Corn – May ’11 corn traded lower early today then rebounded and managed to stay in positive territory for the day. The market dropped to $6.61 1/4 on its low and found support. $6.62 1/2 is the 50% retracement level back to the $6.08 low that we had on March 16th. The volume was light for the day but non-the-less we held support. I don’t think we are going to see any real fireworks tomorrow as everyone should be positioning for the report on Thursday.
I’m still friendly corn at these levels from a TECHNICAL perspective. I think the market wants to make new contract highs. This report on Thursday should bring a big bat to the ball game and send the market moving again in one direction or the other. If you haven’t protected yourself from higher prices and need to do so soon, I would make sure you take a hard look at tomorrow prior to the report on Thursday! Use known risk strategies if you can.
Bottom Line – I’m looking for an early low and late high tomorrow.
Meal – I’m still of the opinion that the May ’11 meal contract is just taking a breather. The May ’11 contract touched the 62% retracement level of $352.30 today and rallied off of it. It looks to me like meal is going to start working its way higher again toward our most recent high of $373.10. I say this but keep in mind that the Acreage report on Thursday will trump anything and send the market in any direction it wants!
Bottom Line – Based on today’s action I’m looking for an early low tomorrow.
Hogs – June ’11 hogs closed higher today after making a fresh contract high of $104.125 vs the old high of $104.10. Typically when the market challenges an old high it will make a run at it and then sell off before taking another run at higher high’s. With that said, I’m of the opinion that the markets back off to some degree before charging higher. I think we will continue to trek higher but maybe take a break for a day or two.
The Acreage report in grains will have an effect on the hogs come Thursday so it is hard to tell what the deferred months will do from Thursday on. If we didn’t have the report coming out I would say that the market looks poised to move higher over the immediate-term.
I wrote last week about independent producers that negotiate their pig sales. I’ve had some correspondence back on that from some of you that do negotiate. We need more negotiated hogs out there, the pool is currently too small. Just like a seller should want more than two people at an auction to give better price discovery, we should want more negotiated pigs. If you don’t know of anyone that does negotiate please drop me an email and I will connect you with someone who is and you can visit about the pros and the cons.
I have to say with all of the individuals that I’ve come across over the years, I have not seen anyone move from negotiating hogs to a formula contract just because. It may happen if there is good logic behind it but it has never (in my experience) been because they thought it was a better deal or way to market. Even if you have to start out small, try to get your feet wet and try for yourself to see if it is truly worth your time. If you’ve already tried it before and you don’t do it anymore, you must have your reasons and I respect that.
These markets are too volatile to only have the few negotiated pigs that we have. We need more people in the game! Please keep in mind that I’m not saying these things out of disrespect for anyones approach to marketing. I’m saying it for what I and several others believe is the good of the producers and the industry. My apologies in advance if I’ve offended anyone.
Bottom Line – I’m looking for an early high in the JUNE ’11 hog contract for tomorrow.
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