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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 - 03-31-09 - Feed grains higher with new highs in sight?

Mar 31, 2009

Hog Comments - 03-31-09 - Feed grains higher with new highs in sight?

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 - $3.86, High - $4.06, Low - $3.81 1/4, Close - $4.04 3/4 Up $.18 1/2.

Thoughts - Long Term (6 months) - Bullish/Higher

Reviewing yesterday's comments I said "USDA report out tomorrow so that will trump any direction I have if there is a surprise.  The trade is looking for corn acres to be around 86 million so anything less (85 or less in my opinion) will be positive to corn prices and I look for trade to give us an early low and a late high.  Support in May '09 corn tomorrow should be $3.82, $3.81 and $3.76 3/4 while resistance should be $3.87 1/4, $3.89 1/2 then $3.92.  I had a buy signal at $3.85 today with a risk management sell stop at $3.75 1/2.  Market action today suggests a probable reversal to the upside tomorrow with buy stops above today's high's of $3.89 1/2."

CORRECTION - I said yesterday the trade was looking for corn acres to be 86 million when in fact it they were looking for 84.4 million acres for this year's intentions.  86 million was last year's actual plantings, my apologies. 

The May '09 contract got within 1/4 cent of my mid range support level today and shattered the top end of my resistance level.  As I have said for a while I want my core position in corn to be a bullish biased position to protect against moves like today.  I said anything below 85 million acres should be viewed as positive by the trade and today's number was just a shade below 85 million acres.  The market also responded the way the chart's suggested by having an early low and a late high today.  

Today's close was a good one; the funds purchased approximately 10,000 contracts of corn and managed to close above the 62% retracement level of $4.03 in the May '09 contract.  I am looking for a steady to higher opening tonight and then find resistance around $4.06 to $4.07.  I expect the market to retrace some of today's gains during tomorrow's trade but bottom line is if we close above $4.03 tomorrow then we could be on our way to the number I have talked about for a couple of weeks, $4.40.  We closed above what has been good resistance at $4.00 now we just need to make sure it was for real.  Make sure you have some type of option coverage in place to the upside, talk with your broker about a strategy that is right for you and your operation.

Today was an event day as I like to call it.  I like to sit back and watch other people trade on "event days" as a matter of fact report days make for good vacation days.  Huh?  My point is prepare yourself going into reports or events and know your risk therefore you need not "worry" about the news that is released and have to make decision based on emotion.  With this being said I think most of the people who react to news instead of prepare for it were the ones in buying today to drive the market up as much as it was.  This is fine because in the end I think buying is the right thing to do but we could see a setback tomorrow.

Bottom line - I expect to see an early high and a late low tomorrow as enthusiasm expires over today's USDA report findings.  I look for early resistance tonight at $4.06-.07 then all the way up to $4.13 (don't think we will get there) and support should be $4.03, $3.99 3/4 and $3.96 1/2 but I think the $4.00 area should hold pretty good support.  ***IF MAY '09 OPENS ABOVE $4.06 TONIGHT THAT WILL BRING A MORE NEGATIVE TONE TO TOMORROW THAT WHAT I HAVE DISCUSSED.***  I don't think we will open above $4.06 but I wanted to point it out if it does so you know what to expect from the market.


MEAL - May '09 Electronic
Open - $281.50, High - $296.40, Low - $281.00, Close - $295.30 Up $13.80
Thoughts - Long Term (6 months) - Bullish/Higher

I said yesterday "
I am looking for an early low and late high with support at $277.60 and $275.10 and resistance at $282.20 and $285.00.  Looking for the USDA report to give us direction tomorrow but I believe we will see positive trade based on the USDA numbers.  This thought is solely based on the way the SHORT TERM charts look to me as well as the expected weakness in the U.S. Dollar Index.  The dollar thing is a big deal guys."

Meal didn't get down to my support levels from yesterday and it blew through my resistance levels but the charts were right with positive trade today as a result of the USDA numbers.  The planting intention report only increased soybean acres by 324,000 acres when the trade was looking for approximately 3.9 million more acres than last year.  It is still a good time to have a known risk strategy in place to prevent you from paying higher prices in meal, talk with your broker about a strategy that is right for you.

Bottom line - the close on May '09 meal was a positive one today but like corn I think we may have gotten too excited to keep a strong rally like this going for two consecutive days.  I'm looking for a steady to better open tonight only to find resistance at $296.40 then $298.70.  Support should be around $293.20, $292.30 and $291.30.  I am looking for an early high and a late low tomorrow in May '09 meal. 

 

HOGS - June '09 GLOBEX
Open - $70.95, High - $72.725, Low - $70.675, Close - $72.40 Up $1.425
Thoughts - Long Term (6 months) - Friendly

Reviewing yesterday I said "as I mentioned above I will continue to look for signs in the market to make me look at adjusting my short positions in the market place.  In an effort to find a patter for the next couple of weeks based on the market tendencies since the year 2000; it seems as if the risk is more to the upside than to the downside.  I am looking for an early low and a late high tomorrow; cutout was a non-event today as it was up $.14.  I look for support at $70.52 and $69.52 and resistance should be around $71.35, $71.575 and then $72.20."

The market held just above my $70.52 support number and traded .52 above my high end resistance number and closed above it for the day.  The issue I have with the market doing this today is its quarter/month end and strange things can happen on days like today.  I am not buying into today's trade action just yet, because there is no evidence of a stronger cash market and cutout dropped by $.99 today.

Bottom line - I look for an early high and a late low tomorrow with resistance at $72.725 then $73.20 and support should be at $71.45 and $70.675.  Cutout was down today which is in line with what the short-term charts show for tomorrow, a negative trade day.  Tomorrow is the cycle low but it is more of a general area it isn't a signal to buy so as I said yesterday I will continue to look for signs in the market that suggest the move lower is over. 

 

NW_LS500 **Resent for correction to strap ons and offs and cutout**
Des Moines, IA     Tue, Mar 31, 2009     USDA Market News

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

Compared to Monday's Close:
                                    Fresh 1/4" trim loins 7.00 to
8.00 lower; butts 1.00-3.00 higher; sknd hams 20-27 lbs 2.00-4.00 lower; sdls
bellies 14-16 lbs 2.00 lower; lean trimmings weak to 4.00 lower. Trading
active, with mostly moderate demand and moderate to heavy offerings.


-----------------------------------------------------------------
Loads PORK CUTS          :            137.37
Loads TRIM/PROCESS PORK  :               9.0
-----------------------------------------------------------------

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
-----------------------------------------------------------------------
03/31       146.4      56.69   70.72   62.55  39.80  97.72 38.37  75.39
Change :               -0.99    1.39    0.85  -0.73   1.53 -5.00  -1.03
-----------------------------------------------------------------------

NW_LS831
Des Moines, IA     Tue, Mar 31, 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 :   .08 hgr   :   .34 hgr   :   .08 hgr   :   .21 lwr
Negotiated      :             :             :             :
CARCASS BASIS   : 45.25-60.00 : 46.00-60.00 : 45.25-60.00 : 45.50-56.08
185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg
Plant Delivered :    56.46    :    57.45    :    57.51    :    54.64
--------------------------------------------------------------------------
Head Count      :   25,072    :   13,267    :   15,886    :    9,186
==========================================================================


 

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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