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BRIAN HOOPS

By Staff | May 9, 2013
  • Finalize 2013 expenses. This includes crop insurance file claim on 2012 crop; marketing expense budget for price insurance; fuels, fertilizers, herbicides expenses are down for 2013-lock in; machinery repairs and upgrades.
  • Recognize the fundamental and technical trends. This includes: are prices moving higher/lower? (Currently sideways to lower); finding where trendlines change; what action will I take when a change occurs? sell cash, sell futures, buy puts, sell calls; are supplies getting larger or smaller? (Supplies are currently shrinking.)
  • Develop a marketing plan. This includes rice objectives projections, retracements, stops; trigger points – date, price, basis; location – elevator, ethanol plant, private sale; type of sale – options, hedge, cash; risk management – price insurance, crop insurance, contracts; write it down!and eliminate the emotion.
  • Find someone to help with plan. This can include an independent third party; spouse, partner, banker, broker/analyst.
  • Diversify. This includes using a combination of puts, calls, cash sales, hedges, basis contracts; use more than one elevator, ethanol plant, private buyer/seller
  • Don’t pick tops or bottoms. No one can do it. Chances of success are minimal. The market will clearly tell you when a top or bottom has occurred.
  • Take responsibility. It’s your farm operation. You have to live with the results. Seek good advice and make great decisions.
  • Farm to make a profit. Recognize opportunities markets move to new highs, large price swings. The goal is to be profitable, not sell on the highs. Be willing to spend money to make money, for instance, options and insurance.
  • Embrace changes such as overnight trading nearly 24 hours per day; electronic trading; increased volatility; increased speculative influences.
  • Recognize the opportunities. These include better marketing opportunities, capitalize on opportunities, more price risk and manaing risk.

CORN ANALYSIS

Corn closed the week $.17 1/4 higher. Last week, private exporters announced a sale of 120,000 metric tons of sorghum to an unknown destination.

In the weekly export sales report, old corn sales are on pace to reach the USDA projection of 800 million bushels.

Sales were 13 mb, nearly identical to the six-week average of 12.3 mb. New crop sales were strong at 25.8 mb.

Last week, the USDA placed the national corn planting progress at only 5 percent completed. This compares to 49 percent last year and 31 percent on average.

This is the slowest planting pace on record. Texas is 69 percent and Missouri is 15 percent complete, with key growing states yet to plant. Corn is struggling despite a wet spring that has slowed corn seedings across the corn belt. It is after May 10 that the trade will become concerned about yield losses.

Rallies in the spring should provide an opportunity for producers to sell/hedge into a weather threat during growing season is the only hope for a corn rally.

Strategy and outlook: Producers are now 80 percent of 2012/13 crop and are also 40 percent sold of the 2013/14 crop.

Sell 10 percent of the 2012/13 crop at $6.70 July and 10 percent of the 2013/14 crop at $5.80 March.

Producers re-owned 50 percent of the 2012/13 corn crop with July calls and bought December corn puts on 50 percent of 2013 production when December traded to $5.67.

SOYBEANS ANALYSIS

Soybeans closed the week $.43 1/2 lower from last week. Last week, private exporters reported a sale of 290,000 mt of U.S. soybeans sold to China.

Soybeans closed in a bearish outside lower weekly close.

In the weekly export sales report, old crop soybean sales showed the second consecutive week of negative cancelations, while new sales were booming at 49.3 mb, dominated by Chinese purchases of 42.3 mb There are only 77 mb of old crop soybeans that have been made that are yet to ship. Soybeans are under pressure from expectations that some corn acres could be shifted to soybeans this spring due to late-planting conditions.

The commercials are buying the weakness, a good sign of a summer rally that will occur during the U.S. growing season. Look for long-term support on the weekly charts to hold as this is the point where commercial buying should increase and gain strength.

For producers wanting to re-own previous sales, this is an excellent opportunity.

Strategy and outlook: Producers are 80 percent sold of the 2012/13 production and are 40 percent sold of 2013/14. They re-owned 50 percent of 2012/13 production with July soybean calls. Cover 50 percent of 2013 production with November puts when November trades to $12.51.

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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