Corn – Dec ’11 had enormous volume the last couple of days and is building up for a breakout of the current $6.25 to $6.65 range that we have been in for nearly a month. I favor the upside on this breakout but I’m beginning to question whether or not it will happen. Fundamentally I think we have every reason to breakout to the upside because of the USDA’s magic numbers (continued feed reduction) they come out with each month.
The market currently seems poised to try and test the $6.30ish level of support but I have a tough time getting a good handle on this market at the moment. It is like a Jekyll and Hyde type trade. It is still a great time to use know risk strategies to control feed costs for the foreseeable future!
Bottom Line – I expect an early low and a late high for tomorrows trade.
Meal – Dec ’11 is currently below $300! There is a buy signal created on the weekly chart at $299.50 stop which will be good for this week and next. This isn’t a recommendation but the way these markets have been trading, now is a great time to protect upside price risk with a known risk strategy.
Bottom Line – I’m looking for an early low tomorrow.
Hogs – Feb ’12 had an interesting day today as the market rallied on news of… ahhh, nothing? Yep, sounds to me like our good friends at Goldman Sachs were creating some liquidity today by pushing the market higher to hit buy stops and get small specs long the market. Once everyone was long today then the market sold off so the big boys could buy the futures contracts that the weak specs were selling out of. Is this fact? No, but it is what I believe happened. The interesting thing to me is that the market backed off going into the close and really didn’t do much for the day.
I’m still of the opinion that we test the $85.50ish area in the Feb ’12 contract before we find some solid bottom-picking in the market. The cash market sounds sick and would expect most producers to stay as current as they can moving into the new year. It sounds like there are plenty of hogs in the countryside for packers to choose from. The frustrating part about this is they may still need pigs but they will not pay up for them. I would expect this to be the case as it is what I hear from our network of cash negotiators. This network is for the benefit of the industry so if you are so inclined please join in! See details below.
Bottom Line – I’m looking for an early high in the Feb ’12 hog contract for tomorrow.
CASH HOG PRICE SHARING NETWORK
We have been using Twitter as a tool to share negotiated cash hog information since April 2011 and it has been working well. We still need more participants to build our network and provide more valuable information to producers that sell open market pigs or are thinking about getting into the negotiated market to some degree.
There is a lot of work to be done in getting more negotiated hogs into the mix of our daily slaughter. Industry experts suggest that we need 10% of the daily slaughter to have fair price discovery and we are currently running below 5% on most days! If there are not enough negotiated pigs in the future then new packer contracts will more than likely be based off of the product and what cutout does. The hog producers would be hurt by a move like this because there would be absolutely no control over their marketing’s. Export business DOES NOT show up in our cutout reports.
If you are interested in what goes out on Twitter just visit www.markethogs.com which will bring you to my twitter page and you can see what is posted. We have producers setup so these messages go directly to their cell phones in the form of a text message to keep producers as up to date as possible on cash news.
Producer hog margins are still very good at the moment but don’t expect them to last forever. If you haven’t made any moves in the market please review your situation and visit with your risk manager about a plan!! If you have been caught in the MF Global debacle and need help with your account and are looking for a place to call home you can give our office a call as we would be glad to help. Our toll-free number is
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.