CORN - February looks to be a positive month for the corn market. With the bullish January supply/demand report fresh in the minds of traders, the market will search for price discovery and a price level which will slow usage.
Demand isn't strong, ethanol production is slowing and cattle supplies are the lowest since 1952, but the market is still worried that usage is better than what has been factored in. Ending stocks are estimated at 602 mb vs. 989 mb last year. With another bullish report in February, ending stocks could tighten even further. Last year, U.S. farmers planted 96.4 million acres. Corn producers are expected to plant 2-3 million more acres in 2013 compared to 2012 as the higher prices will attract more corn acres this spring. Weather this spring will be so important to the growing season. It won't matter how many acres are planted if it doesn't rain. Producers should look to buy the weakness in the last half of February for a rally into the spring and possibly the summer if weather conditions remain dry.
SOYBEANS - Normally, February looks to bring the addition of slower U.S. export sales as early planted beans in Northern Brazil begin to come to harvest and hit the world market at a price lower than any U.S. posted price. Because Brazil can only store up to 25 percent of its harvest, they are forced to forward sell approximately 75 percent of their early harvested soybeans. It is the period between mid-February and May that South America over takes the U.S. as the primary port of origin for beans. This will leave weather on late maturing crops as the sole bullish factor for South American soybean values. February in Brazil and Argentina is like August here as it's a key yield-developing month for three quarters of the crop. If weather turns hot and dry, prices will rally sharply, however with good rains across the country, the price of soybeans should turn south. Producers should buy an major pullbacks in the market. The USDA supply/demand report was slightly friendly in January as the USDA lowered estimated ending stocks to 135 mb, a historically tight figure. Ahead of the February USDA supply/demand report, traders will anticipate the USDA to leave ending stocks unchanged due to the record strong demand pace for soybeans. The soybean markets main job is to not lose acres to other crops this spring. Therefore, if corn rallies, soybeans should as well. U.S. producers are expected to plant an additional 500,000 to 1 million acres this spring.
WHEAT - February is the last month before the winter wheat crop breaks dormancy, and grows into the June harvest. Thus with winter wheat still in the dormant stage, price direction will come from demand. Demand trends have been consistently slow due to the large supplies of wheat worldwide. For winter wheat, low crop ratings were noted when wheat entered dormancy and so far this winter, limited snow cover has fallen in Kansas, Oklahoma and Texas. The key growing timeframe for wheat is the March through May period when wheat has broken dormancy and is growing toward maturity. Wheat is like grass growing in your yard, it may look dead, however if ample rains fall in the spring, it will green up quickly. Currently, technical trends are lower for all the wheat contracts. For new crop wheat hedgers, watch the technical trendlines closely. Wheat could have a nice short cover rally during the growing stage, however the month of February should be bearish as the poor demand and lower technical trends equal lower prices. A sharp reduction in winter wheat acreage mandates a decent growing season.
CORN - ANALYSIS - Corn closed the week 15 1/4 cents higher. Last week, private exporters did not report any private sales. In the weekly export sales report, corn sales shows 10.0 mb slated for 2012/13. This is below the 13.3 mb that is needed to stay on pace with the USDA forecasts of 950 mb. Corn continues its climb post the monthly USDA supply/demand report with gains coming in the front months. I would expect this pattern to continue, with strength in the old crop coming from tighter than expected ending stocks and fund short-covering, while weakness will be seen in the new crop contracts as the trade is anticipating an increase in planted acres for 2013. The market shouldn't experience any sharp rallies as export demand remains weak overall until spring when weather becomes a major pricing influence.
STRATEGY & OUTLOOK
Producers are now 80 percent of 2012/13 crop and are also 40 percent sold of the 2013/14 crop. Re-owned 50 percent of the 2012/13 corn crop with July calls.
