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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 - 11-04-08 - Grains rally but hogs can't find a leg to stand on.

Nov 04, 2008

Hog Comments - 11-04-08 - Grains rally but hogs can't find a leg to stand on.


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


CORN

As I said yesterday it felt as if the Dec '08 corn contract was going to firm up during today's trade session.  The first hour trade was positive for the Dec '08 contract even after the fact we gapped higher from yesterday on the intra-day charts.  Usually when we get gap openings either up or down, it is a signal of excitement that either continues or reverses.  Usually the market will reverse a gap opening just to fill the gap it left but today that wasn't the case, it kept going.

We traded above my high end resistance number of $4.18 that I talked about yesterday but failed to close above it.  The grain markets were higher today with the help of Crude oil being up as much as $7.86 at one point today.  The Dow Jones rallied into its close today which should bring more optimism into the overnight grain trade.

Bottom line - I expect a better opening tonight and then see the market selloff.  I feel $4.18 is still resistance and also $4.22 after that.  I see support at $4.11 and $4.09 1/2, I think we can reach $4.09 1/2 tonight or tomorrow.  The close for the day was good and there isn't anything that says the market should head lower on the daily or weekly charts just yet so if you haven't covered your feed needs yet I would do so with options.

 

MEAL
Dec '08 meal went through my resistance levels that I posted yesterday but failed to close above them.  It looks like Dec '08 meal will open better tonight and sell off (just a little) like corn.  I expect $277.30 to hold support tonight and tomorrow.  Informa released its projected yield for soybeans at 40.2 vs. 40.9 last month which was slightly positive to the soybean market. 

Bottom line - I expect and early low tonight and rally as the evening progresses but tomorrow I expect an early high and late low.  I expect the markets to be volatile tonight/tomorrow when the results of the Presidential race are known.  $281.20 is resistance for tomorrow and then up to $284.70 for the next level.


HOGS
As I said yesterday I thought the hog market would be mixed today and trade both sides of unchanged which we narrowly did.  The cutout number we had yesterday was negative but I felt the market already had some of it figured into the price.  I can't seem to find any positive fundamental news from the countryside and with that being said I can't seem to find any bullishness to the market.

There is nothing in the charts that would make me think we could rebound from these levels and with negative fundamentals and no technical indicators to get excited about I will remain short the market.  As I said yesterday we do have the Goldman roll coming up starting Friday I believe and going until approximately next Friday.  The roll will be selling the Dec '08 contract and buying the Feb '09.  Don't think the Dec '08 will lose value against the Feb '09 as a rule because these guys are professionals and can get their business done in ways that make logic look stupid!

Bottom line - I don't see any major rallies in the market at this time and I would expect more of the same from the market, continued lower movement until we see the cash and cutout come around.  Cutout was down $3.53 today so I expect very weak trade tomorrow.  The Dollar moved in our direction today but is still at elevated levels compared to earlier this year. 

 

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
-----------------------------------------------------------------------
11/04       153.4      57.55   80.84   60.03  41.34  87.31 38.80  65.71
Change :               -3.53   -3.63   -1.63  -4.85  -0.53 -6.52  -1.57
-----------------------------------------------------------------------

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 :   .89 lwr   :  1.47 lwr   :  1.50 lwr   :   .08 lwr
Negotiated      :             :             :             :
CARCASS BASIS   : 43.50-55.00 : 43.50-55.00 : 43.50-55.00 : 46.00-54.73
185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg
Plant Delivered :    53.21    :    53.43    :    53.65    :    52.53
--------------------------------------------------------------------------
Head Count      :   21,657    :    9,432    :   13,359    :    8,098
==========================================================================

 

 

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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