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BRIAN HOOPS

By Staff | Jun 6, 2014

Repeated PED outbreaks

An Indiana farm has become the first to confirm publicly it suffered a second outbreak of a deadly pig virus, fueling concerns that a disease that has wiped out 10 percent of the U.S. hog population will be harder to contain than producers and veterinarians expected.

The farm, through its veterinarian, publicly acknowledged on May 27 a repeat incident of porcine epidemic diarrhea virus, which has killed up to 7 million pigs and pushed pork prices to record highs since it was first identified in the United States a year ago.

But a year after the virus was identified, repeat outbreaks have occurred at farms, but not been publicly confirmed before now.

These so-called secondary outbreaks are a challenge to efforts to stem the disease, which is almost always fatal to baby piglets.

Nationwide, PEDv outbreaks seem to recur in about 30 percent of infected farms, the American Association of Swine Veterinarians told

Reuters, confirming for the first time the likelihood of repeated outbreaks.

Blocking Vilsack’s subpoena

In a motion filed last week, the Justice Department is trying to block a subpoena seeking Agriculture Secretary Tom Vilsack’s testimony.

A subpoena has been issued, demanding Vilsack to testify in a libel suit former U.S. Department of Agriculture state rural development director Shirley Sherrod filed against conservative publisher Andrew Breitbart.

Unless there are extraordinary circumstances, the Justice Department argues Cabinet members should not be asked to testify in civil cases.

Vilsack fired Sherrod in 2010 after a Breitbart video was released. Sherrod was later offered a different job at USDA, but she did not accept it.

Breitbart died in 2011, but his wife and business partner are now defendants in this case.

Tyson raises stakes

Two days after poultry producer Pilgrim’s Pride made a $5.58 billion bid for the maker of Ball Park hot dogs and Jimmy Dean sausages, Tyson Foods barged in with a $6.2 billion offer.

The offer by Tyson, one of the world’s largest meat producers, is for $50 a share – $5 per share higher than Pilgrim’s Pride’s offer.

Hillshire has about 124 million shares outstanding, according to SEC filings. Tyson values the deal at $6.8 billion including debt.

In the meantime, Hillshire Brands has been trying to buy Bird’s Eye frozen vegetables maker Pinnacle Foods for $4.23 billion.

But Tyson said its offer would make a more profitable company and a “clear leader” in the retail sale of prepared foods.

CORN ANALYSIS

Corn closed the week 11.75 cents lower.

Last week, private exporters did not announce any private sales.

Weekly export sales of corn showed a total of 28.1 million bushels.

The weekly crop progress report showed the U.S. corn plantings advanced to 88 percent completed equal to versus the five-year.

Emergence is now 60 percent versus the average of 64 percent.

During June, the outlook for prices is simple as weather and how it impacts the emerging crops will be 95 percent of the pricing movement.

The only other supply-side news the market will deal with is the June 11 USDA monthly supply/demand crop report.

The market will want to be bullish as the key pollination time period is directly ahead of the market, however, it will take weather concerns during June to ignite a rally.

Producers will want to use options as a way to manage risk and provide price insurance.

This will enable producers to make sales and cover the upside if weather is adverse.

The end of the month will also see the quarterly stocks and planting intentions report released by USDA.

This report could be a shocker to the market as some reports have farmers decreasing seeded acres from the last report in March due to some farmers replanting in the Midwest.

Seasonal highs are usually formed by June 23.

Strategy and outlook: Producers are 100 percent sold of 2013/14 crop. Producers are 25 percent sold of the 2014/15 crop and own 480 puts on 50 percent of the crop.

They bought out-of-the-money December calls on 25 percent of sales as insurance.

SOYBEANS ANALYSIS

Soybeans closed the week 25 cents lower from last week.

Last week, private exporters announced a sale of 110,000 metric tons of soybeans to China and 172,000 mt of soybean meal to the Philippines.

Both sales are for the 2014/15 marketing year.

Weekly export sales of soybeans showed 2.2 mb for old crop and 30.2 mb for new crop sales.

In the weekly crop progress report, U.S. soybean seedings are now 56 percent, behind the average pace of 59 percent; while emergence is 25 percent with the average at 27 percent.

The month of June looks to be similar to corn as we are in a weather market and weather forecasts will be the primary driving force.

The crop looks to be seeded before June 15 leaving beans to spend the rest of June developing its root system.

Rains after June 15 will be viewed as beneficial to crop development and negative for prices.

However, dryness in the month of June will send prices sharply higher.

Demand has remained strong for U.S. beans as the soybean crops in Argentina and Brazil have been harvested and the unsold portion will be sold.

Since the soybeans are now in storage, China has returned as a strong buyer of U.S. soybeans.

This strong buying has cut into old crop ending stocks leaving U.S. stocks at only 130 mb, according to the May USDA report.

The month of June is not the key reproductive month for soybeans, however, the market will be quick to add a premium into prices on less-than-ideal weather.

The acreage report at the end of the month could be a shocker to the trade. The market has already anticipated a record seeded acreage, however if producers planted more acres to corn than previously thought, prices could find strength after the report’s release.

Seasonal highs are usually formed by June 23.

Strategy and outlook: Producers are 100 percent sold of the 2013/14 crop. Producers are 25 percent sold of 2014/15 production. Sell another 10 percent at $13.10 against March 2015.

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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