Hog & Corn Comments - 02/01/2010 Hogs continue to be weak.
Feb 01, 2010
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CORN – Mar ‘10 Electronic
Open – $3.56 1/4, High – $3.60 3/4, Low – $3.55 1/2, Close – $3.59 Up $.2 1/2
Thoughts – Long Term (into April '10) – Sideways
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Mar ‘10: Corn posted a minimal gain today as it closed a couple of cents higher on the day. Ever since the January crop report hit the market has been in somewhat of a free fall. All is good for the hog producer assuming corn needs are not locked in. We are trading around the 62% retracement level of $3.57 3/4 in the March '10 contract which is trying to provide some support. I am looking for two consecutive closes above a prior day high before getting excited about owning corn.
If the market settles below $3.57 3/4 again this coming Friday then we could be in for some more downside with the ultimate target of $3.15 1/2. I don't know as though I am that bearish at this point because of the drop we've already had. The market is oversold and has been for the last couple of weeks so if the $3.57 3/4 area can hold we should see a bounce from current levels. The U.S. Dollar Index remains firm as we are now up against some longer-term moving averages and if we can break through we could see the dollar reach $80.10 and ultimately 81.90; it is currently trading at 79.225 as I write this.
I do have a cycle low projected in corn for today and has the market moving somewhat higher through February but I wouldn't bet the farm on it at this point.
Bottom line: I am looking for the market to experience an early high tomorrow.
Mar ‘10 Corn – Support/Resistance for 02-02-10
(R3) Resistance 3: $3.69
(R2) Resistance 2: $3.63 3/4
(R1) Resistance 1: $3.61 1/4
Today’s close: $3.59
(S1) Support 1: $3.56
(S2) Support 2: $3.53 1/4
(S3) Support 3: $3.48
MEAL – Mar '10 Electronic
Open – $274.30, High – $278.00, Low – $271.40, Close – $271.80 Down $2.00
Thoughts – Long Term (into April '10) – Sideways/Lower
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Mar ‘10 meal: Meal was strong early along with soybeans but then lost its luster toward the end of the session. The Mar '10 contract closed below the weekly uptrend line last Friday and we continue to trade below it this week. If the market doesn't get back above $278.00 by this Friday we could see meal sell off even further toward $262.00. $272.00 is also a key level of support that the market needs to hold this week if it wants to gain some footing.
I'm not bullish soybean meal at this point however we should always be on watch for things to change because they can in a heartbeat and you don't need me to tell you that!
Bottom line: I’m looking for the market to experience an early low tomorrow.
Mar ‘10 Meal – Support/Resistance for 02-02-10
(R3) Resistance 3: $286.90
(R2) Resistance 2: $280.30
(R1) Resistance 1: $276.10
Today’s close: $271.80
(S1) Support 1: $269.50
(S2) Support 2: $267.10
(S3) Support 3: $260.50
HOGS – Apr ‘10 GLOBEX
Open – $68.35, High – $68.50, Low – $65.65, Close – $66.15 Down $2.45
Thoughts – Long Term (into February) – Neutral
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Apr‘10 hogs: April hogs were weak most of the day but fell apart around noon today. The morning cash report was lower and cutout was not established according to the USDA reports. April hogs have now touched on some support at $66.525 and need to get back above this level to prevent a move to $64.10. The cutout has dropped $8.02 in the last six trading days led by loins as they are off over $15.00. This year's pork cutout seems to be following a similar pattern to 2005 when we started the year off strong and then collapsed into the 24th of February.
We've had similar action this year but our decline is much harder and faster this year than it was in 2005. If seems as though cutout may have done enough downside for the time being as we reflect on the drop we've had over the last week. The cutout also shot higher with authority early in January so we shouldn't be surprised to see it back off as fast as it has. I would like to keep the Apr '10 futures above $66.00 by the end of the week as it is a trend line that we would like to keep intact as well as the $66.52 support area I mentioned above.
I suspect that we will take some direction from this evening's cutout number and provide some influence to tomorrow's trade. It is my feeling that we should see any weakness early in the session tomorrow and then have the market firm as the day progresses. I will stick with this view assuming the cutout comes in better than $1.00 lower.
Bottom line: I’m looking for an early low tomorrow.
Apr ‘10 Hogs – Support/Resistance for 02-02-10
(R3) Resistance 3: $69.15
(R2) Resistance 2: $68.50
(R1) Resistance 1: $67.85
Today’s close: $66.15
(S1) Support 1: $65.025
(S2) Support 2: $63.90
(S3) Support 3: $63.15
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