Hog & Corn Comments - 03-04-09 Looking for a downside reversal in hogs tomorrow.

Published on: 17:41PM Mar 04, 2009
Hog Comments - 03-04-09 - Looking for a downside reversal in hogs tomorrow.


If you have questions, comments or suggestions, contact me at 1-877-212-2564 or email me at [email protected]urleyandassociates.comTo read what I was thinking at the highs and lows of the market go to  www.leanhog.net to view my archived posts.

CORN - May '09 Electronic
Open - $3.49, High - $3.65, Low - $3.47, Close - $3.63 1/2 Up $.13
Reviewing what I said yesterday - "I feel like we should continue to try and move higher tomorrow as we got very little of that accomplished today. I see today's high of $3.54 1/4 as a target area for tomorrow and then $3.58 in the May '09 contract. Overall I think we could be mixed tomorrow with the upside resistance areas being targets. Tomorrow's support is $3.48 1/4, $3.47 1/4 then $3.44 1/2. Tomorrow's resistance is $3.54 1/4 and then $3.57 1/4. I look for mixed to better trade tomorrow."

I was off by $.07 cents on the resistance side of the market (upside) and within a 1/4 cent of my mid-range support level from yesterday. I felt as though the market would try a move higher but this one surprised me today. I took some small profits on the long futures I have on against my $3.60 puts today because I see $3.66 1/2 as resistance in the May '09 contract. I am looking to re-establish my long position below the market if I can but I have no problem getting back in the market doesn't respect what the charts say it should do.

Bottom line - I expect an early high tonight with the market possibly testing $3.66 1/2 to $3.67 1/2 and then calling it a day. I have a sell signal SETUP at $3.67 1/2 if we move above this level and then come back down through it. I would have a sell stop at $3.67 with a protective buy stop $.01 above the most recent high. I am looking for an ultimate test of $3.56 at some point but I am not sure we will have enough pressure to get there tonight/tomorrow. We should test support of $3.60 1/2 to $3.59 1/2 and then down to $3.56 which is my target before the market makes any bigger moves up at this point. I am still not bearish longer-term but I'm looking for a correction tomorrow.

MEAL - May '09 Electronic
Open - $263.70, High - $273.00, Low - $262.40, Close - $267.30 Up $2.60
I said yesterday "The market looks like we should have follow through to the upside tomorrow based on the way we traded today. I see support at $262.90, $262.20 and then $260.00 if we get moving to the downside. Resistance should be around $263.90 and then $265.70. One note to point out is if the May contract moves above $265.70 and then comes back down through it will trigger a sell signal at $265.20 on a stop. If the sold at $265.20 then a risk management buy stop order should be placed $1.00 above the most recent high. This is an observation not a recommendation."

Bottom line - I was within range on the support side of the May '09 meal market today but not close on the resistance side as it went through what I thought would stop the market by $7.30! I am looking for market action to be similar to corn, open better and then find early resistance. I expect May '09 corn to test support of $265.00 and then to $260.00 and resistance to be $269.50, $270.30 and then $273.10 which was today's high. I still feel like we are looking for a bottom in this area and I do have my needs covered with $280.00 call options in May '09.

HOGS - April '09 GLOBEX
Open - $61.00, High - $62.80, Low - $60.775, Close - $62.325 Up $1.475
Reviewing yesterday's comments I said "We got a market close back above the $60.45 level which will open the door to a longer-term target of $64.00 provided the April '09 contract continues to close above $60.45. I am looking for mixed markets tomorrow but with a friendly feel, I can see both directions tomorrow. April '09 support is $60.65, 60.32 and resistance is 60.975, $61.32 then up to $64.00 (outside of limit range but is the next resistance level). June '09 support is $71.35, $71.125 and resistance is $72.12, $72.45 then $72.75."

I pretty much wrong across the board on this one today, I got close on the support levels but the market blew through all of my resistance points which is fine by me. I had a short-term change of heart today as I sold the June '09 contract. I had/have a sell signal at $72.75 AND at $73.50 on a stop order and if that order is filled (the $73.50 would be) then the protective risk management buy stop would be around $73.85. I see some things building on the chart that doesn't look that good. The signal I had to buy at $70.60ish that started the rally is the same signal I have on the sell side today/tomorrow.

Bottom line - The cash market was stronger again today but there are not a lot of packers in the market place bidding for hogs and cutout was down so the packers took a double whammy in margin today. I haven't been this aggressive of a seller in a while but things are beginning to line up with charts and fundamentals. I am still not a bear longer-term but for now I want to be short and if I am wrong I will exit my positions and look to sell higher. June '09 support is $72.52, $72.25 and $71.35 which I believe is very possible. June resistance is $73.12, $73.75 and then $74.15 which I think is highly unlikely.

 NW_LS500 Des Moines, IA     Wed, Mar 04, 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 generally steady; butts firm; sknd hams 20-23 lbs 4.00-5.00 higher, 23-27 lbs 1.00 higher on a light test; sdls bellies 14-16 lbs steady; lean trimmings unevenly steady. Trading slow to moderate, with light to moderate demand and offerings.    ----------------------------------------------------------------- Loads PORK CUTS          :             75.63 Loads TRIM/PROCESS PORK  :              41.0 -----------------------------------------------------------------  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 ----------------------------------------------------------------------- 03/04       116.6      56.26   73.65   61.39  35.17  97.93 39.09  71.30 Change :               -0.66    1.32    1.63  -5.03  -0.50 -2.42   0.01 -----------------------------------------------------------------------  NW_LS831 Des Moines, IA     Wed, Mar 04, 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 :  1.76 hgr   :  2.25 hgr   :  1.88 hgr   :  1.47 hgr Negotiated      :             :             :             : CARCASS BASIS   : 47.00-62.00 : 47.00-62.00 : 47.00-62.00 : 47.00-61.00 185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg Plant Delivered :    57.76    :    59.13    :    59.00    :    54.90 -------------------------------------------------------------------------- Head Count      :   31,114    :   16,963    :   21,688    :    9,426 ========================================================================== 

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