Hog Comments - 08-12-08 Bullish reversal in corn as hogs slide.

CORN

Corn had a reversal day today, opening lower this morning and trading below Monday's low then closing above Monday's high of $5.24 1/4.  As I said yesterday, when you get a report that has an exaggerated opening it is usually time to fade it (do the opposite) after a large move.  I am beginning to feel like the $5.13 area may be the area that holds in this corn market.  It's still premature to say the market is bottomed but I am really paying attention to market action after today.  The report was "bearish" this morning but the low of today's session was set in the first hour and then the market rebounded into the last half of the session.  I would expect a challenge of today's highs tomorrow and we should see buy stops above $5.35 1/4.  If we have bottomed here in the near-term we could challenge $5.50 and then $5.64 1/2.  

MEAL

Meal closed better today and like corn closed above the previous day's high.  I would expect buying above today's highs with the possibility of testing $350.00 which would be near-term resistance.  I would like to see how the market reacts at that point, but for now it feels like we have bottomed the meal market in the short-term.  There are still concerns of frost but it isn't being talked about yet because forecasts are non-threatening right now.  I would expect follow through strength tonight and tomorrow.

HOGS

Hogs closed down $1.35 in the Oct '08 today based on concerns about the cash market.  The USDA released it's afternoon bids and all cash prices were $1-2.00+ lower than yesterday.  We did have more selling below yesterday's low and the electronic trade actually touched limit down today in the Oct '08 contract but I believe it was due to lack of liquidity- not actual trade concerns.  Cutout came in tonight $1.01 higher so it's still on a wild ride higher.  I would expect a better open tomorrow with higher trade earlier in the day but I expect a test of $75.00 and then down to $74.20 before we find good support.

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
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08/12        47.9      93.92  115.47  101.79  74.12 102.46 90.48  99.72
Change :                1.01    1.67    1.38   0.39   3.62  0.95    unc

National Direct Hog Price Comparison

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                :  National   :    Iowa     :   Western   :   Eastern
                :             :  Minnesota  :  Cornbelt   :  Cornbelt
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   Base Price is the price from which no discounts are subtracted and
   no premiums are added.
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BARROWS & GILTS :  1.58 lwr   :  2.12 lwr   :  2.14 lwr   :  1.06 lwr
Negotiated      :             :             :             :
CARCASS BASIS   : 78.00-89.53 : 78.00-89.53 : 78.00-89.53 : 78.00-88.39
185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg
Plant Delivered :    85.59    :    85.95    :    86.08    :    84.71
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Head Count      :   29,335    :   15,055    :   18,704    :   10,451
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