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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 - 02-25-09 - Hogs find support and look to rally.

Feb 25, 2009

Hog Comments - 02-25-09 - Hogs find support and look to rally.


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 - $3.63, High - $3.77 3/4, Low - $3.59 1/4 Close - $3.63 Up $.09 1/4

As a review from yesterday I said "Resistance is $3.62 3/4 and then $3.68 1/2 which I think we will touch. Support is $3.61 1/4 to $3.59 1/2, we may touch $3.61 1/4 but assuming no surprises from the President tonight I think the first support level will hold. I believe corn is searching for a bottom and I am taking a more aggressive approach to protecting upside price risk on feed needs. We still need to get back above $3.63 1/4 and close there on a Friday if we want to show further signs of a bottom."

I was 1/4 cent off on the lowest level of support I projected and the market did bounce from those levels.  I also had upside targets of $3.68 1/2 that didn't hold and we moved through them by $.09.  The close today was better than I thought it would be, we closed above $3.71 3/4 which is the 50% retracement level back to the $3.93 high we made on Feb 9th, 2009.  The intraday charts suggest a steady to lower opening for tonight and for tomorrow to be a give back day.  

Bottom line - I am looking for a retracement lower tomorrow with a test of the $3.68 1/2 to $3.66 area.  The daily chart looks somewhat impressive after today's activity so if we do not retrace tomorrow and close firmer again I think we may be starting a leg higher in the market.  I think we will make an early high and late low tonight.  Support will be $3.68 1/2 to $3.66 and resistance will be $3.77 3/4 and then $3.80 however I am not confident that we will get that high.  

 

MEAL - May '09 Electronic
Open - $275.10, High - $277.30, Low - $265.90, Close - $267.40 Down $7.60
As a review from yesterday I said "There is one thing I don't like on the hourly chart (very short-term) is if we gap higher tonight and retreat there is a small sell signal at $274.50 on a sell stop with the risk management buy stop above the most recent high. I WILL NOT take this trade tonight because of all the other longer-term indications I get of a potential bottom."  Even though it looks as if the signal was right it was voided because it was conditional to the first two hours of trade and we wouldn't have reached the sell stop during the first hours so it was no good.  

I am surprised the soybean and meal market failed to get anything going to the upside today and the last hour of trade is really confusing.  It looks like the overnight session should be weaker based on my cycle projections but we had an hourly buy signal at $266.80 and if it is good the market should be up right away tonight.  I don't like the way we traded today but I am still in the camp of the market looking for a bottom in here.  

Bottom line - I have a cycle low in place for tomorrow and also a longer-term buy signal at $266.60 on a stop order if the market moves below today's low and turns around and moves higher from there.  The protective risk management sell stop would be $1.00 below the most recent low. I am looking for the early low and late high today which didn't happen so I am carrying that thought over into tomorrow.  Support will be $265.90 then $265.30 and resistance will be $271.60 to $272.90.

 

HOGS - April '09 GLOBEX
Open - $57.60, High - $59.325, Low - $57.025, Close - $59.10 Up $1.40
As a review from yesterday I said "April '09 hogs actually had good price action today if you are looking for signs of a potential reversal in the market. I have a cycle indicator that says yesterday we were near the bottom of the cycle and today's price action confirms that to me BUT I need to see good buying above today's high of $57.95 and a close above this level tomorrow. A close tomorrow above $70.425 in the June '09 contract would also be beneficial for the prospect of a rally in that contract."

It is evident by today's close the April '09 hogs did get some short-covering and buying come in above $57.95 as mentioned yesterday.  I myself bought April '09 futures at $58.075 to hedge my $59.00 put options to protect the equity in them and give me time to see if this rally if for real before I exit puts.  With today's close as strong as it was I expect a better opening tonight and further follow through to the upside tomorrow with our next target at $59.60 but ultimately $60.425 is where I think we could be headed.  If we can reach $60.425 and close above it for a day or two then we can talk prices of $61.275 to $64.00 but let's not count our chickens yet. 

Bottom line - cash was weaker again today with a lot of packers bought up into next week.  The cutout was up $.41 today and cash was lower again so that means the packers gained more of their profit margin back today.  I am expecting follow through on this rally into tomorrow on the coattails of higher product tonight.  I think we  can see the April '09 contract reach $60.425 tomorrow if the follow through is of the force I think it could be.  I look for the hog market to firm as the day moves forward tomorrow.  Support will be $58.75 to $58.50 and resistance will be $59.60 to $60.425 of which I think we could touch.

 

NW_LS500
Des Moines, IA     Wed, Feb 25, 2009     USDA Market News

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

Compared to Tuesday's Close:        Fresh bone-in loins and butts
generally steady; sknd hams 20-23 lbs steady, 23-27 lbs steady to 2.00 higher;
sdls bellies and lean trimmings not tested. Trading slow to moderate, with
mostly light to moderate demand and mostly moderate offerings.



-----------------------------------------------------------------
Loads PORK CUTS          :            103.88
Loads TRIM/PROCESS PORK  :               2.0
-----------------------------------------------------------------

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
-----------------------------------------------------------------------
02/25       105.9      56.43   70.47   60.20  40.59  96.72 41.26  71.26
Change :                0.41   -0.56    0.09   4.19  -1.43  0.60  -0.01
-----------------------------------------------------------------------

NW_LS831
Des Moines, IA     Wed, Feb 25, 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 :   .97 lwr   :  1.22 lwr   :  1.13 lwr   :   .73 lwr
Negotiated      :             :             :             :
CARCASS BASIS   : 44.50-54.50 : 46.50-54.39 : 44.50-54.39 : 45.00-54.50
185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg
Plant Delivered :    52.23    :    51.98    :    52.24    :    52.19
--------------------------------------------------------------------------
Head Count      :   19,432    :    8,112    :   11,565    :    7,717
==========================================================================

 

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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