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BRIAN HOOPS

By Staff | Feb 21, 2014

U.S. beef exports in 2013 had a record breaking year. At National Cattlemen’s Beef Association’s annual convention and trade show, Kent Bacus, associate director of legislative affairs said total beef product sales were more than $9 billion, which includes beef cuts, tallow and hides.

“CattleFax has predicted that for 2013,” Bacus said, “just on the beef cuts, trade will account for $300 per head. We can take something like beef tongue, where you can get maybe a couple dollars a pound here in the U.S., and sell it in Japan for upwards of $20 a pound.

“We’re going to continue to try to take down those tariff barriers that hinder our ability to access foreign consumers.”

U.S. Meat Export Federation Chairman Mark Jagels said 2014 could be even better.

“It was a huge shift for us when Japan went from 20 (months of age) and under to 30 and under,” Jagels said. “Exports

to Japan are up over 50 percent.

“We’ll be back to pre-BSE levels shortly on the amount we export there.”

Jagels said U.S. beef sales need to resume in China.

“We have been out of China since 2003, we need to be back in there and I think things are looking good. Hopefully maybe at the end of the second quarter, beginning of the third, we can get things worked out and we might be able to get back into China.”

CORN ANALYSIS

Corn closed the week 1 cent higher. Last week, private exporters did not report any private sales.

Weekly export sales of corn showed a total of 50 million bushels, the third consecutive week of strong export sales.

Total annual exports total of 1.362 billion bushels are already 81 percent of the current USDA forecast.

USDA’s export forecast of 1.6 bb looks to be raised in the future.

In the USDA baseline projections, USDA forecasts 2014 corn acreage at 93.5 million acres and a 165.6 bushel=-per-acre yield.

This would place 2014/15 U.S. corn ending stocks at 2.6 billion bushels versus 2013/14 stocks of 1.9 billion at 1.48 billion.

In the monthly supply/demand report, the USDA increased corn exports by 150 mb and lowered ending stocks by the same amount.

This was a surprise to the trade. Corn fundamentals have improved during the winter, with ending stocks declining from the 2013 November estimate of 1.89 bb and a 14.6 percent stocks/usage ratio to the current 1.48 bb in ending stocks and 11.1 percent stocks/usage ratio.

The commitment of traders report shows funds are flat and will not need to do any additional “short-covering.”

Thus, there is not an incentive for prices to continue to rally.

Many producers are nervous about the upcoming growing season, wanting to get some hedges in place.

Patience this year should provide selling opportunities.

Strategy and outlook: Producers are 100 percent sold of 2013/14 crop. Producers are 10 percent sold of the 2014/15 crop.

Sell 15 percent at $5.24.

SOYBEANS ANALYSIS

Soybeans closed the week 6.25 cents higher higher. Last week, private exporters announced a sale of 356,000 metric tons of soybeans to China, but also cancelations of 272,000 mt of beans sold to China.

Weekly export sales of soybeans showed a total of 6.4 mb, the second lowest total of the marketing year.

Total export sales of 1.587 bb, are 5 percent larger than the revised USDA forecast of 1.51 bb.

The USDA is assuming foreign buyers will eventually cancel U.S. purchases in favor of cheaper South American product.

The weekly charts show an interesting pattern developing. Soybeans broke out of a triangle or wedge pattern and a large move should follow.

This chart pattern is similar to the one found on cattle charts, that led to a major bullish rally.

Oil World pegged Brazil production at 89.5 million metric tons, Argentina at 54.5 mmt and World production up slightly to 287.8 mmt.

In the USDA baseline projections, they forecast 2014 soybean acreage at 78 million and a 45.2 bpa yield.

This would place 2014/15 U.S. soybean ending stocks at 203 million bushels versus 150 mb now.

In the February supply/demand report, USDA raised 2013/14 U.S. soybean exports by 15 mb to 1.51 bb, but ending stocks were left unchanged at 150 mb as it lowered residual usage by 10 mb to just 12 mb and added 5 mb to supplies with higher imports.

Strategy and outlook: Producers are 100 percent sold of the 2013/14 crop. They re-owned 50 percent of the 2013/14 crop with $13.50 May calls.

This material has been prepared by a sales or trading employee or agent of Midwest Market Solutions and is, or is in the nature of, a solicitation. This material is not a research report prepared by Midwest Market Solution’s Research Department. The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that Midwest Market Solutions believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such.

Brian Hoops can be reached at (605) 660-1155.

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