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BRIAN HOOPS

By Staff | Sep 21, 2012

CORN ANALYSIS

Corn closed the week $.17 1/2 lower. Last week, private exporters did not report any private sales.

In the weekly export sales report, corn sales show 16.8 million bushels slated for 2012/13. This is below what is needed to stay on pace with the USDA forecasts of 1.25 billion bushels.

The weekly crop progress and conditions report showed U.S. corn harvest is 15 percent done nationally, up 5 percent from last week and ahead of the average of 5 percent.

Iowa is 10 percent done with Nebraska 12 percent, Illinois 21 percent and Indiana 9 percent.

The USDA estimated 2012 corn production at 10.727 bb, much higher compared to the average guess of 10.42 bb, but lower than the August estimate of 10.78 bb.

Corn-ending stocks are estimated at 733 mb, compared to 650 mb, a month ago. This has caused selling in the corn market as its considered a bearish surprise. Actual yield results have come in below market expectations. This should put a solid foundation under the corn market.

A close below 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. This level was tested, but not closed below.

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.

If technical support is broken, sell another 20 percent of 2012/13 and 2013/14 crop years.

SOYBEANS ANALYSIS

Soybeans closed the week $.02 1/2 higher from last week. Last week private exporters did not report any soybean sales for the second consecutive week.

In the weekly export sales report, soybean sales were 26.5 mb, this is below what is needed this week to stay on pace with the current USDA forecast of 1.05 bb. The crop progress and conditions report showed the soybean crop at 32 percent good-toexcellent, up 2 percent compared to a week ago. This is well below last year’s 56 percent rating.

Iowa is at 24 percent, Minnesota at 55 percent, Nebraska at 18 percent, Illinois is at 19 percent and Indiana is at 24 percent.

Soybean harvest is just beginning across the U.S. at 4 percent.

The USDA forecast U.S. soybean production was 2.634 bb, slightly down from the average trade guess of 2.659 bb and the August estimate of 2.692 bb.

Soybean-ending stocks are estimated at 115 mb, unchanged from a month ago. 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 $.57 higher, while feeder cattle ended $.47 higher. Last week, cash trade developed in the South at $127, $3 higher compared with a week ago.

In Nebraska, trade developed at $196, $4 higher compared with last week.

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.

Total U.S. beef exports in July were 76,385 metric tons, the largest monthly volume for the year, but still some 15 percent lower than a year ago.

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 $2.67 higher.

The average Iowa-Minnesota hog weight for last week was estimated at 269.6 pounds versus 268.2 lbs the previous week and 267.2 lbs last year.

Cash hog markets have been in a free fall over the last two-plus weeks, dragging futures lower; but there are signs of the cash market stabilizing.

Pork exports in July continued to track above year-ago levels, but the trend for much of the year has been towards lower export volumes.

Total U.S. pork exports in July were 134,170 mt, up 1.4 percent from a year ago.

Year-to-date, U.S. pork exports are up 10 percent from last year.

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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