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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 - 04-14-09 - I knew pigs couldn't fly.

Apr 14, 2009

Hog Comments - 04-14-09 - I knew pigs couldn't fly.

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 - $3.87, High - $3.99, Low - $3.85 1/4, Close - $3.94 1/4 Up $.06 3/4.

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

Yesterday I said:  "I am still bullish corn for reasons other than grain fundamentals, the U.S. Dollar Index was down 1.23 as I was writing this today and I am more concerned about the U.S. Dollar as a fundamental to corn than I am weather.  Support for tomorrow’s market looks like $3.85 3/4, $3.83 and then down to $3.76 3/4.  Resistance should be $3.89 1/2, $3.90 1/2 and then up to $3.94.  I am expecting a sideways market tomorrow, there were signs of bottom picking today and would suggest buy stops above $3.90 1/2 for tomorrow but I am not convinced of it yet.  I am still cautious in the short-term at this price level but I am willing to begin scaling in purchases around $3.76 1/2 which will replace my long call spreads I talked about before."

May '09 corn:  I didn't get my sideways market like I thought I would today but we did hold support near my first number of $3.85 3/4 but I was off by $.05 on the upside for resistance.  You will notice I said I was waiting for $3.76 1/2, which I still am but I do have a call spread in place in case I am wrong so we still have protection in place if the market moves higher.  We didn't manage to close above the 50% retracement level of $3.95 1/4 so as of now this is still just a bounce, we need to close above $3.95 1/4 for a couple days before look to $4.07 as a target. 

Bottom line:  I am looking for the market to have follow through to the upside tomorrow and experience an early high and a late low.  I look for support to be $3.93 1/4, $3.92 and $3.87 3/4.  Resistance should show up at $3.95 1/4, $3.98 1/4 and $4.04.  I expect the May '09 corn contract to open higher tonight and follow through with early strength and then meet resistance early.

 

MEAL - May ‘09 Electronic
Open - $312.80, High - $319.00, Low - $312.40, Close - $316.30 Up $3.20
Thoughts - Long Term (6 months) - Bullish/Higher

Yesterday I said:  "I am looking for an early high and a late low tomorrow.  Support for tomorrow looks like $311.40, $310.6 and finally $307.80.  Resistance should be $315.00 and then $319.00 if the market gets enough steam to get there.  Like I said earlier I am looking for an early high and a late low for tomorrow’s meal trade.  We are nearing a cycle high in meal which would last until the middle of May ‘09; this is not a recommendation of any kind, just a stated observation."

May '09 meal:  The early high did come in the first hour of trade today as well as the low in the last hour of trade but the low was still above my first support point and we nailed the resistance with my second number from yesterday.  After making a high at $319.00 again today we have a small double top formation for the time being.  I am still in the camp that meal looks toppy at this level and I don't want to be an aggressive owner of futures or cash at these levels.  I have a majority of ownership via known risk call spreads which I intend to keep for the moment.

Bottom line:  I'm looking for the market to have follow through to the upside tonight/tomorrow and experience an early high and a late low.  I look for support to be $314.50, $313.50 and $312.10.  Resistance should show up at $316.90, $319.00 and $325.20.  I expect the May '09 meal contract to open higher tonight and follow through with early strength and then meet resistance early.  **IF get above $319.00 either tonight/tomorrow or Thursday and move back below this level then I have a sell signal at $318.50 on the daily chart.  If filled based on the sell signal then the protective buy stop order to manage risk would be $.50 above the current session high.**  This is an observation only and it provides confidence in what the charts have already been saying at these levels, be careful if your long.  As always please do what is right for your operation, take this information as insight not recommendation.


HOGS - June ‘09 GLOBEX
Open - $74.15, High - $74.25, Low - $72.45, Close - $72.60 Down $1.50
Thoughts - Long Term (6 months) - Friendly

Yesterday I said:  "I am looking for an early high and a late low tomorrow as we are approaching the 15th of April and the May and June ‘09 contracts have a sizable lead on the cash index.  I expect support to be $73.97, $73.72 and $73.35.   I am looking for resistance to be $74.40, $74.82 and then $75.90 but I don’t expect this level to be touched tomorrow.  I am looking for a near-term top in hogs this week and the beginning of a small retracement of the recent move higher.

June '09 hogs:  I didn't do very well in projecting accurate support and resistance for today's trade but the market action projections were spot on with an early high and a late low.  I know I know rocket science right?  : )  All kidding aside, I don't think the June '09 hog contract has much upside left for the next week or so.  I believe this is the beginning of a retracement in what should be a longer-term move higher.  

Bottom line:  I'm looking for the market to be higher tonight/tomorrow and experience an early high and a late low.  I look for support to be $72.60, $71.95 and $71.05.  Resistance should show up at $73.35, $73.55 and $74.25.  I expect the June '09 hog contract to open higher tonight and follow through with early strength because of higher cash and cutout but falter as the day progresses.  I am looking for a test of $70.52 within the next week if we close below $72.70 tomorrow in the June '09 contract.


NW_LS500
Des Moines, IA     Tue, Apr 14, 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 loins firm to 5.00
higher; butts generally steady; sknd hams 17-20 lbs 2.00-4.00 lower from last
quote, other weights not established; sdls bellies not tested; lean trimmings
steady to 1.00 higher. Trading slow to moderate, with mostly moderate demand
and light to moderate offerings.


-----------------------------------------------------------------
Loads PORK CUTS          :             86.88
Loads TRIM/PROCESS PORK  :              10.0
-----------------------------------------------------------------

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
-----------------------------------------------------------------------
04/14        96.9      60.66   76.95   68.85  39.84 103.32 43.55  76.68
Change :                0.67    2.75   -0.30  -0.10  -0.64  0.12    unc
-----------------------------------------------------------------------

NW_LS831
Des Moines, IA     Tue, Apr 14, 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 :   .01 hgr   :   .26 hgr   :   .17 hgr   :   .24 lwr
Negotiated      :             :             :             :
CARCASS BASIS   : 46.75-57.23 : 48.50-57.09 : 48.50-57.23 : 46.75-56.08
185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg
Plant Delivered :    55.19    :    55.74    :    55.86    :    54.27
--------------------------------------------------------------------------
Head Count      :   26,504    :   11,039    :   15,382    :   10,942
==========================================================================

 

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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