Hog & Corn Comments - 09-19-08 - Grains and hogs retrace from yesterday.

Published on: 15:04PM Sep 19, 2008
Jeremy Knutson
[email protected]


Dec '08 corn settled at $5.42 1/4 today. When I walked into the office this morning it felt like one of those days you buy the open and close your eyes. I didn't act on this feeling nor did I promote it because of the way the
market has traded this week. I don't know about you but I only need to touch a hot stove once to know that it hurts. In last nights comments I mentioned the thought of Dec '08 corn reaching the $5.41-$5.45 area today for resistance, we got as high as $5.48 today in the first hour of trade and then again in the 3rd hour but never made new highs. I was wrong when I said I thought the market would open lower last night and then move higher, it opened higher and then stayed firm all night.

I exited my long futures positions today around $5.42/.44. I had an order in at $5.52 but after the 3rd hour of trade and we didn't make new highs above $5.48 I went to the market to get it done. I expected the market to sell off going into the close because of the low volume we had today. I was right but I was wrong too, it did sell off but right at the end of trade the market rallied $.10! I didn't want to hold a position over the weekend because of all the uncertainty in the financial markets. I think the Gov has fixed the problem for now but I want to see something more from the market before I hang on to a position over the weekend. I am still long calls for feed so I am not completely out of the market by any stretch.

I still want to be long feed for a long period of time because I think fundamentals warrant the ownership at these levels. I would expect the corn market to open better on Sunday night in conjunction with the close we had today. I do not think we will scream higher unless the trade feels there is some type of crop concern. Crude Oil is up $6.34 today and it was up around $2.50-$3.00 when the corn market closed. The Crude Oil chart looks poised to follow through next week if we get above this weeks high of $105.25. From a weekly chart perspective I would venture to guess Crude Oil is just beginning its move higher. Stops should be triggered above $105.25 next week.

Bottom line - This is the second week in a row we failed to close below the previous week's low. I feel corn can be stronger next week and get stronger as we go when the "funds" are through playing games. I expect Dec '08 corn to be better next week and but we still need to have a daily close above a prior day close, the last time we did that was last Friday.


Dec '08 meal didn't do much today, I said yesterday that $320-$322 would probably hold as resistance for Dec Meal. The high in Dec '08 meal today was $320.20 so the lower end of the resistance range held. $327-$330 is an area of resistance that I expect to touch next week. I said last Friday I thought was could test $347.40 and that turned out to be wrong by $7.50 because our high was only $339.90.

We didn't have a stellar week in meal or soybeans for that matter so the weekly chart isn't anything to write home about. A higher steady opening on Sunday evening would allow for good follow through to the downside if this weeks low is violated. The low for this week was $311.70 which is $.30 away from the low we had in August. I would not take the chance of selling new lows based on how close we came to the August low and didn't take it out and make new lows.

I am NOT a bear at these levels in soybean meal. I want to and do have extended coverage in place for feed needs. I am long around $350 on my last purchase but we have equity built up from other positions that puts our average around $300/ton futures price.

Bottom line - I expect meal to open mixed on Sunday night, no strong conviction one way or the other but I do expect to have a better week next week and test the $327-$330.00 level in the Dec '08 contract.

Dec '08 hogs closed $1.00 CWT higher today which was in line with what I expected based on yesterdays comments. I didn't expect a $1.00 higher close, I just expected better trade today. The market opened strong with good fund buying but when the noon cash report came out we seem to have had our last pop in the market. From a weekly perspective the market seems like it respects the $66.00 level as support. We have traded below it every week for the last six weeks and only close below $66.00 (on a Friday) once.

The weekly action is supportive of a possible bounce in Dec '08 hogs. I have been saying for the last day or two the daily chart seems to be forming a broadening triangle which signals a potential price reversal. NOTHING has formed just yet nor has there been confirmation, it is just something I am watching.

I would like to talk about projection points, support and resistance for Monday but my charts are not giving me todays trade action for some reason. It feels like we should have a better week of trade next week especially if we can make new highs above this weeks high of $67.50 and close there for a day or two. Cash and cutout values were mixed tonight as cash was around a $1.00 higher and cutout was down $.29.

Bottom line - I expect to see buy stops above $67.50 in the Dec '08 contract but only if the market manages to get there. If we can get above this level and close there then I would expect the market to close above this level next week. Today's close would suggest at least a challenge of $67.50 next week.


 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 ----------------------------------------------------------------------- 09/19        18.3      76.66   93.09   78.63  59.29  87.85 74.88  82.40 Change :               -0.29    0.14    0.56   0.05   0.02 -2.48   1.46 ----------------------------------------------------------------------- 


 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 :  1.08 hgr   :  1.15 hgr   :  1.27 hgr   :  1.04 hgr Negotiated      :             :             :             : CARCASS BASIS   : 58.00-72.00 : 58.00-72.00 : 58.00-72.00 : 60.25-71.00 185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg Plant Delivered :    67.73    :    68.83    :    68.79    :    65.99 -------------------------------------------------------------------------- Head Count      :   32,720    :   16,349    :   20,534    :   12,006 ========================================================================== 

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