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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 - 10-21-08 - Grains lower but hogs find some life.

Oct 21, 2008

Hog Comments - 10-21-08 - Grains lower but hogs find some life.

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

CORN
Dec '08 corn did like I thought it would last night and today, it opened higher and traded better for a bit before it sold off.  $4.07 is 50% retracement of the $4.42 1/2 to the $3.71 low and if we continue to close above $4.07 we will have a shot at $4.42 1/2.  $4.15 1/4  to $4.17 is resistance for tonight and tomorrow in the Dec '08 corn contract.

I am looking for the Dec '08 contract to open slightly better tonight only to make an early high and sell off similar to last night.  I don't think the sell off will be as hard as we had last night or today but I do think we can test todays low of $4.06 1/2. 

Bottom line - I expect Dec '08 corn to open slightly higher tonight, make an early high and sell off like last night.  I think we could test $4.06 1/2 either tonight or tomorrow and the next level of support is $4.00.  Resistance for tomorrow is $4.15 1/4 to $4.17.

 

MEAL
Dec '08 meal also did what I thought it was going to do today similar to corn.  We opened better last night and traded higher but failed to find follow through.   Meal has shown us strength over the last few days and today was no different, it rallied the last half of the session.  We closed meal at $265.80 in the Dec '08 contract and that's just above the 50% retracement level (back to high of $271.80) of $265.50.  If we continue to trade above $265.50 tomorrow then a test of $271.80 could be in the cards within the next couple of days.

Bottom line - I expect Dec '08 meal to be slightly higher tonight and I believe it will try to rally toward the $267.00 to $268.00.  I feel like Dec '08 meal is finding some legs and looking to form a foundation of support.  I expect firm trade tomorrow in the Dec '08 contract.

 

HOGS
I am not sure what everyone was looking at today but Dec '08 hogs seemed to be a hot item.  The market opened firm and was stronger all day long.   I don't have ANY good reason for this as the cash market is in the tank, cutout isn't doing much and the U.S. Dollar Index had a huge day!  I don't know if something else is going on or what but it sure doesn't make sense.  

Cash was lower by $.71 nationally which isn't really surprising and cutout was up $.62 which doesn't sound any fire alarms either.  This could be some short covering happening and I think if we continue to move higher we could see good selling above the market.  Resistance for tomorrow is $58.25 and then $59.15.  I would expect good selling at $59.15 if we can get there.  

Bottom line - I expect hogs to open better tonight based on the small good news of cutout being up $.62 but the U.S. Dollar Index (is at its highest level since 02-23-07) is on a runaway train to who knows where.  Momentum would suggest the hog market to be higher tomorrow but I think we will have early highs and late lows.  

 

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
-----------------------------------------------------------------------
10/21       123.0      65.35   90.09   68.90  41.97  93.15 49.46  73.85
Change :                0.62    2.82   -0.36  -4.74   1.06  1.73    unc
-----------------------------------------------------------------------

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 lwr   :   .63 lwr   :   .56 lwr   :  1.32 lwr
Negotiated      :             :             :             :
CARCASS BASIS   : 52.00-60.50 : 54.00-60.50 : 52.00-60.50 : 52.00-56.75
185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg
Plant Delivered :    57.20    :    58.58    :    58.51    :    54.58
--------------------------------------------------------------------------
Head Count      :   22,289    :   12,543    :   14,885    :    7,404
==========================================================================

 

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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