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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 - 01-27-09 - Hogs continue to slide along with grains.

Jan 27, 2009

Hog Comments - 01-27-09 - Hogs continue to slide along with grains.

Jeremy Knutson
1-877-212-2564
jknutson@hurleyandassociates.com


CORN - March '09 Electronic

Open - $3.92 3/4, High - $3.96 1/4, Low - $3.76 3/4, Close - $3.77 1/2 Down $.16 1/4

March '09 did what I expected it could do today, test the $3.83 3/4 level however the market didn't stop in that area.  The weather forecasts continue to confirm moisture in the dry areas of South America and it has the market on edge as we can tell by today's sell off. 

$3.83 was the 50% retracement level back to our most recent low of $3.58 3/4.  If the market has a shot at challenging our most recent high of $4.07 the market needs to get back above $3.83 otherwise I see a test of $3.58 3/4 which is my next target area.  Like I said yesterday I only have around 22% of my needs covered with a call option and I look to buy futures against some $3.60 puts I own in March '09.  

Bottom line - I expect the market to open weaker tonight and trade lower in the beginning hours of trade.  I expect the market to make an early low tonight and firm going into tomorrow's trading session.  I don't think we will see a test of $3.59 tonight or tomorrow, I think we will have an early low tomorrow and then firm as the day goes on.  If $3.77 holds as support we may not see $3.59 at all because $3.77 is a 62% retracement back to the $3.59 number.  I will be looking for clues tomorrow to see if I want to re-own the feed corn I exited last week.  I expect early lows and late highs tomorrow.


MEAL - March '09 Electronic
Open - $316.40, High - $320.60, Low - $306.00, Close - $308.60 Down $7.70

March '09 meal didn't have any issues with selling off today along with soybeans and almost every other Ag commodity.  I said yesterday I liquidated the remaining long soybean meal contracts I had in place and I then turned around and bought some $290.00 March '09 puts for $5.50 to buy futures against if/when the market drops.   I didn't like the way the meal chart looked and today it finally gave way to what the charts had been warning us about.

Bottom line - The meal market feels like it should open lower like corn, trade lower for a period and then turn and start firming going into the morning.  If the market trades firmer like I think it could do, I see $309.80 to $310.60 as resistance for tomorrow.  I feel like the market wants to test the $292.00 area but we need to get and close below $305.00 before I make that prediction although I feel $292.00 is a likely target.  I expect early lows and late highs tomorrow.

 

HOGS - April '09 GLOBEX
Open - $62.80, High - $63.07, Low - $60.25, Close - $60.70 Down $2.075

April '09 hogs didn't leave much time for those that were uncertain this morning.  The market opened lower and didn't look back.  Noon cash reports were $3.00+ lower in IA/MN and the Western cornbelt which seemed to have been traded prior to the reports being released.  Once the reports were released the market just settled into an approximate trade range of around $.35 or so.  

In Friday's comments I said we needed $64.02 to hold otherwise we could see another leg lower.  The market failed to hold $64.02 yesterday and closed well below it and just furthered the downward slide by $2.07 today.  I said yesterday I thought we could see a recovery back to $63.70 area and find resistance.  I was off by $.62 as $63.07 was as high as we got in the Globex trade.  I have to say I only could have been more wrong about today's action if I would have told you yesterday that I expected hogs limit up today!  I also said yesterday that we broke a key level of support for me and I was going to use some put spreads to cover some downside risk for now until the market turns.  I didn't get my options filled today but I sold futures as a delta hedge until I can get my put spread purchased.

Bottom line - It looks the market ran out of steam after the first hour of trade and the open to close ranges of the last couple hours were very narrow which suggests a slowdown in the directional move.  With this being said I also have a cycle indicator moving higher for tonight and tomorrows markets.  With all of this being said it looks like we could move higher tomorrow but the same setup was there yesterday and we all know what happened today!  I have to go with what the charts are saying for tomorrow and that would be for a small retracement to around $61.35 at some point in the day but I am not going to hold my breath.  We should see more selling below $60.25 tomorrow if we get that low.  I expect early lows and late highs tomorrow.

 

 

NW_LS500
Des Moines, IA     Tue, Jan 27, 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 1/4" trim loins weak to
3.00 lower; butts 1.00-2.00 lower; sknd hams 20-23 lbs steady to 2.00 lower,
23-27 lbs steady; sdls bellies 14-16 lbs steady; lean trimmings mostly 2.00
lower. Trading slow to moderate, with mostly light demand and moderate offerings.



-----------------------------------------------------------------
Loads PORK CUTS          :             97.25
Loads TRIM/PROCESS PORK  :              28.0
-----------------------------------------------------------------

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
-----------------------------------------------------------------------
01/27       125.3      58.14   76.78   61.53  36.96 100.53 40.69  73.88
Change :                0.39    1.09   -1.16   0.29   0.13  0.19   0.98
-----------------------------------------------------------------------

NW_LS831
Des Moines, IA     Tue, Jan 27, 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 :  1.95 lwr   :  2.33 lwr   :  2.61 lwr   :  1.60 lwr
Negotiated      :             :             :             :
CARCASS BASIS   : 43.00-61.75 : 43.00-61.75 : 43.00-61.75 : 43.00-57.50
185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg
Plant Delivered :    55.73    :    56.80    :    56.92    :    53.41
--------------------------------------------------------------------------
Head Count      :   30,360    :   16,774    :   20,059    :   10,295
==========================================================================

 

 

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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