Evening Report -- Advice (VIP) -- February 20, 2013

February 20, 2013 08:47 AM

Livestock producers were advised in the "Noon Market Snapshot" to take profits on the 25% 1st-qtr. feed coverage in March corn and March soybean meal futures. With March corn and soybean meal futures entering the delivery process next Monday, it was time to exit the 1st-qtr. coverage. Profits totaled $37.40 for the meal coverage and 10 cents for the corn coverage.

Livestock producers should maintain the 25% 2nd-qtr. Coverage in long July corn and soybean meal futures for now.



FIRST-HALF FEBRUARY PRICES SUGGEST SIMILAR CROP INSURANCE PROTECTION AS 2012... Based on settlement prices during the first half of February, the projected price for corn will be $5.73 corn ($5.68 in 2012) and $13.01 for soybeans ($12.55 in 2012), giving a soybean-to-corn price ratio of 2.27 (2.2 in 2012). Projected prices are used to set crop insurance guarantees and are based on settlement prices of December corn and November soybeans for the entire month of February.

University of Illinois ag economist Gary Schnitkey says settlement prices during the first half of February suggests that guaranteed crop insurance prices will provide "roughly the same risk protection in 2013 as they did in 2012." Click here for more.



RACTOPAMINE DEEMED SAFE, YET SPARKING TRADE ISSUES... News China will follow Russia's lead in demanding that U.S. meat shipments be certified ractopamine-free is raising additional concerns about export demand. Such measures by China could come by March 1, according to reports. These developments have raised questions regarding why the feed additive is under scrutiny, especially since regulations are already in place from the U.S. Food and Drug Administration (FDA) regarding its use in feed and the United Nations (Codex) food safety body approves its use. Click here for more details on the feed additive.




CORN: Hedgers are 100% sold in the cash market, with cash-only marketers 75% priced on 2012-crop. With old-crop futures at a level that has attracted fresh buying in the past, wait for an overdue corrective bounce to get current with recommended sales levels. No 2013-crop cash sales have been advised. Be prepared to make cash sales and/or enter hedge coverage on an overdue corrective rebound or indications of a prolonged price decline.

BEANS: Hedgers are 100% sold in the cash market, with cash-only marketers 75% priced on 2012-crop. Use the strong price recovery this week to get current with advised old-crop sales. Remain patient on 2013-crop sales for now, but be prepared to make initial sales either via cash forward contract sales or a hedge on a bounce to $13.50 in November soybean futures.

WHEAT: Hedgers and cash-only marketers have 75% of 2012-crop sold in the cash market. Wait to get current with advised sales as recent price pressure has been overdone. Be prepared to make initial 2013-crop sales on an extended price recovery. We don't want to get too aggressive with old- or new-crop sales at this stage as we still have HRW crop concerns, although there is a hint of a shift in weather pattern after recent precip in the Plains.

COTTON: Hedgers and cash-only marketers have 50% of expected 2012-crop production sold in the cash market. Be prepared to increase 2012-crop sales and to make initial 2013-crop sales if the market signals a near-term high has been posted. So far, the price runup has not curtailed export demand.

CATTLE: Demand concerns continue to trump tight supplies, which means there's more near-term downside risk until the market signals prices have fallen far enough. While there's more downside risk, fed cattle producers should continue to carry all risk in the cash market as the long-term outlook remains bullish. The sharp price break will eventually present an opportunity for feeder cattle buyers to establish long coverage.

HOGS: Hog producers should continue to carry risk in the cash market as the downside is overdone. With that said, there could be more near-term price pressure as traders are growing increasingly concerned with demand.

FEED: Profits should be claimed on the 25% 1st-qtr. corn coverage in March corn futures and the 25% 1st-qtr protein coverage in March soybean meal futures. Maintain coverage on 25% of 2nd-qtr. Corn needs in long July corn futures at $6.78 3/4 and 25% of 2nd-qtr. protein needs in long July soybean meal futures at $388.00.


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