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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 - 03-04-09 Looking for a downside reversal in hogs tomorrow.

Mar 04, 2009
Hog Comments - 03-04-09 - Looking for a downside reversal in hogs tomorrow.

 

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 - $3.49, High - $3.65, Low - $3.47, Close - $3.63 1/2 Up $.13
Reviewing what I said yesterday - "I feel like we should continue to try and move higher tomorrow as we got very little of that accomplished today. I see today's high of $3.54 1/4 as a target area for tomorrow and then $3.58 in the May '09 contract. Overall I think we could be mixed tomorrow with the upside resistance areas being targets. Tomorrow's support is $3.48 1/4, $3.47 1/4 then $3.44 1/2. Tomorrow's resistance is $3.54 1/4 and then $3.57 1/4. I look for mixed to better trade tomorrow."

I was off by $.07 cents on the resistance side of the market (upside) and within a 1/4 cent of my mid-range support level from yesterday. I felt as though the market would try a move higher but this one surprised me today. I took some small profits on the long futures I have on against my $3.60 puts today because I see $3.66 1/2 as resistance in the May '09 contract. I am looking to re-establish my long position below the market if I can but I have no problem getting back in the market doesn't respect what the charts say it should do.

Bottom line - I expect an early high tonight with the market possibly testing $3.66 1/2 to $3.67 1/2 and then calling it a day. I have a sell signal SETUP at $3.67 1/2 if we move above this level and then come back down through it. I would have a sell stop at $3.67 with a protective buy stop $.01 above the most recent high. I am looking for an ultimate test of $3.56 at some point but I am not sure we will have enough pressure to get there tonight/tomorrow. We should test support of $3.60 1/2 to $3.59 1/2 and then down to $3.56 which is my target before the market makes any bigger moves up at this point. I am still not bearish longer-term but I'm looking for a correction tomorrow.



MEAL - May '09 Electronic
Open - $263.70, High - $273.00, Low - $262.40, Close - $267.30 Up $2.60
I said yesterday "The market looks like we should have follow through to the upside tomorrow based on the way we traded today. I see support at $262.90, $262.20 and then $260.00 if we get moving to the downside. Resistance should be around $263.90 and then $265.70. One note to point out is if the May contract moves above $265.70 and then comes back down through it will trigger a sell signal at $265.20 on a stop. If the sold at $265.20 then a risk management buy stop order should be placed $1.00 above the most recent high. This is an observation not a recommendation."

Bottom line - I was within range on the support side of the May '09 meal market today but not close on the resistance side as it went through what I thought would stop the market by $7.30! I am looking for market action to be similar to corn, open better and then find early resistance. I expect May '09 corn to test support of $265.00 and then to $260.00 and resistance to be $269.50, $270.30 and then $273.10 which was today's high. I still feel like we are looking for a bottom in this area and I do have my needs covered with $280.00 call options in May '09.


HOGS - April '09 GLOBEX
Open - $61.00, High - $62.80, Low - $60.775, Close - $62.325 Up $1.475
Reviewing yesterday's comments I said "We got a market close back above the $60.45 level which will open the door to a longer-term target of $64.00 provided the April '09 contract continues to close above $60.45. I am looking for mixed markets tomorrow but with a friendly feel, I can see both directions tomorrow. April '09 support is $60.65, 60.32 and resistance is 60.975, $61.32 then up to $64.00 (outside of limit range but is the next resistance level). June '09 support is $71.35, $71.125 and resistance is $72.12, $72.45 then $72.75."

I pretty much wrong across the board on this one today, I got close on the support levels but the market blew through all of my resistance points which is fine by me. I had a short-term change of heart today as I sold the June '09 contract. I had/have a sell signal at $72.75 AND at $73.50 on a stop order and if that order is filled (the $73.50 would be) then the protective risk management buy stop would be around $73.85. I see some things building on the chart that doesn't look that good. The signal I had to buy at $70.60ish that started the rally is the same signal I have on the sell side today/tomorrow.

Bottom line - The cash market was stronger again today but there are not a lot of packers in the market place bidding for hogs and cutout was down so the packers took a double whammy in margin today. I haven't been this aggressive of a seller in a while but things are beginning to line up with charts and fundamentals. I am still not a bear longer-term but for now I want to be short and if I am wrong I will exit my positions and look to sell higher. June '09 support is $72.52, $72.25 and $71.35 which I believe is very possible. June resistance is $73.12, $73.75 and then $74.15 which I think is highly unlikely.

NW_LS500
Des Moines, IA     Wed, Mar 04, 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 loins generally steady;
butts firm; sknd hams 20-23 lbs 4.00-5.00 higher, 23-27 lbs 1.00 higher on a
light test; sdls bellies 14-16 lbs steady; lean trimmings unevenly steady.
Trading slow to moderate, with light to moderate demand and offerings.



-----------------------------------------------------------------
Loads PORK CUTS          :             75.63
Loads TRIM/PROCESS PORK  :              41.0
-----------------------------------------------------------------

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
-----------------------------------------------------------------------
03/04       116.6      56.26   73.65   61.39  35.17  97.93 39.09  71.30
Change :               -0.66    1.32    1.63  -5.03  -0.50 -2.42   0.01
-----------------------------------------------------------------------

NW_LS831
Des Moines, IA     Wed, Mar 04, 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 :  1.76 hgr   :  2.25 hgr   :  1.88 hgr   :  1.47 hgr
Negotiated      :             :             :             :
CARCASS BASIS   : 47.00-62.00 : 47.00-62.00 : 47.00-62.00 : 47.00-61.00
185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg
Plant Delivered :    57.76    :    59.13    :    59.00    :    54.90
--------------------------------------------------------------------------
Head Count      :   31,114    :   16,963    :   21,688    :    9,426
==========================================================================

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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