Hog & Corn Comments – 06/30/09 – End of quarter buying in hogs.
Jun 30, 2009
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CORN – Sep ‘09 Electronic
Open – $3.84, High – $3.88 3/4, Low – $3.54 1/2, Close – $3.54 1/2 Down $.30
Thoughts – Long Term (Into September ‘09) – Bullish/Higher
Yesterday I said: "I mentioned last week that I was looking for $3.80 in the Sept '09 contract and today MAY have been close enough with the low of $3.83 1/4. I also mentioned the possible buy stop at $3.89 1/2 last Friday which would have been filled and also stopped out of for an approximate $.03 1/2 loss on the trade. Tomorrow we have the USDA's annual planted acres report due out at 7:30 a.m. CST; this report should dictate tomorrow's trade action.
The market has made a steep enough decline in recent weeks that makes me think we have factored in most of the potential bad news that may come from this report. If anything I would venture to say that the setup for this report is friendly because of the decline we've had coming into it. It is tough to make a call on tomorrow's markets because of the report but my feelings are for lows to be set in the early portion of the trade session and then find support around the $3.80 area.”
Sep ‘09 corn: The USDA does it again, they found just over 2 million more corn acres than what the intentions report said at the end of March. This number was even bigger to the trade who had the number pegged at 1 million less than the March report! Needless to say the market made a move lower right off the open then traded limit and stayed there for the balance of the day.
There were a couple of times throug out the trade session where it looked like we were going to trade off of the limit lower number of down $.30 but there was just to much pressure. We blew through $3.80 support level that I was looking for and went all the way through the next level at $3.63 1/4. The close we had tonight sets up a buy signal IF the market opens lower and then it will trigger a buy stop signal at $3.55. If the stop is filled then a risk management sell stop should be placed $.01 below the most current low.
I am interested in this signal because the market had already fallen significantly prior to the report so I would say some of today's bearishness is already factored into the market. I don't believe this signal will provide a blow and go type reversal but with the hog industry in the state that it is I want to make sure I have good coverage for feed needs at lower levels in the market if it will allow us to do so.
I am not a big fan of straight futures at this level because the report was bearish but I am extremely interested in a known risk strategy to get coverage in place for feed. If you need feed coverage now is a GREAT time to be looking into getting some coverage on. Talk with your broker about a strategy that is good for you and your operation.
Bottom line: I am looking for the market to experience an early low tomorrow.
Sept ‘09 Corn – Support/Resistance for 07-01-09
(R3) Resistance 3: $3.62 3/4
(R2) Resistance 2: $3.61 1/4
(R1) Resistance 1: $3.57 3/4
Today’s close: $3.54 1/2
(S1) Support 1: $3.54 1/2
(S2) Support 2: $3.42 3/4
(S3) Support 3: $3.35 3/4
MEAL – Aug ‘09 Electronic
Open – $371.40, High – $375.10, Low – $360.00, Close – $374.30 Up $2.90
Thoughts – Long Term (Into September ‘09) – Bullish/Higher
Yesterday I said: "The sell stop order at $364.00 that I thought would hit on Friday never did so the protective stop was at $366.10 today which again wasn't touched so for tomorrow the protective sell stop on the position we have been following will be $367.00. August '09 soybean meal looks like it wants to test the old high of $380.20 that we made on June 18th but the daily trade ranges have been getting smaller which means the market may be stalling out unless it can get a boost from somewhere like a report.
Like corn the meal market will be subject to the reaction of the report tomorrow but technically I see the Aug '09 meal putting in an early low and then try to find support from there and be firm the balance of the day. This will all be trumped by what the acreage report says for soybeans.”
Aug ‘09 meal: The trade that we have been following for the last few days would have finally been closed today as the market did touch the $367.00 area and move lower so if we were in the trade (I wasn't because we own calls) we would have been stopped out today around $367.00 in the August contract. The trade was entered around $352 and exited around $367 for a nice gain and now I would like to see the August '09 close above $380.20 for two consecutive days before I would look to re-own it on a rally. This is not a recommendation we are just following some signals so please do what is right for your operation.
The meal market was the strongest link in the grains today as the USDA projects 1.46 million more acres than the March intentions report but they were about 600,000 less than what the trade was expecting therefore it was a friendly report on soybeans. As I said before I need to see the Aug '09 contract close above $380.20 before I get too excited about a test of the old high of $397.00. The weekly chart still looks poised to follow through to the upside from here.
Bottom line: I’m looking for the market to experience an early low and a late high tomorrow.
Aug ‘09 Meal – Support/Resistance for 07-01-09
(R3) Resistance 3: $380.20
(R2) Resistance 2: $377.00
(R1) Resistance 1: $375.10
Today’s close: $374.30
(S1) Support 1: $367.60
(S2) Support 2: $363.80
(S3) Support 3: $360.00
HOGS – Aug ‘09 GLOBEX
Open – $59.25, High – $60.75, Low – $58.70, Close – $60.65 Up $2.025
Thoughts – Long Term (Into August) – Friendly
Yesterday I said: "We broke the support level of $57.62 but have yet to close below it so we are still in testing mode; the market needs two consecutive closes below this level before we look for another leg lower. The front end of the market rallied today while the back end of the market sold off due to lack of liquidation in the Quarterly Hog & Pig report from Friday which was in line with trade estimates. Keep in mind the report is from June 1st and the market has made a very sizable move lower since the first of June.
It appears that most of the report had been factored into the trade already judging by the way the front months rallied and even the deferred months rallied going into the close even though they didn't close higher. The Dec '09 contract had positive (potential reversal) trade action today but it also had the same type of action one day last week that didn't materialize. If the trade action is good and legitimate we could see some buying above today's high in the Dec '09 contract ($56.125). I AM NOT saying the market has bottomed or even Dec has bottomed for that matter I am just pointing out the fact that there could be some buying above today's high's in Dec '09 tomorrow.
I would like to see the market close strong to the upside above $56.125 for two consecutive days before I even think about higher prices on more than just a one day run and if the market did rally I think it is just a corrective rally in that would need to be sold at some point. I am expecting the market to be better tomorrow based on this afternoon's cutout being higher again. There was a letter sent to the Secretary of Ag last week asking the Government to purchase $50 million worth of pork for Government funded programs but as of right now the budget has no money left for purchases like this during this fiscal year. There has been no talk of any exceptions at this point to my knowledge."
Aug ‘09 hogs: The August '09 contract got a burst of buying today as end of month and end of quarter buying surfaced in the market. This was needed to some degree to all the market some room to absorb another stellar day in the cutout market, yes you guessed it, down $1.72. The news was released to the public at about 3:13 p.m. CST and the market immediately dropped off but found some support around $59.80.
The August contract had good volume today has increased in recent day's while the open interest has decreased which suggests this is a short covering bounce for now. The Aug '09 contract closed at $60.65 today which is above the $60.30 resistance area or the 62% retracement back to the $62.15 high from two weeks ago. This needs to happen again tomorrow if we have any shot at testing $62.15 otherwise we may look for another move toward the lows.
My hourly cycle indicator has an early high for tomorrow with the market setting back some as the day progresses and with this afternoon's cutout number being down as much as it was it only stands to reason.
Bottom line: I’m looking for the market to make an early high tomorrow and weaken as the day progresses.
Aug ‘09 Hogs – Support/Resistance for 07-01-09
(R3) Resistance 3: $62.15
(R2) Resistance 2: $61.35
(R1) Resistance 1: $60.75
Today’s close: $60.65
(S1) Support 1: $59.45
(S2) Support 2: $58.70
(S3) Support 3: $58.50
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