Hog & Corn Comments - 01-22-09 - Mixed hogs but grains are lower.

Published on: 16:30PM Jan 22, 2009

Hog Comments - 01-22-09 - Mixed hogs but grains are lower.

Jeremy Knutson
[email protected]

CORN - March '09 Electronic
Open - $3.89 3/4, High - $3.94 3/4, Low - $3.78 1/2, Close - $3.87 1/2 Down $.02 3/4

March '09 corn finished higher in the overnight session but when Microsoft announce 5,000 job cuts the Dow Jones turned south and the Crude Oil market was already trading lower.  With all of this happening we saw the opening calls drift to lower instead of a $.02 higher open.  The March contract opened down $.01 but quickly sold off in conjunction with soybeans.  

The March '09 contract looks top heavy to me, I exited all except around 20% of my long futures position (which are long against $3.60 March '09 puts) as of Friday and Tuesday morning's open.  I still have $3.60 puts in place to buy against if the market gets that low or if I change my mind I can get long the market and know that I am not going to be in a situation where the market can move against me that much.  I exited March '09 corn at $3.77 and $3.97 on Friday and Tuesday respectively.  

Bottom line - I expect corn to continue to see weakness as we had a relatively low volume day today.  We have a gap at $3.90 1/4 that we could look to fill tonight and if we do I have a sell signal at $3.88 stop.  If the sell stop is filled then I would have a risk management buy stop above the most recent high in the overnight trade.  I look for the market to be firm early in the evening trade hours but then fade.  I expect tomorrow to be a selloff day with a test of $3.83 1/2 to $3.82 1/4.

MEAL - March '09 Electronic
Open - $320.00, High - $325.20, Low - $313.50, Close - $318.20 DOWN $2.20

March '09 meal was weak along with soybeans today based on South American rain forecasts for the weekend.  The forecast is for some rain showers to move through some of the troubled soybean areas.  I exited half of my soybean meal contracts on Tuesday morning around $312.50 to reduce my long exposure in the market.  I have $300.00 Feb '09 put options in place to protect the downside of the market in the event it would have moved lower but my options have an expiration date of Jan 23rd. 

Bottom line - March '09 meal looks like it could test $317.50 to $316.50 for support tonight but I am not a big fan of higher prices right here.  We got a warning signal last week and we are setting up to provide another one this week pending on tomorrow's close.  I expect weaker trade tonight and tomorrow but the market direction will be influenced by weather forecasts for South America. 


HOGS - April '09 GLOBEX
Open - $65.90, High - $66.30, Low - $65.35, Close - $65.40 UP $.05 

April '09 lean hogs have been trolling along the bottom of its price range for over a week now but has not built has failed to pick a direction to break out of.  The bottom end of the range is the low from January 14th at $64.27 and the top of the range is $67.30.  The longer the market trades in this area the larger the move it will have when it breaks out of its range.  

The market has experienced good buying below $65.30 in the April '09 contract and I also have a buy signal at $65.55 stop with a risk management protective sell stop at $64.00.   The cash and cutout markets were higher today which should bring some stability to futures prices for tonight and tomorrow.  Cutout was up $.22 today which isn't much but it beats being lower.

Bottom line - I expect tomorrow's trade in the April '09 contract to be firmer with $65.35 being an area of support, the market settled today at $65.40 just $.05 above support.  If $65.35 is violated for a couple hours tonight or tomorrow then we could see a test of $65.12 and then possibly down to $64.40 although I see it as unlikely.  I hate to sound like a broken record but I do not want to be extensively short at these levels.  I am waiting for a rally opportunity to apply some hedges if the environment feels right.  I look for firmer trade tomorrow with an ultimate projection point of $66.30 in the short-term and then $67.12.


 NW_LS500 Des Moines, IA     Thu, Jan 22, 2009     USDA Market News  USDA NATIONAL CARLOT PORK REPORT as of:  3:00 P.M. Purchases equated to FOB Omaha Basis.  Compared to Wednesday's Close:      Fresh bone-in loins 1.00-2.00 higher; butts steady; sknd hams 17-20 lbs 1.00-4.00 lower, 20-27 lbs steady; sdls bellies firm on a light test, lean trimmings not established. Trading slow to moderate, with light to moderate demand and offerings.    ----------------------------------------------------------------- Loads PORK CUTS          :             81.75 Loads TRIM/PROCESS PORK  :               4.0 -----------------------------------------------------------------  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 ----------------------------------------------------------------------- 01/22        85.8      58.13   75.92   61.50  37.12 100.04 41.25  74.12 Change :                0.22   -1.85    0.53  -0.87  -0.48  0.02   4.63 -----------------------------------------------------------------------
 NW_LS831 Des Moines, IA     Thu, Jan 22, 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 :   .35 hgr   :   .81 hgr   :   .70 hgr   :   .63 hgr Negotiated      :             :             :             : CARCASS BASIS   : 42.00-63.45 : 42.00-63.45 : 42.00-63.45 : 45.00-61.00 185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg Plant Delivered :    57.58    :    59.97    :    59.95    :    54.39 -------------------------------------------------------------------------- Head Count      :   30,685    :   14,039    :   17,515    :   12,790 ========================================================================== 



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