Hog & Corn Comments - 01-06-09 - Hogs say no to lower prices.

Published on: 19:37PM Jan 06, 2009

Hog Comments - 01-06-09 - Hogs say no to lower prices.

Jeremy Knutson
[email protected]
Open - $4.10 1/4, High - $4.29, Low - $4.07 1/4, Close - $4.27 1/2 Up $.16 1/4.

Corn had another positive day of trade closing $.16 1/4 higher on the day.  I said yesterday the market created a warning signal last week if you were long the market but it wasn't a sell signal.  I also said there was a potential sell signal at $4.15 on a sell stop which would have been triggered today but the high was $4.18 1/4 when it would have filled and a buy stop loss would have been placed at $4.19 1/4 and we obviously would have been stopped out.  I didn't take this trade because it all happened in the first hour of trade which I try to avoid if I can.

I said if we continue to trade/close above $4.04 in the March '09 contract that we could see a test of $4.23 3/4 in the near future.  Today was that day so now my number is $4.23 3/4, if we continue to trade/close above this number particularly on Friday then I think our next quick target is $4.36 1/2 then $4.50 and finally up to $4.77.

Bottom line - I think we will open unchanged to higher tonight and make an early high in the overnight trade.  We may test the high of $4.29 but I think we should also test $4.23 3/4 and even $4.22 1/2.  I believe we will make early highs tomorrow and then fade the balance of the day and keep in mind $4.23 is a key area for now to keep the March '09 contract trending higher.  I am still holding my calls for feed corn and will do so until the market tells me differently.


Open - $298.60, High - $305.00, Low - $296.20, Close - $301.00 Up $2.80.

I said yesterday we had a warning signal in March '09 meal from the previous week.  I also said I thought we could test $296.30 and our low was $296.20 early last night.  I would still like to see the March '09 meal close above $305.70 before I jump back in the friendly camp again.   There was good support around $300.00 in the March '09 contract today and we finally closed above $300.20 which we have failed to do during the last five trading sessions.

I am looking for support at $300.00 tonight and tomorrow but if that is breached we could test $298.60 however I am looking for $300.00 to hold tonight.  I am having a hard time getting bullish up here without getting a close above $305.70 so I will remain cautious about my long position here until I see some signs of commitment to the upside.

Bottom line - I look for a test of $300.00 and possibly $298.60 tonight but then find support and firm up.  $305.00 will be the upside target tomorrow with the ultimate prize being at $305.70 however I don't think we will get this high tomorrow.  I am looking for a mixed market in meal tomorrow as it looks for direction from soybeans.  


Open - $62.775, High - $64.20, Low - $62.70, Close - $63.95 Up $1.275.

It didn't take much for Feb '09 hogs to take back all of yesterday's losses and add more gains today.  I am holding with my opinion that the Feb '09 contract can reach $67.05 in the near future but we will need to stay above $63.95 for me to be confident.  Today we closed right at $63.95, the 62% retracement back to the $67.05 high.  

I am going to hedge in April '09 instead of Feb '09 when the time comes because I believe it will be a better contract to hedge in this point forward as a result of my studies.  Again, at this point I am not bearish the market but will change my mind in a hurry if the market tells me to.  The cutout was $.80 higher last night and helped spark some buying today as we traded firmer most of the day.

Bottom line - I expect hogs to open higher tonight/tomorrow and rally some but make an early high and a late low.  Cutout was up $2.54 today so it looks like the market should be strong again tomorrow however I believe some of the gains today were in anticipation of tonight's cutout number. 


 NW_LS500 Des Moines, IA     Tue, Jan 06, 2009     USDA Market News  USDA NATIONAL CARLOT PORK REPORT as of:  3:00 P.M. Purchases equated to FOB Omaha Basis.  Compared to Monday's Close:         Fresh loins steady to weak; butts generally steady; sknd hams 17-20 lbs steady, 20-23 lbs not tested; 23-27 lbs firm; sdls bellies mostly 2.00-5.00 lower; lean trimmings steady. Trading slow to moderate, with light to moderate demand and offerings.    ----------------------------------------------------------------- Loads PORK CUTS          :            115.13 Loads TRIM/PROCESS PORK  :              13.0 -----------------------------------------------------------------  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 ----------------------------------------------------------------------- 01/06       128.1      58.16   76.74   57.58  43.40  93.08 45.30  67.46 Change :                2.54   -0.06    1.18   6.99  -0.35  8.36  -2.58 -----------------------------------------------------------------------
 NW_LS831 Des Moines, IA     Tue, Jan 06, 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 :  1.37 hgr   :  1.74 hgr   :  1.54 hgr   :   .95 hgr Negotiated      :             :             :             : CARCASS BASIS   : 40.50-56.50 : 40.50-56.50 : 40.50-56.50 : 41.00-54.05 185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg Plant Delivered :    52.50    :    53.37    :    53.46    :    50.74 -------------------------------------------------------------------------- Head Count      :   25,279    :   13,748    :   16,373    :    8,446 ========================================================================== 


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