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Corn – I said yesterday that I was looking for the corn market to rally which we did but we didn’t follow through with it. I still think today’s trade activity was positive for the corn market and especially the daily chart but the market will need to close above today’s high of $5.36 relatively soon. The Decd ‘10 contract held the $5.24 1/4 low from the first hour of trade this morning so that suggests to me that we should see more upside tomorrow and if we do get above $5.36 I would expect to see some buy stops trigger.
The dollar index was lower today but just milled around and traded a range for most of the day which didn’t give the Ag markets much to go on. The overnight session traded nearly 60,000 contracts in the Dec ‘10 contract alone. This is big volume for one contract month in an overnight session. If the Dec ‘10 contract wants to continue to move higher we are going to have to get a close above $5.29 3/4 on Friday in my opinion. Continue to look for ways to minimize upside risk in corn prices with a known risk strategy. Consult your risk manager right away!
Bottom line – The intraday charts suggest an early low and late high for tomorrows trade.
Meal – We got close to filling our gap at $316.20 in the overnight session with a low of $320.00. I have to say I didn’t think we would get low enough to fill it and granted we haven’tbut it has gone lower than I suspected. Like corn I think we are getting into an area where we are going to see prices run into support and find some buyers. I’m not of the opinion of getting wildly covered with long futures for an extended period of time but I would for SURE want to make sure my upside risk is known for quite a few months out.
We are in a period now were 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 with the market.
Bottom line – The intraday charts suggest meal makes an early low tomorrow.
Hogs – Hogs were basically the dead horse today. We had a very quiet and narrow range for the day session. The Dec ‘10 contract looks like we should see some continued strength tomorrow but again there is very little excitement on the cash front right now. Cutout was down today but not enough to spook the market considering the cash market was lower as well. The weights continue to fall which is a good thing but with the Thanksgiving holiday is giving packers a lot of power over the next week.
I really have nothing to add to my comments from yesterday so I will re-post them below.
Bottom line – The intraday charts suggest hogs make an early low tomorrow.
After testing yesterday’s high of $69.85 the Dec ‘10 contract fell apart. Again as I said yesterday the cash market remains weak with the packer sitting in the drivers seat. The packers believe there is ample supply of hogs to get them through the next couple of weeks therefore there is no reason for them to push the market higher. The cash was considerably lower at noon today if you believe anything on the noon report which seems to have as much value to the hog industry as a Peanuts cartoon in the Sunday paper. That said there was very little volume in the noon report which would suggest the weighted average shouldn’t be as low as the noon report suggests.
It is unfortunate that a lot of producers allow the packers a license to steal in which control is virtually handed over to the packers with all of the packer contracts out there. If the independent hog producer wants to stay in business and actually have and industry in which they can participate, we need to have more negotiated hogs out there. There are a handful of hog producers out there trying to establish an honest cash market and what is the closest thing to knowing actual demand. It is bothersome to see negotiated pigs be less that 5% of the daily kill and the rest of the market is priced off of what the packers use for their pricing contracts.
I’m not saying don’t any packer contracts I’m just saying that the industry needs more negotiated pigs to help establish a fair price on a consistent basis. If you have packer contracts and you know someone who negotiates pigs call them and visit about the pros and the cons. If the current structure continues and commodity prices become more volatile we will more than likely see a lot of independent producers go by the way side and in turn kill the industry and the independent producer.
If negotiating cash hogs is a large part of your business operation I would be interested to hear from you as it never hurts to have a counter part to bounce ideas off of. If you disagree with the thought of negotiating pigs I would also like to know why. If you have time drop me an email with your thoughts at email@example.com.
Again, I’m not expecting much in the way of higher prices as we move into Thanksgiving week. Steady at best to lower is my thought on the coming week and a half.
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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.