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BRIAN HOOPS

By Staff | Oct 5, 2012

CORN ANALYSIS

Corn closed the week $.08 higher. Last week, private exporters did not report any private sales. In the weekly export sales report, corn sales shows 10 million bushels slated for 2012/13. This is below the 17 mb that is needed to stay on pace with the USDA forecasts of 1.25 bb.

The weekly crop progress and conditions report showed U.S. corn harvest is 39 percent done nationally, up 13 percent from last week and ahead of the five-year average of 13 percent.

Iowa is 37 percent done with Nebraska at 36 percent, followed by Minnesota at 30 percent, Illinois 54 percent and Indiana 26 percent.

The quarterly stocks report was a bullish surprise for the market as corn stockpiles were under a billion bushels at 988 mb. The trade was expecting 1.126 bb.

Last September, stock piles were 1.127 bb. In June, stocks were 3.149 bb. The trade had been lower going into the report based on monthly supply/demand info that suggested slow usage by the corn market.

This report has the potential to change the trend of the corn market to an uptrend and end user buying should begin to show up as harvest lows may be getting closer than previously thought.

Strategy and outlook: Producers are now 80 percent of the 2012/13 crop sold. Producers own the December 740 strike puts on 25 percent of production.

Producers are also 40 percent sold of the 2013/14 crop.

SOYBEANS ANALYSIS

Soybeans closed the week $.20 3/4 lower from last week. Last week private exporters reported a sale of 140,000 metric tons of U.S. soybeans to an unknown destination and a total of 290,000 mt of soybeans sold to China.

In the weekly export sales report, soybean sales were 29.4 mb, this is above the 5.3 mb that is needed to stay on pace with the current USDA forecast of 1.055 billion bushels.

The weekly crop progress and onditions report showed U.S. soybean harvest is 22 percent done nationally, up 12 percent from last week and ahead of the average of 8 percent.

Iowa is 23 percent done with Nebraska 19 percent, followed by Minnesota at 45 percent, Illinois at 8 percent and Indiana 10 percent. The quarterly stocks report was bearish for the soybean market with soybeans stocks larger than expected at 169 mb.

This is down from last year’s 215 bb and down from June stocks of 667 bb. Technically, 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.

The support area was tested and held last week. A minor rally should now unfold before this support area is tested again.

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

LIVE CATTLE ANALYSIS

Live cattle ended the week $3.45 lower, while feeder cattle ended $3.42 lower.

Last week, cash trade developed in the South at $123, $3 lower compared with a week ago. In Nebraska, trade developed at $192, $4 lower compared with last week.

The market is concerned about the sloppy fundamentals of the market as cutout values have been sluggish and the amount of boxed beef sold each week remains slow.

Last week’s beef sales were 10 percent below the previous week and 36 percent below the four-week average.

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 $1.37 higher. The average Iowa-Minnesota hog weight for last week was estimated at 270.2 pounds versus 268.0 lbs the previous week and 270 lbs last year.

According to a story by Bloomberg News, U.S. hog farmers are slaughtering animals at the fastest pace since 2009 as a surge in feed costs spured the biggest losses in 14 years. This is expected to lead to smaller herds next year and a rebound in pork prices.

The 73.3 million hogs processed in eight months through August were the most in three years, U.S. Department of Agriculture data show. Pork supply will drop to the lowest per- capita since 1975 next year, the USDA estimates.

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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