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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 - 12-04-08 - Do I really need to say what happened today?

Dec 04, 2008

Hog Comments - 12-04-08 - Do I really need to say what happened today?

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

CORN
I said yesterday that I thought we would make a test of $3.40 in the March '09 contract and we had no problems with that today.  March '09 corn made a low of $3.33 1/4 today and didn't spend a lot of time above $3.40.  I would say we need to close the market back above $3.40 by tomorrow's close otherwise we could see some support at $3.25 but ultimately $2.90 in the March '09 contract.

 I also said yesterday that we had/have a buy signal at $3.45 1/2 stop.  This signal is still in play for tonight and tomorrow however, I don't know as though we can get it done.  It would be a friendly opening tonight if we gap below $3.33 1/4 and then move higher from there which is a possibility but I still don't think we will muster up enough momentum to carry us through $3.45 1/2 tonight or tomorrow.  If it doesn't get through $3.45 1/2 tonight or tomorrow then the signal is gone.  

Bottom line - I expect March '09 corn to open lower tonight and trade lower early on and then try to firm some going into tomorrow morning.  I think we could see some short covering tomorrow going into the weekend.  $3.25 is our next support level and below that is $2.90 so the market needs to close above $3.40 tomorrow in my opinion to keep from drifting further.  

 

MEAL
Jan '09 meal held in there today only closing lower by $1.20 at $245.50.  We still haven't touched the $238.80 number I have talked about this week but I am still not ruling out a test of that level.  Crude Oil was down $3.07 today and made new lows again at $43.36 which is$103.91 off of the high in July of this year!  It makes one wonder how muc h lower the Crude Oil market can go.  I have support around $40.13 which I mentioned a couple of weeks ago and it looks like a likely target at this point.  The next level of support below $40.13 is $33.80 or so.

Bottom line - I expect Jan '09 meal to be relatively strong tomorrow based on the trade activity we had today and the activity on the daily chart the last two days.  I thought we were going to make a test of $238.80 but I don't think tomorrow is that day, I think tomorrow will be firm.

 

HOGS
Feb '09 hogs closed at $63.65 which caught me off guard today, I expected them to firm based on last night's cutout value and the margins packers have.  The U.S. Dollar Index was all over the place today but for the most part it was .40 - .80 lower.  It looks like $63.00 is the next level in Feb '09 hogs and if we don't close above $63.75 (I prefer $64.32) tomorrow then I think we could make a run for $60.50.

I am not bearish hogs but I need to be objective in what I see in the chart because it is what I use for price direction. I still believe longer-term we can reach the low 70's within the next couple of months.  Cutout took back some of its gains from yesterday by dropping $.72 for the day.

Bottom line - I think we could test $63.00 tomorrow and I think it will hold and possibly bounce off of that area.  It feels like we should have some short-covering going into the weekend tomorrow and again I would like to see a close above $63.75.

 

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
-----------------------------------------------------------------------
12/04        47.5      60.24   72.12   67.65  32.50  86.75 57.51  71.53
Change :               -0.72   -0.61   -0.20  -0.45  -0.16 -0.11  -3.17
-----------------------------------------------------------------------

 

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 :   .14 hgr   :   .03 lwr   :   .20 lwr   :   .70 hgr
Negotiated      :             :             :             :
CARCASS BASIS   : 45.00-57.00 : 45.00-56.00 : 45.00-56.00 : 51.00-57.00
185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg
Plant Delivered :    54.14    :    53.85    :    53.80    :    54.68
--------------------------------------------------------------------------
Head Count      :   25,391    :   11,290    :   15,700    :    9,291
==========================================================================

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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