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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 - 12-09-08 Not much for today...

Dec 09, 2008

Hog Comments - 12-09-08 - Not much for today...

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

CORN
Open - $3.30, High - $3.36 3/4, Low - $3.24, Close - $3.27 3/4

I said yesterday that we should try and test $3.36 1/2 and maybe even $3.40.  I was half right, we got as high as $3.36 3/4 today but couldn't get to $3.40.  The market is still experiencing less volume due to the holiday's and therefore the market tends to be more volatile.   It looks like the March '09 contract is looking to take another breather tomorrow and trade sideways lower and test $3.24 again.

Yesterday's volume was largest volume day we have had in the March '09 contract life and therefore I believe we are searching for a bottom.  I said last week that my target area was $2.90 or so which still isn't out of the question.  Again, if you don't have feed corn coverage on I would do so via call options (even cheap out of the money calls) to get coverage in place for when the market decides to turn.

Bottom line - I expect the market to trade lower tonight and test $3.24 again maybe fill the little gap we left on the hourly chart at $3.22 1/2.  The Dow Jones sold off going into its close so the corn opening tonight should experience some early pressure.  There should be good support at $3.21 1/4 tomorrow although I don't expect it to get this far.  Support tomorrow will be $3.24/$3.21 1/4 and I expect sideways to weak trade. 
 

MEAL
Open - $247.70, High - $248.50, Low - $243.00, Close - $244.80


I was wrong on my call for Jan meal today, I thought it would have follow through strength today but it was the opposite.  I did however say I thought we would test $244.40 today which we did and traded through to find today's low at $243.00.  It looks like the market is poised to fill the gap we left yesterday morning at $239.80 in the hourly chart.  I wouldn't rule out a test of this area tomorrow.

Bottom line - as I mentioned in corn, Jan meal had its largest volume day for its contract yesterday.  It looks like market wants to continue its break from yesterday's big rally and then take off to the upside again.  I look for a test of $243 and possibly $239.80 which would fill the intraday gap on the chart.  I am still not bearish here; keep protection on even if it is with out of the money calls! 


HOGS
Open - $63.95, High - $64.95, Low - $63.60, Close - $64.12 


Feb hogs broke my support level of $63.92 but didn't get to the $63.00 area of support and it also got within $.45 of my resistance point of $65.40.  The cash prices came in a couple dollars stronger in the noon USDA reports and the market reacted favorably on those reports but couldn't seem to hold the rally.  The Feb '09 contract closed above $63.77 which is the 50% retracement level back to the low of $60.50, this is good.  

If we continue to hold support at $63.77 then we should make another run at $67.05 in the near future.  The U.S. Dollar Index is marginally higher today but it lost some ground yesterday that it is having trouble making up.  Again I still believe the dollar is toward the top end of its range and that it will work its way lower over the months ahead.  

Bottom line - I expect Feb '09 hogs to test today's low of $63.60 again and then POSSIBLY test $63.00 but I don't think we will get much lower than that.  The cutout was down $.27 today and cash was higher but not as high as it was on the noon report.  I look for an early low and late high tomorrow.

  

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
-----------------------------------------------------------------------
12/09       117.6   ***60.81   73.88   69.10  36.50  87.70 57.76  68.19***
Change :               -0.27    3.42   -0.19  -2.82   0.95  0.45  -6.00
-----------------------------------------------------------------------
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 :   .71 hgr   :  1.01 hgr   :   .85 hgr   :   .46 hgr
Negotiated      :             :             :             :
CARCASS BASIS   : 44.25-57.00 : 46.00-57.00 : 46.00-57.00 : 44.25-56.08
185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg
Plant Delivered :    54.97    :    55.09    :    55.02    :    54.86
--------------------------------------------------------------------------
Head Count      :   28,601    :   15,283    :   19,566    :    8,635
==========================================================================

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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