Corn – May ’11 corn shrugged off lower prices today as it traded lower for most of the session and managed to close higher at the close. The volume for the day wasn’t anything major by any stretch but we are coming off of a pretty good two day rally at the end of last week. I’m still of the opinion that the markets are poised to re-test our old high but it has some work to do if it is going to accomplish this task.
$6.91 is the 62% retracement level back to our last high of $7.42. If we close above $6.91 for two consecutive days then I’m looking for a test of $7.42 to $7.44 otherwise $6.91 is our resistance number. The price action the last two days signals profit taking from the Thursday and Friday rally of last week. That being said it looks like we should try to make another run at $7.00 in the near future.
Not much has changed in the way of managing risk, if you can use a limited risk strategy to cover future needs then do so. Know what you are getting into if you are using straight futures. The market has a mind of its own and is flexing its muscles and significant margin call exposure is a real possibility! There was a major buy signal on the weekly chart in May ’11 corn last week and if it is good we should see a test of old highs in the $7.40+ area relatively soon.
Bottom Line – Tomorrow looks like an early low and late high type trade day.
Meal – Like corn, it looks like the May ’11 meal contract is just taking a breather from the rally from last Thursday and Friday. A cycle low has been placed early last week and suggests that May ’11 meal should be firm going into its expiration. Meal didn’t have the big buy signal on the weekly chart like corn did but it still suggests that dips will be bought moving forward. May ’11 meal needs to get below $320.00 before it does any major technical damage to the charts.
Bottom Line – Based on today’s action I’m looking for an early low tomorrow.
Hogs – Apr ‘11 hogs rebounded nicely after the devastation in Japan. I’m not sure why everyone was so negative to the Ag markets other than the uncertainty was too much to handle. The market has rebounded to pre-quake/tsunami/nuclear disaster prices in the April ’11 contract. It looks like the April ’11 contract found a bottom for now and as we move closer to April expiration, it will follow the cash to more of an extent than it will technicals.
The Jun ’11 contract created a major buy signal (same as the corn) on the weekly chart last week and would suggest that the old contract high’s are coming out. We will have some work to do to make this happen but technically my signs are pointing toward new highs. This DOESN’T mean do not sell production if profits are there. The margin relationship is what matters most and right now crush margins are looking better than they have in a few months. Don’t let opinion trump a business decision, if you want to be a hero then rent a Superman costume and run around the backyard, otherwise let profits tell you what to do!
Cash hogs were better today, especially on a live basis. Typical keep the wtd average price lower on a carcass basis to keep formula purchase pig prices under "control". Cutout was firmer but not by a lot. I can’t imagine with all that has gone on in the world as of late that food prices will drop without a big influx of supply. We can also thank the Fed for quantitative easing for our higher commodity prices. The Dollar index has faded some and is in new low territory for the past 12 months and has the 2010 low of 74.17 on its radar.
Stick to business and make your marketing decisions based on your profits and life will be much easier!
Bottom Line – I’m looking for an early low in the April ’11 hog contract for tomorrow.
-  – Pork Cutout
-  – Noon Cutout
-  – Estimated Slaughter
-  – Cash Summary P.M.
-  – Actual Slaughter
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