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CORN – Sep '09 Electronic
Open – $3.17 1/4, High – $3.18, Low – $3.04 1/4, Close – $3.14 1/4 Down $.05
Thoughts – Long Term (into September '09) – Sideways/Higher
Last Wednesday I said: "The USDA left the corn acres the same as the July report but raised the yield from 153.4 to 159.5 and increased demand to help offset some of the increased yield. The bottom line was the 09/10 corn carryout moved from 1.550 to 1.621 billion bushels for a total increase of 71 million bushels. The report was a bearish report at face value but the market sold off early and then moved higher from there.
Report days are event days to me and I have an unwritten rule not to trade on event days. If the event is known in advance, like today's report, I try to position myself (like many others) going into the report. We liquidated our delta hedges yesterday because we needed to have upside potential if the market rallied and looking at the market today that was a good thing at the close. I am not convinced the corn market has bottomed here but you can't ignore a rally in the face of negative news either. I will continue to monitor the situation to see if adjustments to positions need to be made but for now I am comfortable in a known risk position.”
Sep '09: The market started off weaker than what the overnight closed but managed to find support at a 1/4 cent above our $3.04 contract low in the Sep '09 contract. I was actually impressed with the way the market closed as it was near the top of the trade range and also held the contract low for support. As of right now we have a double bottom in Sep '09 contract at $3.04/$3.04 1/4 and I would expect to see some additional buying above $3.18 tomorrow.
There really is no fundamental reason for corn to move higher at this point but there are some signs that point to a possible rebound over the coming days. I need to see Sep '09 close above $3.18 for two consecutive days before I get excited about any thought of a rally. I am looking for the market to open steady to higher tonight and look for follow through to the upside tomorrow.
Bottom line: I am looking for the market to experience an early low tomorrow.
Sept '09 Corn – Support/Resistance for 08-18-09
(R3) Resistance 3: $3.23
(R2) Resistance 2: $3.19
(R1) Resistance 1: $3.16
Today’s close: $3.14 1/4
(S1) Support 1: $3.10 1/4
(S2) Support 2: $3.04 1/4
(S3) Support 3: New contract low
MEAL – Sep '09 Electronic
Open – $319.00, High – $319.00, Low – $307.50, Close – $309.50 Down $9.80
Thoughts – Long Term (into September '09) – Sideways/Higher
Last Wednesday I said: "It was interesting to see the corn market out rally the soybean market when the soybeans had more of a friendly report than the corn did. I am looking for an early low tomorrow morning and the market should firm from there. We have below normal temperatures in our extended day forecasts which may bring in some weather premium for the sake of a possible early frost in soybeans. I still think a known risk option strategy is needed for meal at this time until we get past the prospect of a potential early frost.
We are still range bound between $332.00 and $349.20 and again whichever side we breakout of we could see the market make a nice move in the direction of the breakout.”
Sep '09 meal: If you notice my last sentence above I said we could make a nice move in the direction of the sideways range breakout and we have done just that having the Sep '09 contract losing $24.50/ton since it traded below the $332.00 I spoke of. The support level of $309.40 needs to hold tomorrow if the Sep '09 meal contract has any chance of moving higher again, if we close below $309.40 then it looks like a potential test of $296.70 area with an ultimate goal of $285.00.
I believe the market will experience an early low tonight and tomorrow but I am not expecting any fireworks to the upside at this time. Rallies will probably be sold in this market until we see something fundamentally happen to change that, like a frost scare.
Bottom line: I’m looking for the market to experience an early low and late high tomorrow.
Sep '09 Meal – Support/Resistance for 08-18-09
(R3) Resistance 3: $316.90
(R2) Resistance 2: $313.30
(R1) Resistance 1: $312.20
Today’s close: $309.50
(S1) Support 1: $307.50
(S2) Support 2: $304.10
(S3) Support 3: $296.70
HOGS – Oct '09 GLOBEX
Open – $44.40, High – $45.15, Low – $43.65, Close – $44.70 Up $.05
Thoughts – Long Term (into December) – Negative
Last Wednesday I said: "This is getting old, I feel like I have been writing the same thing over and over for weeks now but nothing has really changed. The market should continue in a downward spiral until we can prove that cash and pork cutout have bottomed and we are unable to do so. We have made some good rally attempts the last couple of days but have failed to close the market near the high of the day. I don't have much to say other than cutout still looks weak and proved it again today and it seems there are plenty of pigs for packers to pick from therefore there is no reason to get excited about the cash market.
The Oct '09 contract gave us a projected cycle low today but like I said the past few days I will not buy into that thought until we see some good price appreciation in the cash and cutout markets. The day session left us with a warning signal if you are short the market but that was before the cutout number was released. After the cutout number was known the Oct '09 contract made new lows on the day."
Oct '09 hogs: The Oct '09 looked like it was off to an early price grave again today only to find support early. It managed to close over $1.00 cwt off of the low for the day and $.35 off of the high of the day, this is pretty decent action. The action was decent but it didn't provide any buy signals or anything like that just yet. We did purchase some call strategies on Friday in the October '09 contract to protect the equity we have in our hedges. This was a risk management move that had little to do with a feeling of price direction.
Our position is structured so we still have downside hedge potential but also have upside in the Oct '09 contract which is where all of our hedges are. We remain in the Oct '09 contract because of the weakness in the cash market and the also for the potential of SOWS going to slaughter. Canada announced over the weekend they will incorporate a SOW buyout program in the estimated area of $78 million Canadian dollars to help reduce the Canadian SOW heard and also provide government backed loans for those that may be able to weather the storm. This announcement didn't seem to affect the market any
Cutout was $.88 higher tonight but I am looking for an early high tomorrow and then I expect the market to drift the balance of the day. I think some of the cutout number was factored into today's trade action.
Bottom line: I’m looking for the market to make an early high tomorrow.
Oct '09 Hogs – Support/Resistance for 08-18-09
(R3) Resistance 3: $45.65
(R2) Resistance 2: $45.225
(R1) Resistance 1: $44.875
Today’s close: $44.70
(S1) Support 1: $43.60
(S2) Support 2: $43.40
(S3) Support 3: $39.64
(S4) Support 4: $35.27
(S5) Support 5: $29.40
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