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Commodity moves

By Staff | Oct 12, 2012

CORN ANALYSIS

Corn closed the week $.08 1/4 lower. Last week, private exporters announced a sale of 100,000 metric tons of optional origin corn to Mexico. This was not a sale from the U.S., rather it is likely a commercial is importing corn from Brazil and reselling to Mexico cheaper than buying U.S. corn.

In the weekly export sales report, corn sales shows 12.9 million bushels slated for 2012/13. This is below the 17.5 mb that 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 54 percent done nationally, up 15 percent from last week and ahead of the average of 20 percent.

Normally, 50 percent is the threshold used to determine harvest lows. Iowa is 56 percent done, followed by Nebraska at 53 percent, Minnesota at 53 percent, Illinois at 71 percent and Indiana at 35 percent.

Informa released its latest production estimates and has corn production up 467 mb from September to 11.194 bb and the yield up 0.4 bushels per acre to 127 bpa.

Strategy and outlook: Producers have sold 80 percent of the 2012/13 crop and 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 $.49 1/2 lower from last week. Last week private exporters reported a sale of 180,000 mt of U.S. soybeans to China and 21,000 mt of bean oil sold to China.

In the weekly export sales report, soybean sales were 47.6 mb, this is above the 4.1 mb that is needed to stay on pace with the current USDA forecast of 1.055 bb.

So far in the marketing year, the U.S. is 82 percent sold of the USDA projections.

The weekly crop progress and conditions report showed U.S. soybean harvest is 41 percent done nationally, up 19 percent from last week and ahead of the average of 19 percent.

Next week, harvest should advance past the 50 percent mark, which traditionally indicates when harvest lows form. Iowa is 54 percent done, followed by Nebraska at 48 percent, Minnesota at 76 percent, Illinois at 22 percent and Indiana at 18 percent.

Informa estimated the bean yield 2.5 bpa higher at 37.8 bpa and production at 2.860 bb, 226 mb higher.

Strategy and outlook: Producers are 80 percent sold of the 2012/13 production and own the November 1600 put options on 25 percent of the 2012/13 production.

Producers are now 40 percent sold of 2013/14.

LIVE CATTLE ANALYSIS

Live cattle ended the week $4.12 higher, while feeder cattle ended $2.40 higher.

Last week, cash trade developed in the South at $124, $1 higher compared with a week ago.

In Nebraska, trade developed at $191, $1 lower compared with last week.

Commercials were buyers again of live cattle futures last week, indicating their willingness to buy on any extended dips in the market.

Weekly charts indicate resistance is near the $131 level, another $5 higher than where the current market is.

If the market is able to rally near this resistance level this fall and winter, producers should look to place hedges throughout 2013 marketing year.

Strategy and outlook: Producers currently have no hedges in place.

Feed costs should be covered in corn futures and options or cash product through December.

LEAN HOGS ANALYSIS

Lean hogs closed the week $.62 lower.

The average Iowa-Minnesota hog weight for last week was estimated at 270.2 pounds versus 268 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 spurred 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.

The 2013 pork supply will drop to the lowest per capita since 1975, the USDA estimates. Cash hog markets are rallying with the cash product gaining 21 percent in the last three weeks.

Cutout values have also climbed back to the highest levels since late August.

Strategy and outlook: Producers currently have no hedges in place. Sell 50 percent of December at $84.75, and 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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