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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 - 03-11-09 - Hogs respond to yesterday's higher cutout.

Mar 11, 2009

Hog Comments - 03-11-09 - Hogs respond to yesterday's higher cutout.

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 - $3.74 1/2, High - $3.81, Low - $3.62, Close - $3.64 1/2 Down $.11

Reviewing yesterday's comments I said "I am still looking for a place to buy May '09 corn against $3.60 put options as the market didn't get to my target levels over the past couple of days.  We have now traded substantially above the downtrend line in the May '09 contract and I look for a close above $3.68 for a couple of days before getting extremely excited about a major rally.  Support for tomorrow is $3.74 $3.71 3/4, $3.69 and resistance should be $3.81 1/4 and then $3.84.  The market created a sell signal at $3.79 1/2 in the May '09 contract today with a protective buy stop at $3.85."

As stated above the $3.79 1/2 sell signal in May '09 corn was quiet good.  I have been looking to purchase futures against $3.60 puts for the last several sessions but we haven't gotten to an area where I am comfortable putting them on.  My resistance number at $3.81 1/4 for today was good within a 1/4 cent but I was off on my support levels.  I had orders in at $3.64 this morning but then moved them down to $3.58 to see if we could touch it but I really wanted to see the market close today before getting long futures.  It is still my intent to get ownership in the May '09 contract but I plan to buy below today's closing price.

Bottom line - The May '09 futures settled at $3.64 1/2 which is 1/4 cent above the 50% retracement level from our most recent low to our most recent high.  This area should provide support and if it doesn't we should see $3.59 1/2, $3.58 and $3.55 1/2.  I am looking for more weakness in the overnight and early day session tomorrow.  I expect a test of $3.59 1/2 at some point between tonight and tomorrow's close.  Support for May '09 corn is $3.62, $3.59 1/2 and $3.58.  Resistance is $3.66 3/4, $369 1/4 and $3.71 1/2.  I expect an early low and a late high tomorrow.

 

MEAL - May '09 Electronic
Open - $271.60, High - $276.00, Low - $268.20, Close - $269.50 Down $1.80
Reviewing yesterday's comments I said "I am looking for tonight/tomorrow's trade to open on weaker tone and test support at $269.20 to $268.00 before finding support.  As I said above we need to see the market continue to close above $270.50 before I think we can make a bigger move higher.  If you don't have upside protection in place I would make sure you visit with someone who can help you with this need.  Support for tomorrow is $269.20, $268.00 then $264.40 and resistance is $272.30 and $273.90."

Support for May '09 meal was $.20 away from my lowest support level from yesterday and the resistance point was under estimated by $2.10.  I sold futures at $274.40 against my $280.00 call options today because they expire on Friday of next week.  My intent was to protect the equity I have in this call option so it doesn't dwindle into next week.  Now the call was out of the money so the equity was all time value however I didn't like the way the market looked therefore I sold the futures and missed taking profit by $.10 today as I had an order to exit the short futures at $268.10.

Bottom line - I am looking for continued weakness in May '09 meal tonight/tomorrow but I think we will see an early low and late high.  We are having a tough time closing above $271.00 to get anything going to the upside.  Support for May '09 meal should be $268.20, $267.20 and then $265.10.  Resistance should be $271.20, $272.10 and then $273.00.  I expect early lows and late highs tomorrow.

 

HOGS - June '09 GLOBEX
Open - $72.05, High - $72.65, Low - $71.70, Close - $72.40 Up $.70
As a review, yesterday I said "I am looking for continued downside tomorrow with pressure more than likely mounting.  We closed below my support area of $71.90 today and if we continue to close below it we should test $69.525 in short order.  If we test and close below $69.52 then ouch, another leg lower is possible.  Support for tomorrow is $71.35 then $69.525 and resistance is $72.425 then $72.62 then today's high of $73.25.  I expect a weak day of trade tomorrow with the majority of negativity coming early in the day as the charts look like we could find support later in the session. "

June '09 hogs didn't get to my support number of $71.35 today but it did reach my second resistance point of $72.62 ($72.67 was the high) which I sold against.  I added to my short position today as I see this bounce as a gift.  My work from 2000 to 2008 shows that June futures decline 67% of the time from March 15th to April 1st on average of $2.83 cwt and the other 33% of the time they increase on average of $3.02 cwt.  

Bottom line - with packer margins still in the red I continue to have a negative bias toward the market because today's action didn't tell me much from a chart perspective.  We closed back above the $71.90 number I spoke of yesterday so we need to continue to watch this level to give us further direction.  Cutout was up $.98 today and it was up $.82 yesterday so we've had back to back days of higher cutout numbers which will be psychologically supportive to the market.  I look for early strength in the market based off of tonight's cutout number but I believe we will have early highs and late lows.  Support for June '09 should be $72.175, $71.70 then $71.47.  Resistance should be $72.675 then $73.25.  I am still not friendly hogs at these levels and I have a cycle high being put in tomorrow and then a lower trend into approximately March 27th.  Again I'm looking for early highs and late lows tomorrow.


NW_LS500
Des Moines, IA     Wed, Mar 11, 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 bone-in loins mostly
steady; butts steady to 1.00 higher; sknd hams 17-20 lbs steady, 20-23 lbs weak,
23-27 lbs not tested; sdls bellies 14-16 lbs 2.00 higher; lean trimmings not
tested. Trading slow, with light to mostly moderate demand and light to
moderate offerings.


-----------------------------------------------------------------
Loads PORK CUTS          :             74.38
Loads TRIM/PROCESS PORK  :               4.0
-----------------------------------------------------------------

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
-----------------------------------------------------------------------
03/11        78.4      57.08   73.68   63.71  32.32  97.00 40.07  75.68
Change :                0.98    1.77    0.02   1.33   0.08  0.82   1.10
-----------------------------------------------------------------------

USDA cash reports were delayed today due to packer submission problems so
please use the link below to check for the updated cash prices.
USDA Hog Price Comparison

 

 

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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