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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 - 02-04-09 - Back on the hog roller coaster.

Feb 04, 2009

Hog Comments - 02-04-09 - Back on the hog roller coaster.



If you have questions, comments or suggestions, contact me at 1-877-212-2564 or email me at jknutson@hurleyandassociates.comTo read what I was thinking at the highs and lows of the market go to  www.leanhog.net to view my archived posts.
Jeremy Knutson
CORN - March '09 Electronic
Open - $3.61 1/4, High - $3.69 1/4, Low - $3.55 3/4, Close - $3.58 1/4 Down $.03 1/2
I didn't have much of a commentary yesterday because of my schedule but I did write enough to say I expected early highs and late lows today and got the exact opposite.  The market came out of the starting gate with enthusiasm but it was too much for its own good.  I also talked about the $3.59 1/2 area and how we failed to close below this number yesterday which would be supportive to the market.
 
March '09 corn played games most of the day as we traded .03-.05 lower and then we rallied to unchanged before selling off again around 12:45 p.m. CST and making new lows.  The trade was looking for sell stop orders below yesterday's low of $3.56 but failed to find many as we only made a new low by 1/4 of a cent.  I feel like a lone ranger out here but I am not bearish the market yet, I am viewing this as an opportunity to catch up on feed need coverage via known risk strategies i.e. options.  If we close below $3.59 for two consecutive days then I may change my mind and adjust my positions but for now I need the market to prove me wrong.
 
Bottom line - I look for March '09 to open slightly weaker tonight but then find some support around the $3.56 area and bounce from there.  I will be looking for a test of $3.62 1/2 to $3.64 for resistance tomorrow.  I like the fact the market rallied near the closing bell in today's day session which makes me think the bottom feeders are searching for a deal.  I expect better trade tomorrow.

 
MEAL - March '09 Electronic
Open - $301.70, High - $306.50, Low - $297.00, Close - $300.50 Down $1.30
March '09 meal met my upside target for today of $305.50 and actually got as high as $306.50 for the day's high.  Like I said yesterday I need to see March '09 meal close above $305.00 for me to get excited about the market moving higher.  I have conflicting indicators, my cycle indicator projects a downward turn while I see signs on the charts that we may be slowing down.
 
 
Bottom line - I am looking for meal to have a better trading day tomorrow because we rallied off of our session lows going into the market close.  Today was a relatively low volume day for corn, soybeans and meal so we have to take that into consideration.  I am looking for a test of $301.80 to $302.90 for tonight/tomorrow.  Make sure you have some type of meal price protection in place via options if you can.

  

HOGS - April '09 GLOBEX
Open - $62.425, High - $62.625, Low - $60.60, Close - $60.875 Down $1.275

April '09 futures didn't respond exactly the way I thought it would today.  We saw weaker cash markets early this morning and that allowed the market to stub its toe a bit.  I said yesterday I thought we would see buy stops above yesterday's high of $62.52 but we didn't get that high during the day trading session.

The aforementioned morning cash reports were lower spooking the market causing a sell off and it had very little interest in price recovery after that.  We did see a small pop in the market after the noon reports were released but we couldn't get any follow through to the upside.  I said yesterday that I like the hog market more and more each day and that is still true but the longer we trade within the $63.25 to $60.25 price range the larger the break out will be.  The question is which direction is the break out going to be, up or down?

Bottom line - I am looking for the April '09 contract to be steady to weaker in the overnight trade until we see some volume from the day session tomorrow.  I expect support to be at $60.60 and then down to $60.25, we do not want to close below $60.25 if we can help it.  Because we didn't get our early low and late high scenario today I am expecting it tomorrow.  Afternoon cash

NW_LS500
Des Moines, IA     Wed, Feb 04, 2009     USDA Market News

USDA NATIONAL CARLOT PORK REPORT as of:  3:00 P.M.
Purchases equated to FOB Omaha Basis.

Compared to Tuesday's Close:        Fresh loins generally steady;
butts steady to 1.00 lower; sknd hams 17-23 lbs 3.00-5.00 lower, 23-27 lbs
steady to 1.00 higher; sdls bellies steady; lean trimmings firm. Trading slow
to moderate, with light to moderate demand and offerings.



-----------------------------------------------------------------
Loads PORK CUTS          :             103.5
Loads TRIM/PROCESS PORK  :              11.0
-----------------------------------------------------------------

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
-----------------------------------------------------------------------
02/04       114.5      57.09   76.07   58.66  40.37 101.64 37.45  72.31
Change :                0.09    0.44   -1.52   3.83   0.08 -1.18    unc
-----------------------------------------------------------------------
 
NW_LS831
Des Moines, IA     Wed, Feb 04, 2009     USDA-IA Dept of Ag Market News

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 :  1.52 lwr   :  1.65 lwr   :  1.70 lwr   :  1.08 lwr
Negotiated      :             :             :             :
CARCASS BASIS   : 42.50-60.14 : 46.00-60.14 : 44.00-60.14 : 42.50-56.76
185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg
Plant Delivered :    55.72    :    57.19    :    57.40    :    53.27
--------------------------------------------------------------------------
Head Count      :   24,429    :   11,044    :   14,279    :    9,970
==========================================================================
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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