Corn – May ’11 corn traded lower early today then rebounded but failed to stay in positive territory during the day session. Soybeans were by far the weakest link of all the grains today which helped the corn back off. Today was a very low volume trade day so to me that means don’t read into it. The market is consolidating at this level after last week’s rebound. I’m still of the opinion that the market wants to make another attempt toward the $7.42 area.
I have a cycle low projection for tomorrow in the May ’11 contract and we also still have the buy signal on the weekly chart that needs attention. Now is a great time to cover the upside of any bushels that you need whether it is feed or re-ownership of sales. The March 31st report is just around the corner and I’m sure it will have a surprise of some type in it. The best thing to do before the report is buy an option in the direction of your risk. For example if you need feed but you haven’t purchased it yet then buy a call. Even if you end up not needing it, it can make the morning of the 31st a lot less stressful knowing you are in control.
Bottom Line – I looked for an early low and late high today but the high failed to come late in the day. Tomorrow looks like an early low and late high type trade day once again. I think this corn market is just looking for an excuse to move higher.
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Meal – I’m still of the opinion that the May ’11 meal contract is just taking a breather. We sold off today but it didn’t do any damage to the charts based on what I look at. We can still get down to the $352-355 area and still be searching for buyers. We are just around the corner from volatility in the market place; yes we probably haven’t seen anything yet. If you what to know what I’m talking about take a look at a Cotton chart and that should give a good example. I don’t think we will be as volatile as cotton because it has fundamental reasons wrapped up in its gyration but we could see plenty of ups and downs in the months to come.
Bottom Line – Based on today’s action I’m looking for an early low tomorrow.
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Hogs – Apr ‘11 was the only futures month that didn’t close lower. As I said yesterday the April contract looks like it found a bottom as we move into contract expiration. The June ’11 contract had the big buy signal on the weekly chart last week and I’m still a believer in that signal. The June contract is going to have to make its way through the $102.32 high we had prior to the tragic events in Japan.
The June contract fended off a key reversal on the daily charts but closing right at yesterday’s low in the market. We could see some more downside in the very short-term but the dip and recovery that we had over the last couple of weeks was quite impressive. I’m looking for breaks in the market to be supported as we move forward. Again, we need to close above the $102.32 resistance level before we can get too excited about a test of contract highs.
Very similar activity in the cash market today, carcass was nearly unchanged and live basis was up $1.50. My assumption is the packer is trying to maintain the current carcass weighted average price to keep a lid formula based pigs they purchase. We need more negotiated pigs folks! We are giving up WAY to much control to the packers. Out of 400,000+ hogs killed on a daily basis we are negotiating around 4-6% on the open market to establish the prices for the other 94-96%. Hmmmm, what is wrong with this picture?
If you know of anyone who makes hog sales on a negotiated basis, please visit with them and ask them about the pros and cons of open market marketing of hogs. I know the folks that I work with are working their butts off to try and keep the negotiated price as close to the actual market as they can but there is very little leverage. I’m not saying get out the pitch forks and torches or anything but low volume trade is not good for price discovery!!
Think of it this way… you own a farm out in the country but the only bidders you have are two guys from the city that don’t care about the buildings and other assets that may be on the property. The only thing they care about is having to do all of that mowing! If you only have two people bidding on the home and see no value in the assets other than the house, you are not going to get a very good price if you NEED to sell within a small window of time. You throw a farmer in the mix that understands the value or someone who will creatively use the assets then you will have a more realistic market price or negotiation of price. If you throw several farmers in the mix and you will have an even better assessment of value. Just look at farmland prices today!!
Well, off the soap box for today. It frustrates me and many others that I know when we are essentially handing over control of our lively-hood to those that can easily manipulate the market if they so choose. I’m not saying all packers are dirty and devious I’m saying they have access to a lot of different methods to maximize the returns on their business. Some of these methods of profit are much easier to come by than what they should be. This is the nature of business and capitalism, you take it or someone else will and the packers are taking it because it is being given to them on a silver platter.
Stick to business and make your marketing decisions based on your profits and life will be much easier!
Bottom Line – I’m looking for an early low in the JUNE ’11 hog contract for tomorrow.
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Hurley & Associates believes positions are unique to each person’s risk bearing ability; marketing strategy; and crop conditions, therefore we give no blanket recommendations. The risk of loss in trading commodities can be substantial, therefore, carefully consider whether such trading is suitable for you in light of your financial condition. NFA Rules require us to advise you that past performance is not indicative of future results, and there is no guarantee that your trading experience will be similar to the past performance.
