Tri-State Neighbor: South Dakota Farm Newspaper

Corn closed the week 7.25 cents higher. The weekly export sales report showed net sales of 551,400 metric tons (MT) were down 10 percent from the previous week and 6 percent from the prior four-week average.

For the marketing year, corn sales remain 54 percent behind last year's demand pace. In fact, exports are the slowest since 2002 and 15 percent below the five-year average. Despite the slow exports, the economy and the crude oil market are as much as price indicators for the corn market as the traditional fundamentals.

Traditional fundamentals are bearish, such as the slow demand trends, slowing ethanol consumption and increased farmer selling after the first of the year; however a rally in the economy and crude oil could lift the corn market as traders will cover shorts. Technically, corn rallied off of strong weekly support and must maintain closes above the $3.73 area on the weekly charts.

Recommendations:

Hedgers: Hedged 40 percent of 2008 production at $7.30. Long $3.60 March puts on 60 percent of 2008 production. Hedge 10 percent at $4.35 March. Hedge 10 percent of 2009 production at $4.75 December.

Cash Marketers: Sold 40 percent of 2008 at $6.70. Sell 10 percent at $4.35 March. Sell 10 percent of 2009 production at $4.75 December.

Traders: Stand aside.

Soybeans:

Soybeans closed the week 14.25 cents higher. The weekly export sales report showed net sales of 584,800 metric tons (MT)

were down 35 percent from the previous week and 18 percent from the prior four-week average.

Increases reported for China (374,400 MT, including 167,000 MT switched from unknown destinations), the Netherlands (129,800 MT, including 120,000 MT switched from unknown destinations), Indonesia (114,500 MT), Egypt (60,000 MT), and Taiwan (59,600 MT, including 56,000 MT switched from China), were partially offset by decreases for unknown destinations (232,000 MT) and Morocco (23,800 MT). Net sales of 6,100 MT for 2009-10 delivery were for Japan.

The annual sales pace has slowed compared to last year and is now 4 percent behind last year's strong demand pace. The demand trends should remain strong throughout the winter as the United States is the only port of origin for the world's soy needs. Technically, the March chart shows the downtrend has been broken, although weekly charts continue to indicate the downtrend is intact.

Weather in South America remains slightly drier than hoped for, although there are chances of rain in the long-term forecasts. The crude oil market continues to remain soft, despite an expected production cut by OPEC. Crude oil will remain a leading indicator for price direction for the soy complex.

Recommendations:

Hedgers: Hedged 50 percent of 2008 at $15.20. Long March 1,400 calls on 25 percent of 2008 production. Long $8.60 March soybean puts on 50 percent of 2008 production.

Cash Marketers: Sold 50 percent of 2008 at $13.80.

Traders: Stand aside.

Cattle:

Live cattle ended the week $2.77 higher while feeder cattle ended $6.32 higher. The cash trade occurred last week at higher money as tighter showlists enabled the feedlots to win the battle of the cash market. Cash traded in the North at $134 to $135; $1 to $3 higher compared to the previous week. Live trade in Kansas and Texas occurred at $85; steady compared to the previous week. Cutout values rallied to over $150 in the Choice before finding resistance from consumers and have fallen quickly into support of $140.

The USDA on Friday reported weekly beef exports for the 2008 marketing year were a negative 6,200 tonnes due to cancellations by South Korea, Vietnam, Japan and Russia. However, the week's export sales for the 2009 marketing year were 13,000 tonnes. Technically, cattle futures remain in a solid downtrend.

Recommendations:

Hedgers: Hedged 50 percent of December marketings at $107.20. Covered December hedges at $92.70. Buy 100 percent of February marketings with $90 February puts if February rallies to $90.

Feed Costs: Producers need to have coverage in the cash market or at the money March corn call options.

Wheat:

For the week, Chicago wheat closed 50.25 cents higher; Kansas City wheat 52.75 cents higher and Minneapolis wheat 21.25 cents higher. The weekly export sales report showed net sales of 253,600 metric tons (MT) were down 3 percent from the previous week and 12 percent from the prior four-week average.

Increases reported for Mexico (58,600 MT), Egypt (57,800 MT), Taiwan (56,000 MT), Japan (53,700 MT), Guatemala (30,900 MT, including 30,200 MT switched from unknown destinations), Yemen (28,000 MT), and South Korea (23,800 MT), were partially offset by decreases for unknown destinations (50,800 MT) and Spain (40,000 MT).

This year's export performance pales in comparison to last year's sales. This year's U.S. wheat sales stand at 74 percent compared to last year's strong sale performance. Wheat sales continue to lag as Egypt purchased 100,000 metric tons of Russian wheat last week, Pakistan purchased 490,000 metric tons of Russian wheat and Iraq will purchase 300,000 metric tons of wheat, also likely from the Black Sea region.

With the soft demand trends, don't expect a bull market as there is plenty of competing wheat out there for the world's export business. Technically, despite the poor export performance, wheat has broken its downtrend. The broken downtrend has produced short-covering which should lead to a test of key resistance at the $7.45 area of the Chicago contract.

Recommendations:

Hedgers: Hedged 55 percent of 2008 production at $11.05 Kansas City and 30 percent of September Minneapolis $11.90. Long $5.50 March KC puts and/or $5.90 Minneapolis March puts on 30 percent of 2008 production.

Cash Marketers: Sold 55 percent of 2008 production at $8.50 Kansas City. Sold 30 percent of 2008 spring wheat at $10.90 Minneapolis.

Traders: Stand aside.

Hogs:

Lean hogs closed the week $5.67 lower. Cash market weakness prevailed last week, pulling futures lower as well. The cash hog market has remained soft under heavy supplies of hogs. During the winter months, short-covering rallies due to adverse weather should be sold as the deferred contracts have a large premium over the cash.

The average Iowa-Minnesota hog weight for last week at 267.1 pounds versus 268.3 pounds previous week and 268.5 pounds last year. Lean hogs should continue to struggle with large deferred premiums in the futures market built into prices to incentivize producers to continue to feed out supply. However, as expiration nears, this premium is normally removed from prices.

Recommendations:

Hedgers: Hedged 100 percent of fall marketings at $75.85 December. Lifted hedges at $56.85.

Feed Costs: Producers need to have coverage through harvest in the cash market or at the money March corn and meal call options.

Traders: Stand aside.

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