Hog & Corn Comments - 03-02-09 - Hogs take a break from the recent rally.

Published on: 16:21PM Mar 02, 2009

Hog Comments - 03-02-09 - Hogs take a break from the recent rally.

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CORN - May '09 Electronic
Open - $3.57 1/4, High - $3.62 3/4, Low - $3.44 1/2 Close - $3.50 1/4 Down $.08 3/4
May '09 corn did what everything else was doing today, moving lower.  I had support last week at $3.59 1/4 where I purchased futures ($3.60 actually) against $3.60 May'09 call options to get further coverage in place after taking some equity out of the market the day before.  I have around 25% exposure to the downside that has unknown risk however all of my other positions have a know risk factor.

As I watched the May '09 corn contract sink lower and lower today it did find some support around $3.45 1/2.  The market made its big move during the first hour of trade then had $.01 1/2 worth of follow through to the downside during the second hour and the third hour was looking for a retracement of the earlier downside move.  It is hard to have a friendly tone to the market now that we have pierced the $3.50 1/2 support level in the May '09 contract.  Last Friday's close below $3.63 wasn't the best Weekly close we could've had.  A close below $3.63 on a consistent basis would project another test of the contract low of $3.15 3/4 set on 12-05-08.  

Bottom line - today's action is piggy backed on the decline of the Dow Jones making its lowest low since 1997 by the help of our friends at AIG needing more taxpayer money.  The Dow Jones aside I am looking for an early low tomorrow and firm as we move forward into the day.  I think it is safe to say we should see a test of today's low of $3.44 1/2 and then attempt to rally toward $3.50 3/4.  Support for tomorrow in the May '09 contract is $3.44 1/2 then small support at $3.37 1/2 and resistance should be $3.50 3/4 then $3.52 1/4.  I am looking for some turn around Tuesday action tomorrow.


MEAL - May '09 Electronic
Open - $267.50, High - $269.30, Low - $259.50, Close - $260.80 Down $9.00
May '09 meal wasn't anything special today as it followed the same trade tendencies as the rest of the Ag commodities.  I have a cycle low in place on May '09 meal as of last Thursday but that doesn't mean the cycle is that exact low; it makes a projection in the area of the low.  Looking at today's trade we see some signs of a possible recovery tomorrow.  The troubling part of this cycle low is the market has now closed below $270.70 for three straight days and that would suggest a test of the contract low at $237.00.   I have call option positions in place where I know my risk and will continue to use this strategy until I see signs that would suggest otherwise.

Bottom line - I see May meal opening lower tonight on follow through weakness and then finding support and firming from there.  Again, similar to corn I believe the Dow Jones is going to have some effect on tonight's open for the Ag sector.  I see tomorrow having an early low and a late high looking for a turnaround Tuesday type action.  Support is $259.50 then $255.30 and resistance is $263.90 then $265.20.  I am looking for an early low and late high tomorrow but it all depends on how the Dow Jones reacts tomorrow.


HOGS - April '09 GLOBEX
Open - $60.925, High - $60.975, Low - $59.825, Close - $60.275 Down $.625 
April '09 hogs retraced some of its gains from last week today closing $.625 lower on the day.  Morning cash bids were up nicely according to the USDA but with the outside markets in the crapper it was hard to get anything going to the upside.  Also some of the cash optimism was factored into last week's trade.

The market action in the April '09 contract was just a pause to make a move higher in the future.  We bounced off of the 50% retracement level of Friday's price range ($59.825) and closed above it.  With this being said it looks as if the market wants to make another run at Friday's high of $61.075 at some point in the near future.  June '09 is also holding above $71.175 which is the 50% retracement level back to the $69.62 low prior to our rally.  As long as we hold $71.175 the market is still poised to test the most recent high of $72.75 at some point in the near future. 

Bottom line - I am looking for some early weakness tonight/tomorrow and test the $59.82 level in the April '09 and also the $71.175 level in the June '09 contract.  Cutout was mildly lower tonight only down $.13 but we sure could have used some positive news in what seems to be a huge bear blanket surrounding the markets today.  I expect some recovery for the hog sector tomorrow along with the grains with projections of early lows and late highs.  April '09 support for tomorrow is $59.825 then $59.55 and if we get bearish then $58.60, resistance is at $60.45 then $61.075-$61.275.  June '09 support is $71.175 then $70.825 while resistance should be $71.925-$72.125 then $72.75.  I don't think the high end of my resistance levels for either April '09 or June '09 are attainable tomorrow unless we get major rallies in other markets.


 NW_LS500 Des Moines, IA     Mon, Mar 02, 2009     USDA Market News  USDA NATIONAL CARLOT PORK REPORT as of:  3:00 P.M. Purchases equated to FOB Omaha Basis.  Compared to Friday's Close:         Fresh loins steady to weak; butts, sknd hams, and sdls bellies steady; lean trimmings firm. Trading slow, with light to moderate demand and mostly moderate offerings.     ----------------------------------------------------------------- Loads PORK CUTS          :             52.38 Loads TRIM/PROCESS PORK  :               6.0 -----------------------------------------------------------------  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 ----------------------------------------------------------------------- 03/02        58.4      56.22   70.76   60.01  40.12  98.00 40.32  71.26 Change :               -0.13   -0.36    0.26   0.00  -0.16 -0.25    unc -----------------------------------------------------------------------
 NW_LS831 Des Moines, IA     Mon, Mar 02, 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 :  1.32 hgr   :   .13 hgr   :   .88 hgr   :   .67 hgr Negotiated      :             :             :             : CARCASS BASIS   : 46.00-59.00 : 46.00-59.00 : 46.00-59.00 : 46.00-59.00 185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg Plant Delivered :    55.22    :    55.44    :    56.19    :    52.63 -------------------------------------------------------------------------- Head Count      :   24,537    :   11,776    :   17,344    :    6,489 ========================================================================== 

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