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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 - 02-26-09 - Hogs got stuck in the mud today.

Feb 26, 2009

Hog Comments - 02-26-09 - Hogs got stuck in the mud today.

If you have questions, comments or suggestions, contact me at 1-877-212-2564 or email me at jknutson@hurleyandassociates.comTo read what I was thinking at the highs and lows of the market go to  www.leanhog.net to view my archived posts.

CORN - May '09 Electronic
Open - $3.71 1/4, High - $3.80 1/2, Low - $3.65 3/4 Close - $3.70 1/2 Down $.01 3/4
As a review from yesterday I said "I am looking for a retracement lower tomorrow with a test of the $3.68 1/2 to $3.66 area.  The daily chart looks somewhat impressive after today's activity so if we do not retrace tomorrow and close firmer again I think we may be starting a leg higher in the market.  I think we will make an early high and late low tonight.  Support will be $3.68 1/2 to $3.66 and resistance will be $3.77 3/4 and then $3.80 however I am not confident that we will get that high."

May '09 corn hit both ends of my range from yesterday, the high was $3.80 1/2 just a 1/2 higher than my number and the low was $3.65 3/4 only a 1/4 below my number.  I sold out of some long positions at $3.76 which were put on the other day at $3.59 1/2.  I am now back down to around 25% of feed corn covered and I look to re-establish my coverage around $3.60 if we can get that low.  If May '09 closes above today's high of $3.80 1/2 then I may change my mind but for now I am going to make the market prove itself to me.

Bottom line - I expect the May '09 contract to open slightly higher tonight and find early resistance.  I think we have another shot at testing today's low either tonight or tomorrow.  Sustained trade below $3.70 tonight/tomorrow will trigger a target of $3.59 1/4.  Support will be $3.65 3/4 and then $3.59 1/4 and resistance will be $3.73 to $3.75 and then ultimately $3.80 1/2.  I am expecting another day of weak trade tomorrow however I am still not bearish longer-term. 

 

MEAL - May '09 Electronic
Open - $267.40, High - $270.50, Low - $259.70, Close - $263.20 Down $4.20
As a review from yesterday I said "I have a cycle low in place for tomorrow and also a longer-term buy signal at $266.60 on a stop order if the market moves below today's low and turns around and moves higher from there.  The protective risk management sell stop would be $1.00 below the most recent low. I am looking for the early low and late high today which didn't happen so I am carrying that thought over into tomorrow.  Support will be $265.90 then $265.30 and resistance will be $271.60 to $272.90."  

As mentioned above, we will have a longer-term buy signal ON A STOP at $266.60 if and only if the market makes its way back up to these levels.  The intraday chart suggests we have a chance to make this signal during tomorrow's trade.  The evening trade has the market making another dip lower before we take a stab higher.  

Bottom line - I believe support will be at $259.70 with a good chance of touching this level and resistance will be $265.10 to $266.40 but if the aforementioned signal is good then we could see a challenge of today's high of $270.50.  I was expecting an early low and late high today which we didn't get but the third time is a charm right?  My expectation is for an early low and late high tomorrow (I know if you say it long enough it will happen eventually but that isn't my intent) although the meal market has been challenging me this week.  I still own my $280.00 April call options and have the downside open, if the market drops enough I will roll my options down to a lower strike price.

HOGS - April '09 GLOBEX
Open - $59.35, High - $59.50, Low - $58.60, Close - $58.975 Down $.125
Reviewing yesterday's comments I said "cash was weaker again today with a lot of packers bought up into next week.  The cutout was up $.41 today and cash was lower again so that means the packers gained more of their profit margin back today.  I am expecting follow through on this rally into tomorrow on the coattails of higher product tonight.  I think we can see the April '09 contract reach $60.425 tomorrow if the follow through is of the force I think it could be.  I look for the hog market to firm as the day moves forward tomorrow.  Support will be $58.75 to $58.50 and resistance will be $59.60 to $60.425 of which I think we could touch."

Reviewing my comments I guess I should have gone with my first level of resistance at $59.60 considering the high today was $59.50.  I was in range on the support side of the equation but not accurate in thinking we would firm as the day moved forward.  I think today was just a corrective/slow down day because it didn't do anything damaging to the charts.  We will need to close below $58.05 in the April or $70.52 in the June contract.  There are levels of support slightly above the respective numbers but these are my line in the sand values.

Bottom line - I am looking for April to continue lower tonight and make and early low and possibly test $58.35 but the market had a hard time moving lower today.  I am still on board with higher hog prices to come and I would like to see us close at $59.00 or higher tomorrow for a continued setup on the weekly chart.  Support tomorrow is $58.32 to $58.05 for April and $70.80 to $70.53 in June.  Resistance for April '09 is $59.15 to $59.50 and then up to $61.00 although it is unlikely to happen.  Resistance for the June '09 contract is $71.60 to $72.00 and then all the way up to $73.50 which is unlikely tomorrow.

 

NW_LS500
Des Moines, IA     Thu, Feb 26, 2009     USDA Market News

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

Compared to Wednesday's Close:      Fresh loins generally steady;
butts steady to 1.00 lower; sknd hams 17-23 lbs not tested, 23-27 lbs weak in
a light test; sdls bellies 14-16 lbs steady; lean trimmings not tested. Trading
slow to moderate, with light to moderate demand and mostly moderate offerings.



-----------------------------------------------------------------
Loads PORK CUTS          :              86.5
Loads TRIM/PROCESS PORK  :               3.0
-----------------------------------------------------------------

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
-----------------------------------------------------------------------
02/26        89.5      56.57   71.97   60.91  40.06  97.15 40.65  71.26
Change :                0.14    1.50    0.72  -0.53   0.44 -0.61    unc
-----------------------------------------------------------------------

NW_LS831
Des Moines, IA     Thu, Feb 26, 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 :   .10 lwr   :   .63 hgr   :   .49 hgr   :  1.12 lwr
Negotiated      :             :             :             :
CARCASS BASIS   : 44.50-54.05 : 47.00-54.05 : 47.00-54.05 : 44.50-54.00
185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg
Plant Delivered :    52.14    :    52.70    :    52.77    :    51.05
--------------------------------------------------------------------------
Head Count      :   20,873    :   10,336    :   13,206    :    7,667
==========================================================================

 

 

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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