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BRIAN HOOPS

By Staff | May 24, 2013

In the May Cattle on Feed report, the USDA reported U.S. cattle on feed was down 3 percent from last year.

This is actually more than the trade expected and comes at a time when the prevailing mentality is already bearish.

The USDA reported cattle and calves on feed for slaughter market in the U.S. for feedlots with capacity of 1,000 or more head totaled 10.7 million head on May 1. The inventory was 3 percent below May 1, 2012. Placements in feedlots during April totaled 1.75 million, 15 percent above 2012. Net placements were 1.68 million head. During April, placements of cattle and calves weighing less than 600 pounds numbered 375,000, 600-699 pounds totaled 270,000, 700-799 pounds tallied 455,000, and 800 pounds and greater were 650,000.

Placements were the second largest in the last 10 years. Placement activity in Nebraska was up 22 percent and Kansas placements were 17 percent higher.

This should especially weigh on late summer cattle futures, although they already are heavily discounted to the current cash market. The marketings of fed cattle during April totaled 1.86 million, 2 percent above 2012. Other disappearance totaled 69,000 during April, 12 percent below 2012. The market is fearful the current cash market will erode into the summer under the weight of the increased supplies of cattle. The cattle market has seen rally attempts fail under the weight of fund selling and producer hedge selling. Until the technical and fundamental trend changes, rallies will continue to be viewed as selling opportunities.

CORN ANALYSIS

Corn closed the week $.16 1/2 higher. Last week, private exporters did not announce any private sales.

In the weekly export sales report, old corn sales were only 8.6 million bushels, just above the 8 mb needed each week to reach the lowered USDA export forecast of 750 mb. New crop sales were also weak at only 6.7 mb. Last week, the USDA reported U.S. corn planting at 28 percent, the slowest planting pace for this date since the flood year of 1993 when only 27 percent of the crop was planted. Emergence is at 5 percent versus 52 percent last year and 28 percent on average.

Planting in Texas is 78 percent complete and Missouri is 28 percent complete, with key growing states of Iowa at 15 percent, Indiana 30 percent, Illinois 17 percent and Nebraska at 43 percent complete.

Rallies in the spring are good opportunities for producers to sell/hedge into as a weather threat during growing season is the only hope for a corn rally. Informa, in its monthly report, lowered corn planted acreage to 96.8 million, down 455,000 acres from the USDA’s forecast. Corn yield is estimated at 160.9 bushels per acre.

Srategy and outlook: Producers are now 80 percent of 2012/13 crop sold, and 40 percent sold of the 2013/14 crop. Sell remaining 2012/13 crop at $6.60 July and 10 percent of the 2013/14 crop at $5.80 March. They re-owned 50 percent of the 2012/13 corn crop with July calls.

They bought December corn puts on 50% of 2013 production when December traded to $5.67.

SOYBEANS ANALYSIS

Soybeans closed the week $.49 1/2 higher from last week. Last week, private exporters reported sales of 291,000 metric tons of U.S. soybeans sold to China for the 2013/14 marketing year and 138,000 mt of soybeans to an unknown destination.

In the weekly export sales report, old crop soybean sales were only 0.6 mb, below the 3.6 mb needed each week to reach the USDA forecast of 1.35 billion bushels.

Over the last four weeks, old crop sales are still net negative. New sales were strong at 12.7 mb, but annual commitments are now 326 mb this year compared to last year’s 381 mb commitment pace.

Soybean plantings are at 6 percent complete versus 43 percent last year and 24 percent on average. NOPA reported April soybean crush at 120.1 mb, solidly below market expectations of 125.2 million, and down from last month’s 137.1 million and down nearly 9 percent from last year’s April crush. Crush activity relative to last year has declined notably in recent months, as needed based on the extreme tightness in the 2012/13 balance sheet.

After running 10 to 11 percent above year-ago levels during November through January, February crush was unchanged from last year, March was down 2.5 percent and now April was down 8.8 percent.

However, for the marketing year, crush is still up 5 percent from last year. In its monthly report, Informa raised soybean acreage by 1.2 million, up from 78.3 million the USDA used. Yield was estimated at 42.9 bpa.

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.

Sell remaining 2012/13 production at $14.75. 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.

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