OUR SITE HAS MOVED TO A NEW LOCATION!

THIS SITE HAS OFFICIALLY MOVED TO WWW.LEANHOG.NET. ALL FUTURE POSTS WILL BE POSTED ON WWW.LEANHOG.NET. PLEASE CLICK HERE TO GO TO OUR NEW SITE.

WE HAVE MADE MANY CHANGES TO THE FORMAT, LOOK AND FEEL AND CONTENT OF OUR NEW SITE SO PLEASE TAKE THE TIME TO CHECK IT OUT, I THINK YOU WILL ENJOY IT. THANK YOU!

Jeremy Knutson


Monday, August 18, 2008

Hog Comments - 08-18-08 Grains rebound strongly, mild recovery in hogs.

CORN

Up .23 cents today makes Friday look like it almost never happened.  Today's high was $5.79 which was also the high of last Thursday.  The $5.79 area now becomes quite interesting to me because it's a possible sell signal for tomorrow but with conditions of course.  If the market makes highs above $5.79 tonight or tomorrow there is a sell signal at $5.78 stop that will be good for tomorrow and or Wednesday.  If the sell signal is hit then I would put a stop order to exit the position above the current high at the time you get stopped short.  If this signal is good it could provide us with a push lower.  I see the sell signal but I have some other issues with making a hardnosed sell against this level.  $5.80 is resistance we talked about last week so it almost makes sense for it to be at the $5.79 level, but  I still have my big buy signal that was triggered at $5.14ish last week which I feel is in good position to follow-through on.  I believe I will act on this sell signal tomorrow (if it happens) but I will keep a tight stop in place if I decide to do it.  This sell would be against call ownership (delta hedge) that I have for feed needs in corn.  I would not expect to keep my short positions in place for a very long time at all.  As I said on Friday, we need to be careful of getting too bearish in here with the buy signal on the weekly charts.  I think I will take this signal because of the action the corn had going into the close today, it sold off to get below up .20 and then came back some into the close.  Please do not take this trade as a recommendation as I could change my mind in the morning and not do it because of something else I see in the charts.  I am pointing this out for the sake of idea sharing only.  If this signal is good for a sell tomorrow, it just may be the signal that gives the market a chance to get to the $5.42 number I spoke of last week.  I am still longer-term friendly corn, keep feed coverage in place.


MEAL
Sep '08 meal was strong along with soybeans today.  As I said on Friday the meal market left a warning sign on the weekly charts.  It was telling us to be careful if we were short the market.  Meal completely rejected the $338 level of resistance (which was support on Friday) today and closing $17.00 higher for the session.  I said on Friday that the charts suggested a potential test of $292.00 in the Sep '08 meal but I was leaning more toward the $317.60 level if we were going to continue lower, I still agree with this in the short-term if we fail to hold this rally.  I don't know if the market has it in it to test the $292.00.  Today's trade would suggest continued upward movement tonight/tomorrow BUT the Nov '08 soybeans leave an interesting potential signal as well.  If Nov '08 beans open higher tonight (the higher the better) and reverses only to come down and trade below $12.89 then we would have a sell signal at $12.88 STOP.  If the sell stop were to be triggered then I would place a buy exit order around .01 cent above the high at the time you get filled on your sell stop.  I ultimately believe we have a shot at reaching $14.02 in the Nov '08 soybeans before reaching significant resistance which would/should pull meal along with it to touch $376.40 in the Sep '08 contract.  I will continue to hold my long call options in meal and stay protected to the upside from here.  Looking at the daily charts in Dec corn, Sep & Oct meal and Nov beans, I see the left shoulder and the head being formed of what COULD BE a head and shoulders bottom, however, it is WAY premature to project a head and shoulders bottom.  I just wanted to point out the possibility of it happening and we are around 2/3 of the way there.  If it was to complete a head and shoulders bottom I would expect it to finish the formation in the last half of September.  This is PURELY speculation on my part; please don't make any, ANY decisions based on the head and shoulders information.  


HOGS
Hogs closed mildly higher today having a relatively quiet session.  Cash was higher in all regions except the eastern corn belt this morning per the USDA.  Today was an inside day for the Oct '08 futures meaning today's high was lower than Friday's high and today's low was higher than Friday's.  Whichever direction the market goes tomorrow, we should see some snap to the trade meaning we should see stop orders both above and below today's highs and lows.  Today the hogs left a warning signal in the Oct '08 contract, a warning if you are short the market although I don't know as though I agree.  The warning signals that I talk about are just to make us pay attention and look for other clues that would suggest a price reversal.  In themselves they are not buy or sell signals.  I have done a little research and there have been three years since 1993 that the Oct futures have been above $65.00 cwt on Aug 15th, 1997, 2004 and 2007.  Each of these years the Oct futures dropped from the 15th to the end of August.  2007 - down $1.76, 2004 - down $2.35 and 1997 - down .58.  I must note that I said in my comments on July 30th, 2008 that there hasn't been a year that the Oct futures have closed on Aug 15th above its closing price on Aug 1st.  The research was collected on years that Oct futures were above $65.00 on Aug 1st of the respective year.  (Here is the link to that post http://leanhog.blogspot.com/2008/07/please-check-back-later-tonight-for.html)  This year was the first year the Oct futures have closed higher on Aug 15th vs. its close on Aug 1st.  Oct was $.92 higher on the 15th than it was on the 1st this year.  I am staying hedged, the dollar is still strong although it had a small setback today and cutout has had a couple of down days here recently which has rarely happened in the recent weeks.  Cutout was down today and cash was modestly higher.  I am sticking with weaker prices tomorrow.


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
-----------------------------------------------------------------------
08/18        37.3      94.00  117.40  105.31  74.95 107.72 90.48  93.82
Change :               -0.41    0.40    0.40   0.15   0.39 -0.12  -3.49
-----------------------------------------------------------------------
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 :   .34 hgr   :   .61 hgr   :   .64 hgr   :   .07 hgr
Negotiated      :             :             :             :
CARCASS BASIS   : 76.50-89.00 : 77.00-89.00 : 77.00-89.00 : 76.50-88.00
185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg
Plant Delivered :    85.65    :    86.60    :    86.74    :    84.23
--------------------------------------------------------------------------
Head Count      :   23,576    :    9,670    :   12,536    :   10,445
==========================================================================

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 there is no guarantee that your trading experience will be similar to the past performance.

No comments: