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Friday, July 25, 2008

Hog Comments - No fireworks for Friday.


CORN
Corn rallied .04 1/2 cents today with volume around 74,982 in the Dec '08 contract (electronic trade only) which is a lot less than the approximate 184,704 contracts traded in the Dec '08 corn on Wednesday. What does this all mean? It tells me that we just saw some short covering going into the weekend. My buy signal is still good but if we don't get buying above $6.04 1/2 on Monday and close above that level I am going to really lose my patients with this signal. We really should have done some type of rally already with this signal and it isn't happening. We keep selling off the nice little rallies that we have. I still think this could be the beginning of a bounce in the corn market but each day that passes and we fail to close above a previous day's high makes me think that we are going to consolidate down here and then search for direction. As you can see in the chart to the left the "bodies" of the candlesticks (the red or green part) are smaller the last three trading days. This is typical toward the end of a move. The weekly chart had a middle of the road close meaning that it closed just above the halfway point of this weeks range which was $5.95 and we settled at $5.96 1/2 today. Again as each day passes it feels like the corn market is going to make a slight retracement which is not what my signal would suggest. I guess next week will shed more light on the matter. Still think we could bounce but not as much as I felt it could a couple of days ago.

MEAL
Meal closed okay from a daily perspective and the weekly chart has held a 50% retracement support from the April low. I said yesterday that I had a buy signal in meal at $364.00 in the Sep '08 contract and it is still in effect but the lack of explosive follow through to the upside is missing. The explosive move up is a caracteristic of this signal and when you don't get that type of action then one should be skeptical if is validity which is what I am feeling right now. It almost feels like we are wanting to pause here for a couple of days and then find direction again after taking a rest. I almost feel the same way as I do in corn, we may bounce but it doesn't feel like it will be a runaway reversal. Upside coverage is still a good idea but I don't think I would take a very aggressive stance in the market right now. Not a lot of volume in meal today either.

HOGS
Hogs were up this morning and made new highs until the morning (noon) cash report was released by the USDA. It stated cash hog prices lower across the board by $1.00 +. The afternoon cash showed basically an unchaged cash market per the USDA. It sounds like packers have good margins but want to keep them so they aren't pushing the cash price as much as they could. Cutout was lower tonight by .22 cents and has slowed some vs. Wednesday's jump of $1.15. The October '08 hog futures settled below the $74.00 level that I have been talking about this week which is just below the 62% retracement of the old high. As a matter of fact there was a sell signal at $74.10 today in the Oct '08 lean hogs. This sell signal again like the corn and meal isn't textbook but it is close and MAY be close enough to be good. If the signal is accurate it could send the market tumbling next week. There should also be some stop orders below $73.65 (today's low) for Monday's trade. Like I said yesterday I would feel better about saying we could test the old highs of $77.42 in the coming weeks if we closed today above $74.00 but we failed to do so which means I continue with my defensive position in the market and maintaining hedges.


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
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Total Today's Primal Cutout Values
Date Loads Carcass Loin Butt Pic Rib Ham Belly
-----------------------------------------------------------------------
07/25 34.8 85.25 100.18 90.49 68.17 96.05 88.06 87.60
Change : -0.22 -0.28 -0.17 -0.50 -1.55 0.00 unc

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 : .08 lwr : .05 hgr : .18 hgr : .32 hgr
Negotiated : : : :
CARCASS BASIS : 73.00-82.84 : 75.00-82.84 : 75.00-82.84 : 73.00-81.64
185 lb Base Hog : wtd avg : wtd avg : wtd avg : wtd avg
Plant Delivered : 79.61 : 80.50 : 80.54 : 78.42

Hurley & Associates believes positions are unique to each person’s risk bearing ability; marketing strategy; and crop conditions, therefore we give no blanket recommendations. The risk of loss in trading commodities can be substantial, therefore, carefully consider whether such trading is suitable for you in light of your financial condition. NFA Rules require us to advise you that past performance is not indicative of future results, and here is no guarantee that your trading experience will be similar to the past performance.

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