Weather, planting delays impacting markets

2011-05-08T10:26:00Z Weather, planting delays impacting marketsBy Brian Hoops, Market Watch The Prairie Star
May 08, 2011 10:26 am  • 

Wheat

For the week, Chicago wheat closed $.30 1/4 lower; Kansas City wheat $.39 1/4 lower and Minneapolis wheat $.06 1/4 lower.

Last week, private exporters reported 100,000 mts of HRW sold to an unknown destination.

In the weekly USDA crop condition report, rated the U.S. winter wheat crop at only 35 percent g/e, down 1 percent from last week with the poor/very poor rating up 4 percent to 40 percent. Kansas fell 2 percent to 23 percent g/e; Oklahoma fell 2 percent just 5 percent g/e and Texas is now 9 percent good and 0 percent excellent.

Spring wheat seedings have reached 6 percent vs. 39 percent a year ago.

The weekly export sales report showed net sales of 265,000 MT for the 2010/11 marketing year were up 97 percent from the previous week, but down 19 percent from the prior 4-week average.

Increases reported for Peru (51,500 MT, including 15,000 MT switched from unknown destinations and decreases of 2,300 MT), Nigeria (41,000 MT), South Africa (34,400 MT, including 33,000 MT switched from unknown destinations), Venezuela (34,000 MT), Guatemala (31,600 MT, including 31,400 MT switched from unknown destinations), and Mexico (24, 200 MT), were partially offset by decreases for unknown destinations (59,300 MT). Net sales of 153,200 MT for delivery in 2011/2012 were mainly for Taiwan (34,000 MT), Italy (31,000 MT), unknown destinations (27,500 MT), and Peru (20,000 MT).

This year's exports stand at 1.275 bb vs. the USDA forecast of 1.275 bb.

Strategy & outlook

Producers should be sold/hedged on 100 percent of 2010 crop with hedge to arrive contracts as basis levels will likely to improve during the winter.

Producers should now be 50 percent sold of the 2011 crop after making a sale at the $9.54 level against the Kansas City contract.

We look to make additional sales on spring and summer rallies.

Corn

Corn closed the week $.16 3/4 higher. Last week, private exporters did not report any private corn sales.

Last week, the USDA reported corn plantings as of Sunday, April 24, have reached only 9 percent complete. This is only 2 percent more done than the previous week as virtually no progress was made in key states of Illinois, Indiana, Iowa and Ohio.

The weekly export sales report showed net sales of 349,000 MT were down 43 percent from the previous week and 65 percent from the prior 4-week average.

Increases were reported for Japan (244,600 MT, including 129,600 MT switched from unknown destinations and decreases of 38,200 MT), Cuba (27,800 MT, including 25,000 MT switched from unknown destinations), Guatemala (25,000 MT), unknown destinations (17,400 MT), Colombia (15,000 MT), and Jamaica (9,400 MT).

This year's net export profile is now at 1.603 bb vs. the USDA forecast of 1.950 bb.

Strategy & outlook

Producers and are now sold/hedged on 80 percent of the 2010 crop and re-owned 35 percent of sales/hedges with at the money July call options after rolling up March and May calls.

Producers should have 30 percent of new crop production sold.

Make another old and new crop 10 percent sale at $8.24.

Soybeans

Soybeans closed the week $.12 1/4 higher from last week. Last week, private exporters did not report any private export sales.

Census March soybean crush was reported at 140.3 million bushels, slightly better than expectations of 139.1 million, and compared to the seasonally-low February crush of 129.4 million bushels. However, March crush was still down solidly from last year's 156.1 million bushels and represented the lowest crush for the month of March in 7 years.

The weekly export sales report showed net sales of 143,500 MT were down 59 percent from the previous week and 18 percent from the prior 4-week average.

Increases were reported for Indonesia (88,700 MT, including 60,000 MT switched from unknown destinations), Mexico (63,500 MT), Canada (16,400 MT), South Korea (15,000 MT), and Taiwan (6,800 MT). Net sales of 55,700 MT for delivery in 2011/2012 were mainly for China (55,500 MT). This year's export pace stands at 1.509 bb vs. the USDA forecast of 1.580 bb.

Strategy & outlook

Producers have sold/hedged 70 percent of the 2010 crop and re-owned 35 percent of sales/hedges with at the money July call options after rolling up March and May calls.

Producers should have 30 percent of new crop production sold.

Make another 10 percent sale of old and new crop at $15.69.

Live cattle

Live cattle ended the week $1.87 lower while feeder cattle ended $1.07 lower.

Last week, cash cattle trade was reported in the North at $187, $6.00 lower compared to last week while trade in the South was $116.00, $3.00 lower compared with the previous week.

Feeder cattle in Oklahoma City sold $31to $2 higher.

The weekly beef export sales of 16,600 MT for delivery in 2011 were primarily for Mexico (3,000 MT), Japan (2,600 MT), Russia (2,500 MT), Vietnam (2,200 MT), and South Korea (2,100 MT).

Exports of 13,600 MT were mainly to Mexico (2,900 MT), South Korea (2,500 MT), Japan (2,200 MT), Canada (1,900 MT), and Vietnam (1,500 MT).

Strategy & outlook

Producers were advised to make their first round of 2011 inventory hedges when the market advanced to the $108 major weekly resistance level. Next hedge target was $113 and achieved against the April contract.

Target $122 against the June contract for a sale. Producers can look to make hedges in feeder cattle at this time as well. I would recommend 50 percent of inventory to be hedged at this time and remaining risk carried in the cash market.

Feed costs should be covered in corn futures/options or cash product through the 2011 growing season.

Lean hogs

Lean hogs closed the week $6.77 lower.

Futures failed at technical resistance and turned lower, following a softer cash market and following a falling live cattle market. Pork product values are sliding, adding to the idea that futures are overbought.

The average Iowa-Minnesota hog weight for last week was estimated at 272.9 lbs versus 272.2 lbs previous week and 269.9 lbs last year.

Strategy & outlook

Producers have extended hedges against the June contract to 50 percent coverage at $101.25.

Next sales target for June hogs is $105.25 where producers can make another 25 percent hedge.

All feed costs should be locked in as well. Commercial accounts are beginning to sell into this rally while the funds cover short positions but are not in a bearish position yet. 

Copyright 2011

Midwest Market Solutions, Inc.

Copyright 2015 The Prairie Star. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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