Wheat, corn and soybeans all close week lower

Wheat
For the week, Chicago wheat closed $.59 1/2 lower; Kansas City wheat $.56 lower and Minneapolis wheat $.52 1/2 lower.
Last week, there were no private export sales to report, however Egypt purchased 235,000 mts of U.S., Australian and French wheat with 115,000 mts from the U.S. Iraq also purchased 250,000 mts of wheat from the U.S., Australia and the Ukraine.
Good to excellent ratings for the winter wheat crop are only 45 percent g/e, down 1 percent from last week, with 16 percent p/vp. This is the worst rated winter wheat crop in the last 20 years. Last year’s crop was rated 64 percent g/e. Kansas is only rated 38 percent g/e with Oklahoma only 31 percent.

The weekly export sales report showed net sales of 832,000 MT for the 2010/11 marketing year were up 47 percent from the previous week and 57 percent from the prior 4-week average.
Increases were primarily for Japan (163,200 MT, including 40,000 MT switched from unknown destinations), Mexico (113,300 MT), unknown destinations (110,000 MT), the Philippines (102,000 MT), Peru (70,000 MT), and Sri Lanka (55,000 MT).

This year’s exports stand at 766 mb vs. the USDA forecast of 1.250 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 have started making sales/hedges for the 2011/12 marketing year.
Corn
Corn closed the week $.56 3/4 lower. Corn failed at old resistance and closed sharply lower for the week.
There were no private export sales to report.
Producers in the eastern and western cornbelt are wrapping up fall field work and any late harvest activity. Basis levels should now improve as farmers will be tight fisted with their remaining inventory until after the January crop report.
The weekly export sales report showed net sales of 573,600 MT were up 24 percent from the previous week and 9 percent from the prior 4-week average.
Increases reported for Japan (272,900 MT, including 110,700 MT switched from unknown destinations), Egypt (181,300 MT, including 60,000 MT switched from unknown destinations), South Korea (115,400 MT, including 57,800 MT switched from unknown destinations), Taiwan (73,300 MT, including 58,000 MT switched from unknown destinations), and Mexico (66,700 MT).
This year’s export profile is now at 817.2 mb vs. the USDA forecast of 1.950 bb.
The 50 percent retracement on the weekly continuation charts occurs at $5.26, a likely destination for December corn.
Strategy & outlook
Producers have sold/hedged a portion of the 2010 crop and re-owned cash sales with call options.
Don’t become too aggressive marketing the 2011 crop until more is known about the 2011 marketing year.
Soybeans
Soybeans closed the week $.15 lower from last week.
Last week, private exporters reported sales of 440,000 mts of soybeans to China, 112,000 mts of soybeans to Mexico and 30,000 mts bean oil to China.
With harvest virtually completed, basis levels will likely improve as the cash markets will need to bid for a steady supply of product.
The weekly export sales report showed net sales of 809,800 MT were down 49 percent from the previous week and 52 percent from the prior 4-week average.
The primary destinations were China (620,900 MT, including 57,000 MT switched from unknown destinations and decreases of 5,800 MT), Japan (85,100 MT, including 36,000 MT switched from unknown destinations), Mexico (67,000 MT), Tunisia (56,700 MT), and Italy (16,200 MT, including 18,000 MT switched from unknown destinations).
Net sales of 120,000 MT for delivery in 2011/12 were for China. This year’s export pace stands at 1.093 bb vs. the USDA forecast of 1.570 bb.
Strategy & outlook
Producers have sold/hedged a portion of the 2010 crop and re-owned cash sales with call options.
Don’t become too aggressive with marketing the 2011 crop until more is known about the 2011 marketing year.
Live cattle
Live cattle ended the week $85 higher while feeder cattle ended $3.62 higher on a rebound in the cash markets.
Cash cattle trade rebounded as the showlists were smaller this week and packers were forced to bid the cash market higher.
There is expected to be an increase in heavier cattle over the next couple of weeks, which could limit the upside for cash trade as packers will not need to raise cash bids through the end of November.
Cash trade was $98.00 in the South, steady compared to the previous week and $156 to $157 in the North, $2.00 to $3.00 higher compared to the previous week.
USDA reported last week’s beef export sales at 12,700 tonnes, up from 10,700 tonnes previous week. Exports year-to-date up 32 percent.
Strategy & outlook
Producers should have price protection through a combination of options and hedges through the fourth quarter of 2010.
The downside is likely limited to the tight supplies, so use price breaks as a way to cover hedges.
Feed costs should be covered in corn futures or cash product through the growing season.
Lean hogs
Lean hogs closed the week $2.02 higher.
Futures ended the week higher as futures rebounded off of technical support.
The average Iowa-Minnesota hog weight for last week was estimated at 275.9 lbs, record high for this time of year, versus 276.0 lbs previous week and 271.3 lbs last year. These weights must come down before values will find a bottom and sustain a rally.
I would be careful of pressing the downside as seasonals have turned higher, downside technical targets have been reached and commercials have been strong buyers.
Strategy & outlook
Producers should now be hedged or covered the downside with put options if producers want to leave the upside open.
Producers should be 100 percent covered through the fourth quarters of 2010 with either futures or options or a combination of both. Producers have covered their meal needs through fall. Producers also have covered their corn needs through the growing season.
Wide basis levels will make owning cash supplies attractive.