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BRIAN HOOPS

By Staff | Sep 14, 2012

CORN ANALYSIS

Corn closed the week $.03 1/4 lower. Last week, private exporters reported a sale of 180,000 metric tons to Japan and 434,848 mt to unknown destinations.

In the weekly export sales report, corn sales shows net cancelations of 4.1 million bushels slated for 2011/12. This brings year-to-date sales to 1.558 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 from the previous week at 22 percent good-to-excellent. This year’s rating is well below last year’s 52 percent.

Iowa is rated at 13 percent, Nebraska at 30 percent, Minnesota at 50 percent, Illinois at 4 percent, Indiana at 8 percent and Ohio at 11 percent.

Corn harvest is 10 percent done nationally, ahead of the average of 3 percent.

Informa said it expects the USDA, in a monthly supply-and-demand report, to forecast a national corn yield of 119.8 bushels per acre and total production of 10.31bb. The USDA last month estimated the U.S. corn crop at 10.779 bb, using a yield of 123.4 bpa.

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 all over. Yields are coming in much less than expected in early harvested corn areas. This should put a solid foundation under the corn market.

Strategy and outlook: Producers are now 60 percent sold 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 against 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 $.28 lower from last week. Last week private exporters did not report any soybean sales.

In the weekly export sales report, soybean sales were 19.3 mb, this puts year to date sales at 1.44 bb, above the current USDA forecast of 1.35 bb.

New crop soybean exports are outstanding, supporting new crop prices. Over 55 percent of the estimated new crop exports are already booked compared to an average of 30 percent.

The latest USDA crop progress and condition report showed the soybean crop at 30 percent g/e, unchanged compared to a week ago. This is well below last year’s 56 percent rating. Iowa is at 23 percent, Minnesota at 54 percent, Nebraska at 20 percent, Illinois is at 18 percent and Indiana is at 20 percent.

Informa said it expects USDA to forecast national soybean production of 2.639 b based on a national yield average of 35.4 bpa.

The USDA last month estimated soybean output at 2.692 bb, with a national average yield of 36.1 bushels an acre.

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 all 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 $.45 higher, while feeder cattle ended $1.55 higher.

Last week, cash trade developed in the South at $124, $1 higher compared to a week ago. In Nebraska, trade developed at $192, $1 higher compared with last week.

Cattle futures continue to probe upside technical resistance. Declining open interest, combined with commercial buying interest, is bullish for the live cattle

market. This bullish technical buying should propel cattle futures into major weekly chart resistance near the highs that were charted in early 2012.

Commercials will have to be the best buyers on a rally as they have pared down their long positions, giving them plenty of buying power if they decide to purchase cattle futures.

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 $2.82 lower. The average Iowa-Minnesota hog weight for last week was estimated at 268.2 pounds versus 268.6 lbs the previous week, and 263.5 lbs last year.

Cash hog markets have been in a free fall over the last two plus weeks, dragging futures lower. Cash hogs have fallen 16 percent or $14.49 per hundreweight since Aug.

8. Futures have fallen near the lows from 2012 as a result.

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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