demand. The beef cow inventory as of July 1 was 3.958 million head, 0.1 percent higher than a year ago, but about 27 percent smaller than what it was in 2005.

Total cattle inventory in Canada as of July 1 was 13.52 million head, 0.1 percent smaller than last year.

The decline in the overall inventory was largely a result of a smaller calf crop in 2011, down 3.5 percent from the previous year.

Declining open interest, combined with commercial buying interest, is bullish for the live cattle market.

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 $3.82 lower. The average Iowa-Minnesota hog weight for last week was estimated at 267.7 pounds versus 266 lbs the previous week and 262.5 lbs last year.

The total Canadian hog and pig inventory as of July 1 was 12.87 million head, 0.5 percent higher than the previous quarter and 1.5 percent higher than on

July 1, 2011. The lean hog market is struggling with increased supplies of lean hogs in the third and fourth quarters of this marketing year.

At the same time, hog weights are not decreasing as logic would indicate with rising feed costs. Instead, weights are well above last year at this time. This has kept the hog futures on the defensive.

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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