SOYBEANS - ANALYSIS - Soybeans closed the week 33 1/4 cents higher from last week. Last week, private exporters announced three sales totaling 615,000 mts of soybeans to China. In the weekly export sales report, soybean sales were 46.0 mb. This is above the 4.1 mb that is needed to stay on pace with the current USDA forecast of 1.345 bb. Private sales of soybeans to China is currently lifting soybean futures as early harvest in South America is revealing a slightly smaller than expected soybean crop. Also, shipping soybeans out of South America has become a major problem as soybeans are shipped out directly from the combine and not stored. This has created a backlog of nearly 45 days to move soybeans from the harvested areas to the shipping ports. China has returned as a U.S. soybean buyer with the intent to shift these purchases from new crop to old crop if the delays continue.
STRATEGY & OUTLOOK
Producers are 80 percent sold of the 2012/13 production and are 40 percent sold of 2013/14. Re-own 50 percent of 2012/13 production with July soybean calls if July futures hit $13.75.
WHEAT - ANALYSIS - For the week, Chicago wheat closed 11 1/2 cents lower; Kansas City wheat 7 1/2 cents lower and Minneapolis wheat 12 1/2 cents lower. Last week, exporters did not report any private sales. In the weekly export sales report, wheat sales were 14.3 mb, below the 15.8 mb needed each week to reach the USDA's forecast of 1.05 bb. Plains States reported that winter wheat crops continued to face declining January conditions due to the dire drought. 20 percent of the Kansas wheat crop was rated GD/EX in late January, down 4 percent from late December, while 8 percent of the Nebraska wheat crop was rated in the same category (down 14 percent) and just 3 percent of the South Dakota crop was rated GD/EX. The ongoing drought should provide support to wheat once wheat breaks dormancy. Until then, producers should be aware the U.S. dollar is sitting on major support and could begin to rally. If this occurs, grains and particularly wheat, could face additional selling from index funds.
STRATEGY & OUTLOOK
KC producers are 80 percent sold of the 2012/13 production. Producers are 50 percent sold of 2013/14 production.. MW wheat producers are 80 percent sold of 2012/13 production. Producers are 50 percent sold of 2013/14 production.
LIVE CATTLE - ANALYSIS - Live cattle ended the week $5.87 higher while feeder cattle ended $1.25 higher. Last week, cash trade developed in the South at $125, $2 higher compared with a week ago. In Nebraska, trade developed at $201, $4 higher when compared with last week. Cash traded higher and the futures rallied as well. The premium between the cash and the futures has been erased, leaving cattle futures on solid footing and in a position to rally. On the weekly charts, futures rallied off the weekly uptrend line. Winter weather conditions should give the market a boost and seasonal highs are not normally scored until March. Look for prices to work higher during February as supplies remain tight for cattle.
STRATEGY & OUTLOOK
Producers currently have no hedges in place. Feed costs should be covered in corn futures/options or cash product through July, 2013 when prices pulled back to support.
LEAN HOGS - ANALYSIS - Lean hogs closed the week $1.47 higher. The average Iowa-Minnesota hog weight for last week was estimated at 275.1 lbs versus 274.9 lbs previous week and 275.5 lbs last year. According to Bloomberg News, pork inventories in the U.S. rose 14 percent at the end of December from a year earlier as production increased, the government said. Warehouses held 554.4 million pounds of the meat, up from 484.5 million on Dec. 31, 2011, USDA said in a report. Inventories were down 0.8 percent from the end of November.
STRATEGY & OUTLOOK
Producers have sold 50 percent of February at $85.85.and 50 percent of April at $91.50. Sell 50 percent of June at $101.25. Feed costs should be covered in corn futures/options or cash product through December, 2012.
NEWS - From Reuters News, Bloomberg News, Dow Jones Newswires and Red River Farm Network.
According to new data from the Risk Management Agency, 12 states have loss ratios of at least 1.1 percent. That means crop losses are $1.10 for every dollar received in premiums for the 2012 crop year. The highest loss ratio state was Illinois at 2.36. To date, more than $12 billion in indemnities has been paid out to farmers.
