Hog & Corn Comments - 12-15-08 - Possible short-term top in corn and meal.

Published on: 16:26PM Dec 15, 2008

Hog Comments - 12-15-08 - Possible short-term top in corn and meal.

 Jeremy Knutson
[email protected]


Open - $3.74, High - $3.93 1/4, Low - $3.73 1/2, Close - $3.75 1/4

After seeing March '09 corn up .11 to .13 cents last night I figured the March '09 corn was going to have the trade action it did today.  With this in mind I exited some long futures positions last night with anticipation of the market moving lower today.  I have orders to get back long corn toward the $3.65 support area if we get there.  Usually when we get big openings one way or the other at what could be the end of a move, we tend to overdo it.  Today we did just that, most of the excitement was during the first 30 minutes of trade. 

The crude oil market was up around $3.50 prior to the 9:30 a.m. corn open and when the grain market closed this afternoon crude was down around $1.50.  I REALLY didn't like the way corn traded today, it left a sign of warning and I expect sell stops to be triggered below today's low of $3.73 1/2.  It looks as if we could begin a correction in the March '09 corn and move back toward $3.60 and then down to $3.50 which would be a 50% retracement of our rally.

Bottom line - I feel like we could open lower tonight and continue lower because of the selloff we had late in the day.  We traded as much as .19 3/4 cents higher today but could only manage to close .01 3/4 higher on the day?  Not so good.  I look for weakness in the March '09 corn tomorrow and expect a test of $3.65 to $3.58.  On a positive note, the U.S. Dollar is still nose-diving which will be positive for commodities longer-term.  I still want protection for feed needs, this hasn't changed.  I altered my position because I am trying to protect equity and I plan to re-enter at a lower price or above today's high if I am wrong.

Open - $257.00, High - $263.00, Low - $254.50, Close - $256.80

I will now base my comments on March '09 soybean meal instead of January because January has little time left in the contract.  I exited my meal positions last night like I did with corn; I want to re-own these positions at a lower price or above today's high whichever comes first.  As I stated in my corn comments the U.S. Dollar Index is falling apart faster than a $2.00 suitcase, as a friend of mine would describe it. 

March '09 meal closed at $257 which is above the 50% retracement level of $255.90 and if we stay above $255.90 we should make another run at last night's high of $263.00.  As I said in corn I am not impressed at all with the trade action today, we were up $6.00 today and ended up closing down $.20.  Not impressed!  The trade today is consistent of that with tops in markets, now I am not saying the meal market is done at all but I am saying I am looking for a correction before we make our next leg up. 

Bottom line - I am expecting a lower market in March '09 meal tomorrow and I am also looking for a test of $255.90 and ultimately $250.00 in the near future.  The Dow Jones and crude oil have both dropped off since the meal market closed at 1:15 p.m. cst and that should bring some weakness to the overnight trade.  Lower trade tomorrow is my thought.


Open - $62.50, High - $62.85, Low - $62.37, Close - $62.57

Feb '09 hogs had a whopping $.47 trade range today.  Day traders are going to be switching from prime rib to noodle soup after a trade range like todays!  It seems to me the downside test will be complete if we can close the Feb '09 futures above $63.00 again in the near future.  I look for the market to be firm tomorrow based on technical considerations.  If we can get back above $63.00 then I think we test $64.30 to $65.00 in the Feb '09 contract.

The hog market STILL hasn't responded to the falling dollar during the past week as well as today.  Like I said last week, it is only a matter of time before it kicks in and we see exports pick up.  Maybe the government bailing everyone out is a back handed bail out to the Ag sector by crushing the dollar and making our Ag products look more attractive to the international market.  

Bottom line - I expect hogs to be higher tomorrow but after the trade we have had the last couple days I wouldn't be surprised if it is quiet.  I still think we will test our most recent high of $67.00 in the near future and I believe we will still see the $70's at some point in the coming months.  I'm looking for better trade tomorrow and we could see resistance come in around $63.40 and then up to $64.52 although unlikely to see the $64.52 tomorrow.


 Des Moines, IA     Mon, Dec 15, 2008     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; butts weak to 1.00 lower; sknd hams 17-23 lbs not tested, 23-27 lbs weak; sdls bellies steady; lean trimmings unevenly steady. Trading slow, with light to moderate demand and offerings.    ----------------------------------------------------------------- Loads PORK CUTS          :              42.5 Loads TRIM/PROCESS PORK  :              19.0 -----------------------------------------------------------------  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 ----------------------------------------------------------------------- 12/15        61.5      59.28   74.19   66.11  36.72  87.80 53.32  66.88 Change :               -0.76    0.73   -0.72   0.11   0.16 -3.24  -0.52 -----------------------------------------------------------------------
 Des Moines, IA     Mon, Dec 15, 2008     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 :   .07 lwr   :   .49 lwr   :   .24 lwr   :   .22 hgr Negotiated      :             :             :             : CARCASS BASIS   : 42.50-55.25 : 42.50-55.25 : 42.50-55.25 : 45.50-55.00 185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg Plant Delivered :    53.44    :    53.01    :    53.33    :    53.57 -------------------------------------------------------------------------- Head Count      :   19,939    :    8,991    :   12,650    :    6,199 ========================================================================== 


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