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The Lean Hog Perspective

RSS By: Jeremy Knutson

This lean hog and feed commentary contains thoughts from Jeremy Knutson, a commodity broker with Hurley & Associates.

Hog & Corn Comments - 01-07-09 - Everything takes a breather today.

Jan 07, 2009

Hog Comments - 01-07-09 - Everything takes a breather today.

Jeremy Knutson
1-877-212-2564
jknutson@hurleyandassociates.com

CORN
Open - $4.24 1/4, High - $4.27, Low - $4.13 1/4, Close - $4.16 1/2 DOWN $.11.

March '09 corn took back most of the gains we had yesterday and fell more than I expected.  Crude Oil was under pressure today because of larger supply than what was expected and traded close to $5.00 a barrel lower throughout the day.  The Dow Jones was around 150.00 points lower or worse though most of the day as well; the only positive item for grain prices was the U.S. Dollar Index down around 100 points. 

March '09 corn had an inside day today meaning today's highs and lows were inside of yesterdays range of highs and lows.  The general thought of an inside day is that the market will move in the direction of a breakout of the inside day.  I mean if the market makes new highs tomorrow above today's high of $4.27 then we should see some follow through to the upside, conversely if the market makes new lows below today's low of $4.14 1/4 then we could see some acceleration to the downside.    

Bottom line - It feels like we could have more follow through selling tomorrow but we are up against some intra-day support around $4.12 1/4 to $4.15 1/2.  If the market doesn't hold these levels then we could drop to $4.02 for a test of that level but I don't think we will get down that far.  I look for lower trade early tonight (maybe make new lows) and then firm as the evening progresses and probably test $4.17 1/2-.18 1/2 and we also left a gap at $4.23 that needs to be filled at some point.  I am not looking for a collapse tomorrow but I will go with the direction of the breakout of either today's high or low, my gut tells me we will trade mixed to higher tomorrow but the highs will be later in the day.

 

MEAL
Open - $300.40, High - $303.50, Low - $295.20, Close - $295.50 DOWN $5.50.

March '09 meal moved lower today in line with most of the Ag complex.  I had support today for March '09 corn at $300.00 and $298.60 which we went right though and finally bottomed out at $295.20.  I said yesterday that I have a hard time getting bullish at these levels unless we close above $305.70 which we have failed to do.  We are also back below the $300.20 I talked about the past couple of days.  The market has only close above $300.20 once (yesterday) in the last seven trading days (today included) but has traded above this level every day.  Hmmmm.

As I have mentioned before, we had a warning signal on the weekly chart last week and I am still sticking to my thought of caution at these levels unless we close above $305.70 for a couple of days.

Bottom line -  I think we will open lower tonight and then firm as the evening progresses.  We had a big selloff in Crude Oil while the Ag markets were closing and provided some pressure to the Ag commodities.  From a longer-term view it feels like the meal market looks top heavy and that we could see a retracement back toward $271.40 IF we do not close above $305.70.  Again, I am not bullish up here.

 

HOGS
Open - $64.50, High - $65.30, Low - $63.35, Close - $63.55 DOWN $.40. 

I said yesterday that I thought we would have an early high and a late low today and that is how the trade reacted today.  The high came within the first few minutes of trade today during the 9:05-13:00 trade hours and the low was made in the second hour of trade.  I am still not bearish Feb '09 hogs here although I think they could reach $63.35 to $62.60 before we catch some support.

As I said yesterday we had a lot of the $2.54 higher cutout number factored in to yesterday's trade so this morning was a trap for those that wanted to "get in on the action" of better fundamental news.   The cutout came in $1.13 lower today which helped the market selloff like it did.  

Bottom line - I look for the Feb '09 contract to be weaker early tonight and even tomorrow but like I said above I believe we will catch some support around $62.60 and then hold for a bit.  I look for lower trade tomorrow in the early going and then firm as the day progresses.  Tomorrow's trade will give us some good detail on whether the Feb '09 will reach the $67.05 area that I have been looking for.  

 

NW_LS500
Des Moines, IA     Wed, Jan 07, 2009     USDA Market News

USDA NATIONAL CARLOT PORK REPORT as of:  3:00 P.M.
Purchases equated to FOB Omaha Basis.

Compared to Tuesday's Close:        Fresh loins weak to 4.00 lower;
butts steady to 1.00 lower; sknd hams 17-20 lbs firm, 20-23 lbs steady, 23-27
lbs not tested; sdls bellies steady to weak; lean trimmings not tested. Trading
slow to moderate, with light to moderate demand and mostly moderate offerings.



-----------------------------------------------------------------
Loads PORK CUTS          :            111.25
Loads TRIM/PROCESS PORK  :
-----------------------------------------------------------------

USDA ESTIMATED PORK CARCASS CUTOUT
Based on FOB Omaha carlot pork prices and industry yields.

           Calculations for a 200 lb Pork Carcass
        53-54% lean, 0.65"-0.80" backfat at last rib
-----------------------------------------------------------------------
         Total                   Today's Primal Cutout Values
Date     Loads      Carcass    Loin    Butt   Pic     Rib   Ham  Belly
-----------------------------------------------------------------------
01/07       111.3      57.03   74.76   55.98  43.38  94.51 43.80  66.39
Change :               -1.13   -1.99   -1.60  -0.02   1.44 -1.51  -1.07
-----------------------------------------------------------------------

NW_LS831
Des Moines, IA     Wed, Jan 07, 2009     USDA-IA Dept of Ag Market News

National Direct Hog Price Comparison

--------------------------------------------------------------------------
                :  National   :    Iowa     :   Western   :   Eastern
                :             :  Minnesota  :  Cornbelt   :  Cornbelt
--------------------------------------------------------------------------
   Base Price is the price from which no discounts are subtracted and
   no premiums are added.
--------------------------------------------------------------------------
BARROWS & GILTS :  1.26 hgr   :  1.60 hgr   :  1.45 hgr   :   .96 hgr
Negotiated      :             :             :             :
CARCASS BASIS   : 41.00-57.43 : 42.00-57.43 : 42.00-57.43 : 41.00-55.41
185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg
Plant Delivered :    53.76    :    54.86    :    54.82    :    51.67
--------------------------------------------------------------------------
Head Count      :   28,723    :   14,640    :   19,122    :    8,981
==========================================================================

 

 

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.


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