The nation's largest dairy cooperative, Dairy Farmers of America, will pay nearly $159 million to settle an antitrust lawsuit. The class-action lawsuit alleged DFA and Dean Foods worked together to limit competition in the Southeast and control the prices paid to dairy farmers. Dean Foods previously reached a settlement in the case for $140 million. The case was scheduled to go to trial on Tuesday, but came to terms on the settlement arrangement. Despite the settlement, DFA admits no wrongdoing.
Monsanto and Brazilian farm groups have an agreement that ends a dispute over royalties on Roundup Ready soybeans. This deal also establishes rules for the introduction of second generation Intacta Roundup Ready 2 Pro soybean seed. Farm groups in Mato Grosso, which is Brazil's number one soybean producing state, refused to sign off on this agreement and will continue its fight in court.
Commodity Futures Trading Commissioner Jill Sommers plans to resign in the coming months. One of the two Republicans on the CFTC, Sommers has been in charge of the MF Global investigation. The commission is in the process of implementing the Dodd-Frank financial services reform act.
A U.S. farm boom showing few signs of a let-up isn't translating into more opportunities in one of the most robust areas of the economy. Farmers, ranchers and other agricultural managers will see the steepest decline of any employment category by 2020, losing a projected 96,000 jobs this decade out of 1.2 million positions, part of a broader trend toward less labor in the sector, according to the Bureau of Labor Statistics. The drop comes even as agricultural managers have the highest median wage of any of the top 20 declining categories, at more than $60,000 a year. Consolidation tells only part of the story. The number of U.S. farms, which fell by half in the three decades up to 1986, dropped by just 3.1 percent in the past quarter-century, according to USDA . About one- quarter have sales of less than $100,000 annually and don't need a fulltime manager, while larger farms are more easily overseen by one person, said David Anderson, an agricultural economist at Texas A&M University in College Station.
(Bloomberg) - Wheat sowing in Canada, set to be the world's third-largest shipper, will probably expand as much as 10 percent this year spurred by a rally in prices, according to the nation's wheat board. Area may rise 5 percent to 10 percent from 9.63 million hectares (23.8 million acres) last year, as growers switch to wheat from less profitable crops including oilseeds and rye, said Bruce Burnett, a weather and crop surveillance specialist at the Canadian Wheat Board, which monopolized the country's exports for 70 years until a new law was enforced in 2012.
In the semi-annual cattle inventory report, USDA reported all cattle and calves in the United States as of January 1, 2013 totaled 89.3 million head, 2 percent below the 90.8 million on Jan. 1, 2012. This is the lowest Jan. 1 inventory of all cattle and calves since the 88.1 million on hand in 1952. All cows and heifers that have calved, at 38.5 million, were down 2 percent from the 39.4 million on Jan. 1, 2012. This is the lowest Jan. 1 inventory of all cows and heifers that have calved since the 36.8 million head in 1941.
Brian Hoops is president and senior market analyst of Midwest Market Solutions Inc. Brian can frequently be heard on radio stations across the country including The Linder Farm Network and the Red River Farm Network. Brian can also be heard daily on the DTN doing his own grain market commentary program as well as the Minneapolis Grain Exchange marketing hotline and the University of Illinois commodity wrap up program. Brian also writes several newsletters that are published throughout the Plains and the Midwest, covering Iowa, Minnesota, North and South Dakota, Nebraska, Kansas, Montana, Wyoming and Idaho. Brian has been quoted in the Wall Street Journal, Bloomberg, Reuters and Dow Jones newswires and U.S. Farm Report.
Midwest Market Solutions is the leading edge in commodity marketing and trading and is widely recognized as one of the top marketing advisory and brokerage firms in America. Midwest Market Solutions was established in March 2002 and is a full-service commodity brokerage and marketing advisory service, clearing through R.J. O'Brien. The firm specializes in individual trading strategies for the investor, personalized marketing programs for individual farm operations as well as full-service and discount broker services. The firm is located in Springfield, Mo., with a branch office in Yankton, S.D., and is committed to providing clients with the best information and service possible.
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