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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 - 12-02-08 - Mixed to lower grains and hogs today.

Dec 02, 2008

Hog Comments - 12-02-08 - Mixed to lower grains and hogs today.

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

CORN
I mentioned in yesterday's post that I thought we would move lower and test yesterday's low of $3.45 which we did and held.  I also said I thought we could test $3.51 to $3.52 which was also achieved early in today's session.  Our low today was $3.45 and our high was $3.54 in the March '09 contract and again we closed above the $3.48 number I spoke of yesterday.  

I also said yesterday that we should have good support at $3.40 and if we can't hold $3.40 we could test $2.90 in the March '09 contract.  According to the CFTC the index funds actually increased their net long position by approximately 8900 contracts but the commodity funds (shorter-term traders compared to index funds) decreased their net long position by approximately 13,900 contracts.  

Bottom line - I am going to continue with my thoughts from yesterday of having better trade tomorrow.  The Dow Jones closed 270 points higher today while Crude Oil was down nearly $2.00.  I believe we will open slightly better tonight and have relatively quiet trade tonight.  I have a buy signal tonight/tomorrow IF the market trades below $3.45 and if it does and comes right back there would be a buy at $3.45 1/2 on a buy stop order.  The protective exit stop should be placed $.01 below the most recent low.  I think the market is poised to test $3.60 1/2 in the March '09 sometime in the near future.

 

MEAL
As I said yesterday, if we get a close below $250.20 then we could test $238.80 sometime in the near future.  I believe this is our next target in the Jan '09 meal contract in the coming days.  The low of $248.50 held early this morning but failed to maintain a solid support level as the session went on.  Crude Oil made new lows today and added pressure to the soybean and meal market.

Bottom line - I think we can test $238.80 sometime in the near future to see if it will hold support.  I don't think we have a ton of downside risk below this level at this time but I do think we can test it.  I am looking for tomorrow to be a better day although I think we could trade below today's low of $244.30 first and then rebound some but I am not looking for a runaway day to the upside either.   


HOGS
I don't have much to add to the hog picture today other than I still think $64.32 is a good area of support in the Feb '09 contract and I still believe we could see $72.95 at some point prior to Feb '09 expiration.  The cutout seems to be firming some and is giving the market some room to hope.  I am not a bear at these levels but I am cautious here because nobody knows what will happen.  You can never get married to an opinion of the market because it is a good way to get hurt.  

Bottom line - the cash and cutout were better again today but I still think we could make a test of $64.32 before making another run higher in the Feb '09 contract.  I think we will have early lows tonight and then firm tomorrow as the day progresses.

 

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
-----------------------------------------------------------------------
12/02       121.0      59.64   71.52   68.93  32.67  86.81 53.17  74.69
Change :                0.21   -0.56    0.73  -3.10   0.39  2.29    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 :   .26 hgr   :   .18 lwr   :   .02 lwr   :   .99 hgr
Negotiated      :             :             :             :
CARCASS BASIS   : 43.25-56.76 : 47.00-56.76 : 47.00-56.76 : 43.25-55.41
185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg
Plant Delivered :    54.43    :    54.63    :    54.79    :    53.98
--------------------------------------------------------------------------
Head Count      :   25,061    :   10,791    :   13,659    :   11,077
==========================================================================

 

 

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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