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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 - 01-06-09 - Hogs say no to lower prices.

Jan 06, 2009

Hog Comments - 01-06-09 - Hogs say no to lower prices.

Jeremy Knutson
1-877-212-2564
jknutson@hurleyandassociates.com
CORN
Open - $4.10 1/4, High - $4.29, Low - $4.07 1/4, Close - $4.27 1/2 Up $.16 1/4.

Corn had another positive day of trade closing $.16 1/4 higher on the day.  I said yesterday the market created a warning signal last week if you were long the market but it wasn't a sell signal.  I also said there was a potential sell signal at $4.15 on a sell stop which would have been triggered today but the high was $4.18 1/4 when it would have filled and a buy stop loss would have been placed at $4.19 1/4 and we obviously would have been stopped out.  I didn't take this trade because it all happened in the first hour of trade which I try to avoid if I can.

I said if we continue to trade/close above $4.04 in the March '09 contract that we could see a test of $4.23 3/4 in the near future.  Today was that day so now my number is $4.23 3/4, if we continue to trade/close above this number particularly on Friday then I think our next quick target is $4.36 1/2 then $4.50 and finally up to $4.77.

Bottom line - I think we will open unchanged to higher tonight and make an early high in the overnight trade.  We may test the high of $4.29 but I think we should also test $4.23 3/4 and even $4.22 1/2.  I believe we will make early highs tomorrow and then fade the balance of the day and keep in mind $4.23 is a key area for now to keep the March '09 contract trending higher.  I am still holding my calls for feed corn and will do so until the market tells me differently.

 

MEAL
Open - $298.60, High - $305.00, Low - $296.20, Close - $301.00 Up $2.80.

I said yesterday we had a warning signal in March '09 meal from the previous week.  I also said I thought we could test $296.30 and our low was $296.20 early last night.  I would still like to see the March '09 meal close above $305.70 before I jump back in the friendly camp again.   There was good support around $300.00 in the March '09 contract today and we finally closed above $300.20 which we have failed to do during the last five trading sessions.

I am looking for support at $300.00 tonight and tomorrow but if that is breached we could test $298.60 however I am looking for $300.00 to hold tonight.  I am having a hard time getting bullish up here without getting a close above $305.70 so I will remain cautious about my long position here until I see some signs of commitment to the upside.

Bottom line - I look for a test of $300.00 and possibly $298.60 tonight but then find support and firm up.  $305.00 will be the upside target tomorrow with the ultimate prize being at $305.70 however I don't think we will get this high tomorrow.  I am looking for a mixed market in meal tomorrow as it looks for direction from soybeans.  

 

HOGS
Open - $62.775, High - $64.20, Low - $62.70, Close - $63.95 Up $1.275.

It didn't take much for Feb '09 hogs to take back all of yesterday's losses and add more gains today.  I am holding with my opinion that the Feb '09 contract can reach $67.05 in the near future but we will need to stay above $63.95 for me to be confident.  Today we closed right at $63.95, the 62% retracement back to the $67.05 high.  

I am going to hedge in April '09 instead of Feb '09 when the time comes because I believe it will be a better contract to hedge in this point forward as a result of my studies.  Again, at this point I am not bearish the market but will change my mind in a hurry if the market tells me to.  The cutout was $.80 higher last night and helped spark some buying today as we traded firmer most of the day.

Bottom line - I expect hogs to open higher tonight/tomorrow and rally some but make an early high and a late low.  Cutout was up $2.54 today so it looks like the market should be strong again tomorrow however I believe some of the gains today were in anticipation of tonight's cutout number. 

 

NW_LS500
Des Moines, IA     Tue, Jan 06, 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 steady to weak;
butts generally steady; sknd hams 17-20 lbs steady, 20-23 lbs not tested; 23-27
lbs firm; sdls bellies mostly 2.00-5.00 lower; lean trimmings steady. Trading
slow to moderate, with light to moderate demand and offerings.



-----------------------------------------------------------------
Loads PORK CUTS          :            115.13
Loads TRIM/PROCESS PORK  :              13.0
-----------------------------------------------------------------

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
-----------------------------------------------------------------------
01/06       128.1      58.16   76.74   57.58  43.40  93.08 45.30  67.46
Change :                2.54   -0.06    1.18   6.99  -0.35  8.36  -2.58
-----------------------------------------------------------------------

NW_LS831
Des Moines, IA     Tue, Jan 06, 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 :  1.37 hgr   :  1.74 hgr   :  1.54 hgr   :   .95 hgr
Negotiated      :             :             :             :
CARCASS BASIS   : 40.50-56.50 : 40.50-56.50 : 40.50-56.50 : 41.00-54.05
185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg
Plant Delivered :    52.50    :    53.37    :    53.46    :    50.74
--------------------------------------------------------------------------
Head Count      :   25,279    :   13,748    :   16,373    :    8,446
==========================================================================

  

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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