Hog & Corn Comments - 01-14-09 - The hog market makes a bungee jump!

Published on: 16:40PM Jan 14, 2009

Hog Comments - 01-14-09 - The hog market makes a bungee jump!

 Jeremy Knutson
[email protected]

CORN - March '09 Electronic
Open - $3.64 3/4, High - $3.69 1/2, Low - $3.58 3/4, Close - $3.66 1/2 UP $.04

Corn showed signs of optimism in the overnight trade but by the time we opened the day session it seemed as though the optimism faded.  The market was trading higher than where it opened at 10:30 a.m. CST so that would indicate a good chance the market would close higher than the open which it did.

The March '09 contract made an attempt to test the number I mentioned Monday afternoon, $3.54 but we only got as low as $3.58 3/4.  We also settled near the $3.68 number I spoke of on Monday but settle just shy of it at $3.66 1/2.  The action today has the feeling of bottom searching; we neared the 50% retracement level and held support as well as rallied.  If we continue to close above $3.53-.54 I will look for the market to make another rally attempt.

Bottom line - The feeling I get after today's action is we will continue to move higher in the overnight session.  The first area of resistance is $3.69, then $3.71 and all the way up to $3.79 1/4 although $3.79 1/4 is a big stretch and I don't think we will get there.  We need to continue trading above $3.69 for a period of time before I get excited about $3.79 1/4.  I do think we will see some buy stops above today's high of $3.69 1/2 either tonight or tomorrow.  I'm looking for follow-through positive trade tomorrow.


MEAL - March '09 Electronic
Open - $295.70, High - $300.70, Low - $293.50, Close - $297.00 UP $2.00  

I said Monday I thought March '09 meal could test $278.20 to $268.00 and we have only gotten as low as $292.40 since Monday's down limit day.  I must say it is somewhat confusing to me.  I am still holding on to a cautious approach to March '09 meal because even though it closed higher today it hasn't done anything on the charts to make me change my opinion.  

If March '09 gets on a roll to the upside for some reason we should see good resistance at $308.00 on the daily charts.  I think this area will stop a rally if one develops from short-covering from Monday's selloff. The market seems firm because it isn't breaking like it looks like it should but I am not bullish here.

Bottom line - if the market decides to continue moving higher tonight which I think it will, we should see near-term resistance at $297.90 and $300.70.  We can't seem to break away from the $300.00 level in either direction.    I will continue to keep my calls in place for coverage because what I think and what the market does are two different things.  It is very important to know and understand that difference.


HOGS - April '09 GLOBEX
Open - $67.25, High - $67.30, Low - $64.27, Close - $66.70 DOWN $.57.

I said on Monday I thought we were too close to the contract low of $66.57 in the April '09 contract to not test it.  The market did it in full force today!  We traded down limit in the April '09 Globex contract and slowly found support and rallied back for the balance of the day.  I also said I didn't want to hedge unless we close the week below $66.57 and I need to wait two days to find out if I need to employ a strategy.  

Today's action looked very pretty on the daily chart.  We opened lower, tanked and then came screaming back to close out the day.  We also close above the previous contract low of $66.57 which was important to me.  The cash prices are higher this afternoon but cutout was down $1.64 but the market hasn't really sold off in after hours yet.  Today was the last day of the Goldman roll so the hog markets should get back to normal.  If we are in 2009 it is okay to use the word normal in conjunction with the markets right?  

Bottom line - I expect continued strength tomorrow but we may need to get the cutout number traded early in the session.  We could test $65.65 early in the session and then catch some support.  If we end up moving higher tomorrow I expect buy stops above today's high of $67.30 and should accelerate buying.  Higher cash and lower cutout isn't good for cash margins on the packing side so something has to give sometime.  Which will it be, cash or cutout?


 NW_LS500 Des Moines, IA     Wed, Jan 14, 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 steady in light test; butts mostly steady to firm; sknd hams 17-20 lbs steady, 20-27 lbs 2.00-4.00 lower; sdls bellies 14-16 lbs not established; lean trimmings steady to firm. Trading slow to moderate, with light to moderate demand and mostly moderate offerings.   ----------------------------------------------------------------- Loads PORK CUTS          :              88.0 Loads TRIM/PROCESS PORK  :              16.0 -----------------------------------------------------------------  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 ----------------------------------------------------------------------- 01/14       104.0      56.21   76.32   58.50  38.17  94.58 40.07  66.17 Change :               -1.64    0.66    0.89  -5.87  -0.26 -5.55   0.90 -----------------------------------------------------------------------
 NW_LS831 Des Moines, IA     Wed, Jan 14, 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 :   .34 hgr   :   .46 hgr   :   .57 hgr   :   .86 hgr Negotiated      :             :             :             : CARCASS BASIS   : 43.00-62.84 : 44.00-62.84 : 43.00-62.84 : 44.00-59.46 185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg Plant Delivered :    58.10    :    59.54    :    59.79    :    54.78 -------------------------------------------------------------------------- Head Count      :   28,764    :   15,627    :   19,070    :    9,506 ========================================================================== 

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