Hog & Corn Comments - 01-23-09 - Wild day in the grains but hogs knew their direction.

Published on: 13:14PM Jan 26, 2009

Hog Comments - 01-23-09 - Wild day in the grains but hogs knew their direction.

Jeremy Knutson
[email protected]

CORN - March '09 Electronic
Open - $3.85, High - $4.01, Low - $3.80 1/2, Close - $3.90 1/2 Up $.03

March '09 corn got off to a great start Friday morning as it opened $.04 lower and rallied from there.  The first hour trade was positive in the sense it was trading higher than where it opened at 10:30 a.m. CST and as I have said before if that happens statistically we will close above that level approximately 80% of the time.  That was the case today, we closed higher than where the day session open was.

I was reviewing my comments from Thursday as Friday's trade progressed and thinking wow, I am 0 for 3 today on market direction.  Everything I thought would happen didn't, I did expect a test of $3.83 1/2 to $3.82 1/4 which did happen except it was in the overnight trade session vs. the day session.  The market also filled the gap area I spoke of at $3.90 1/4 and rallied right through it.  The talk was less production out of South America and the general belief that beneficial rains would not fall in South America this weekend.

Bottom line - We have traded above $3.93 3/4 three of the last four trading days but have failed to close above it.  $3.93 3/4 is the 50% retracement level back to the most recent high of $4.29 on Jan 6th, 2009.  If we continually fail to close above this number I believe we will test $3.58 3/4 which is where I believe the market can go.  If we do get to this level I will be aggressive in covering feed corn needs for the future because I AM NOT a long-term bear of the corn market.  I expect weak markets on Sunday night and Monday but of course we are subject to the rains in South America but I still go with a lower call.


MEAL - March '09 Electronic
Open - $316.40, High - $326.00, Low - $314.80, Close - $318.30 Up $0.10

Action in March '09 meal today was a fluke in my opinion; it is the spec crowd betting on the rains that may happen in South America this weekend.  Like I said in the corn comments will be seeing a big reduction in soybean and corn production from South America if the dryness persists.  If indeed it stays dry we see continued support in the meal market just as it has been supported thus far on the issue of South American dryness.

Bottom line - I am still not a big fan of higher prices even though I was eating crow for most of Friday's day trade session.  I still have some upside on meal but it is minimal at best, I am waiting for a pull back toward $281.00 March '09 to extend my coverage again.  This week is the third out of the last four weeks to give warning signals that a top may be near.  I am being patient for now in regards to owning soybean meal.  If rains fail to materialize and it sends the market higher it will change the look of the charts which in turn will change my mind but for now I will stand aside.  I look for weak trade Sunday and Monday.


HOGS - April '09 GLOBEX
Open - $65.45, High - $65.45, Low - $64.02, Close - $64.40 Down $1.00

April '09 hogs have me eating my words to some degree today as I thought the market would hold support and rally.  I said April hogs had support at $65.35 but if we trade below this level for a couple of hours we could test $65.12 and then $64.40 (which I thought was unlikely).  The market bottomed out today at $64.02 before settling right at my number of $64.40.  

As I have been saying for some time now I am still waiting for a bottom to show up but the market is being stubborn.  If we close below $64.02 for two straight days we could be in for some extended downside from there.  As I said yesterday, the longer the market trades within a range the more explosive the breakout will be.  If April does break through $64.02 I may put some hedges in place for hogs going to town in the next 30 days.  I do not see the need however to be aggressive with longer-term hedges at this point.  

Bottom line - I am expecting sideways to lower trade on Monday as the market continues to look for direction outside of its current range.  There isn't much to say other than we need $64.02 to hold as support otherwise we could be setting up for another leg lower.


 NW_LS500 Des Moines, IA     Fri, Jan 23, 2009     USDA Market News  USDA NATIONAL CARLOT PORK REPORT as of:  3:00 P.M. Purchases equated to FOB Omaha Basis.  Compared to Thursday's Close:       Fresh loins steady to weak; butts steady; sknd hams 17-23 lbs steady to firm, 23-27 lbs steady to 1.00 lower; sdls bellies and lean trimmings not established. Trading slow to moderate, with light to moderate demand and offerings.    ----------------------------------------------------------------- Loads PORK CUTS          :             67.13 Loads TRIM/PROCESS PORK  : -----------------------------------------------------------------  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 ----------------------------------------------------------------------- 01/23        67.1      57.81   73.54   63.10  38.96 101.01 40.93  74.12 Change :               -0.32   -2.38    1.60   1.84   0.97 -0.32    unc -----------------------------------------------------------------------
 NW_LS831 Des Moines, IA     Fri, Jan 23, 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 :   .92 hgr   :   .53 hgr   :   .63 hgr   :   .04 lwr Negotiated      :             :             :             : CARCASS BASIS   : 40.25-62.40 : 42.50-62.40 : 40.25-62.40 : 45.00-61.00 185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg Plant Delivered :    58.50    :    60.35    :    60.47    :    54.35 -------------------------------------------------------------------------- Head Count      :   34,270    :   17,538    :   22,813    :   10,947 ========================================================================== 


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