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Corn – December corn finally had some follow-through to the upside today. Although today’s day session range was relatively narrow, we continued to hold the support level of $5.36. I mentioned yesterday that we needed to take out yesterday’s high of $5.36 relatively soon, this was accomplished in the overnight session. Volume was rather light today coming in at only 133,000 contracts for the December corn futures, in recent days we have been reaching the 200,000 contract level. The one thing that sticks out like a sore thumb on a daily chart is yesterday’s rejection of lower prices. Today follow-through price action would suggest that the market is looking to retrace back towards the $6.05 high, with probable stops at $5.57 and $5.68, which are the 50% and 62% retracement levels respectively.
The dollar index once again was under pressure today and looks like it could be looking for a break from its most recent run-up. The 60 minute intraday chart suggests that the dollar should trade higher tomorrow. As I mentioned in recent posts, now is the time to be consulting your risk manager to set up a plan to protect your operation from higher corn prices.
Bottom line – The intraday charts suggest an early low and late high for tomorrows trade.
Meal – to reiterate what was stated yesterday, now is the time to be looking for opportunities to protect meal prices from moving higher. Again I don’t want to be extremely aggressive in using straight futures contracts or flat priced cash contracts for an extended period of time. I believe that adding some cash ownership and/or futures positions are warranted however a known risk strategy will be the safest in this volatile environment. Some of the concerns of the market had with the world economy have been lessened and to some extent, which now brings the risk takers back into the market arena.
We are in a period now were hog producers need to focus on profit margin more than ever. Legging into feed purchases or hog sales could be a catastrophic under the current volatility structure of the market. Make sure you have a plan to lock in all three aspects of your crush if you are looking at doing anything. If you do leg into something the safest thing to do is use a known risk strategy so you are flexible in the market.
Bottom line – The intraday charts suggest meal makes an early high tomorrow.
Hogs – thanks to corn, soybeans and meal, the deferred hog contracts came to life today. Most of the contracts from February through August of 2011 traded over $1.50 higher for the day. As I mentioned this week , I don’t expect much out of the December futures contract because of the Thanksgiving holiday coming up next week. With the short week ahead of us, packers shouldn’t have to pay up for cash hogs, this should continue to keep cash prices under pressure therefore holding the December futures relatively stable. The deferred months on the other hand, will have more of a relationship with the feed prices and the dollar index.
Today’s price action in the deferred contracts looks encouraging in the sense that it seems as though the summer months of 2011 should challenge contract highs in the coming days. It shouldn’t come as a surprise to see the backend contracts trade in unison with the corn market as we move forward over the coming weeks. Remember to keep an eye on your crush margins for deferred delivery time frames and take a serious look at protecting profits if you can. Remember in these volatile times it can be very dangerous trying to lock in one leg of the crush without the others.
Bottom line – The intraday charts suggest hogs make an early high tomorrow.
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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.