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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 - 03-26-09 - I'm still negative the hog market for now.

Mar 26, 2009

Hog Comments - 03-26-09 - I'm still negative the hog market for now.

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.

It has been a week since my last post due to my schedule and illness.  I will refer to my previous comments as a starting point.  

CORN - May '09 Electronic
Open - $3.86, High - $3.92, Low - $3.86, Close - $3.90 3/4 Up $.05

As a review from my last post (03-16-09) I said "The May '09 contract made it through the upside target of $3.92 and looked like it had a great shot at testing the $4.03 number I wrote about last week too but it didn't get the job done as it stalled out at $3.97 1/2.  I am still of the opinion we could test $4.40 in the May '09 contract IF we get closes above $3.92 for a couple of days this week and especially on Friday.  I have one thing I am watching right now and it is a potential sell signal at $3.89 on a stop order.  If the order would be executed there should be a buy stop at $3.98 1/2 to manage risk in the position."

As I mentioned in the paragraph above, the May '09 contract needs to get back above $3.92 in my opinion and hold that level for a day or two before we have a valid shot of testing $4.40 in the May '09 contract.  I am a longer-term bull for the corn market especially after the Government said they will buy $1 Trillion of toxic assets which killed the dollar last week.  I believe we are going to see the corn (commodities) markets move more off of money flow than fundamentals.  

From here on out I want to structure any position I have with a bullish tone for reasons that have nothing to do with fundamentals of the corn market.  I think the market will once again be technically driven especially if the U.S. Dollar index continues its recent decline.

Bottom line - I expect corn to have an early high and a late low tomorrow.  I expect Resistance to be $3.91 3/4 then $3.92 3/4 and support is projected at $3.89, $3.88 1/4 and $3.87 1/4.  The $3.92 area has been like a magnet for the May '09 contract but hasn't moved very far in either direction.  I am bullish corn long-term and will hold my feed coverage in place with known risk strategies but tomorrows action my provide enthusiasm early and then the market should weaken.

 

MEAL - May '09 Electronic
Open - $294.30, High - $298.70, Low - $289.40, Close - $290.80 Down $3.50
I will review my comments from my last post on March 16th, 2009; I said "My opinion hasn't changed much from a longer-term perspective and I believe ownership is needed in some form at these levels.  I would still like to leave the downside open if possible which points to using options however do what is best for your operation.  I am looking for downside pressure tomorrow with support at $284.10 and $282.70 with an ultimate target of $278.20 but I don't think we will get there tomorrow.  Resistance should be at $290.10 and $291.60.  I expect an early high and a late low but noting to get too excited about to the downside."

My short-term call of $278.20 was off last week as the market never did move that low, the lowest we got was $284.40 which was just above the first level of support from my comments.  The May '09 meal contract filled a gap that was left on March 18th, 2009 at $290.80 which is exactly where we closed today.  I am a longer-term bull in meal as a result of my U.S. Dollar index comments written in the corn commentary above.

Bottom line - it looks like the May '09 meal contract is looking for an early low and a late high tomorrow, opposite of corn.   I expect support to be $289.40, $286.70 and resistance at $294.10, $295.10 and finally $298.70.  I don't think $298.70 is attainable tomorrow but it is still the next level of resistance according to my studies.

 

HOGS - June '09 GLOBEX
Open - $71.80, High - $72.45, Low - $71.40, Close - $71.775 Down $.95
I will review my post from March 16th, 2009; I said "I am still looking for a run lower in the June '09 contract.  $72.475 is a target that I believe we can touch at some point in the near future.  Unless cash hogs start to move again it just adds to my negative bias that the chart have been showing for days.  My cycle indicator has June '09 hogs trending lower until March 28th before finding a bottom.  I do not follow my cycle indicator solely but it is a part of my decision making process.  Support for June '09 tomorrow is $73.50, $73.10 and $72.47.  Resistance should be $74.425, $74.67 and $75.37.  I expect tomorrow to have an early high and a late low with $73.10 having a good chance of being tested."   

The high on the 17th was $74.20 and the low was $73.22 so I was $.22 off on the resistance number and .12 off on the support number for trade on the 17th.  The market moved higher before it went lower since my last comments but the bottom line is the market backed off like the charts said it should.  I am still have a negative feel toward June '09 hogs for the time being but we have the Quarterly Hog & Pig report out at 2:00 p.m. CST tomorrow which could switch directions with a major surprise however I don't see it.  

$71.95 is a key number for me in June '09 hogs, if we close below it again tomorrow then I look for a test of $69.52 in the June contract however the Pig Report could be a wild card event.  If the market gaps lower tomorrow below $71.40 and then trades back above $71.40 it would signal a buy on the candlestick charts at $71.65 on a buy stop only.  If the buy stop it filled then a risk management sell stop should be place $.25 below the most recent low for the day.  I will not buy the hog market based on this signal, I need to see more than this potential signal. 

Bottom line - I am looking for an early low in June '09 hogs tomorrow and then strengthen as the day progresses.  The cycle indicator still has the market moving lower into the first part of next week before finding support.  Support for tomorrow is $71.40, $70.85 then all the way down to $69.52 but I don't think we get there.  Resistance for tomorrow should be $72.10, $72.32 and $72.52.

 

 

NW_LS500
Des Moines, IA     Thu, Mar 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 unevenly steady;
butts steady; sknd hams 2.00-3.00 lower; sdls bellies 14-16 lbs 2.00 lower; lean
trimmings weak to 4.00 lower. Trading moderate, with light to moderate demand
and mostly moderate offerings.



-----------------------------------------------------------------
Loads PORK CUTS          :             109.0
Loads TRIM/PROCESS PORK  :              26.0
-----------------------------------------------------------------

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
-----------------------------------------------------------------------
03/26       135.0      57.28   68.35   58.86  41.00  96.99 43.26  77.41
Change :               -0.58    0.33    2.02   2.16   1.98 -2.15  -4.39
-----------------------------------------------------------------------

NW_LS831
Des Moines, IA     Thu, Mar 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 :   .25 hgr   :   .27 hgr   :   .39 hgr   :   .07 hgr
Negotiated      :             :             :             :
CARCASS BASIS   : 45.50-58.11 : 46.00-58.11 : 46.00-58.11 : 45.50-55.41
185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg
Plant Delivered :    55.64    :    56.48    :    56.54    :    53.71
--------------------------------------------------------------------------
Head Count      :   26,173    :   11,986    :   17,820    :    7,968
==========================================================================

 

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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