Hog Comments - 08-20-08 Another firm day in grains and hogs rally.

Dec '08 Daily Corn Chart

CORN

Dec '08 Corn stayed above my $5.79 area that I have been talking about the last couple of days.  This means the active sell signal at $5.78 1/2 stop is gone.  The close above $5.79 today would suggest prices test $6.24 in the near future.  The market rallied into the close today after what seemed to be boring trade today.  It is our third day that we closed above the 50% retracement level of $5.64 1/2 which gives me confidence to say we should test $6.24 by sometime next week.  We are still at the mercy of weather forecasts but from a technical perspective we look awefully good right now from a bullish standpoint.  The signal that I talked about last week to buy corn at $5.14ish is definatly good and I would still project more upside from here (around $6.50) based on that signal.  Here is the link to the article I wrote last week that talked about the signal, http://leanhog.blogspot.com/2008/08/hog-comments-08-13-08-grains-lock-limit.html.  I would expect the trade to be better again tomorrow, more importantly not closing below todays low.  I have my sights set on $6.24 now that we have accomplished some objectives around this $5.79 area.  I will mantain my long call positions in corn and manage my short $6.10 calls accordingly.  I had an order in to buy 1/4 of a position today at $5.86 and of course the low for the day session was $5.86 1/4.  Live to fight another day I guess!  KEEP FEED COVERAGE COVERAGE IN PLACE!!!

Sep '08 Daily Meal Chart

MEAL
Sep '08 meal closed higher today leading the way ahead of all the other contract months in meal. We had a $10.00 trade range but the market didn't seem to get too excited in either direction today.  I think the marekt is still trying not to get a handle on what happened yesterday.  Crude Oil was all over the place today trading around $2.50 higher and over $2.00 lower and then back around $1.00 higher at 1:15 p.m. cst.  The soybeans seemed to follow the crude market to some degree today but corn rallying on the close helped soybeans and meal stay strong as well.  I said yesterday if we could hold $338.00 as support in Sep '08 meal then we could test $350.00 and ultimately up to $365.00.  We reached and closed above $350.00 today settling at $352.90, this leaves the door open to test $365.00 in the near future.  KEEP UPSIDE COVERAGE IN PLACE FOR MEAL!!!

Oct '08 Hogs Daily Chart

HOGS
 Oct '08 hogs gapped lower by $1.15 on the opening (bullish opening) which was the low of the day.  Oct '08 rallied right before the 11:00 a.m. cst morning cash hog report release by the USDA.  The morning cash report had most cash markets down close to $3.00 cwt but the market stayed firm and actually traded to the plus side to get as high as .45 higher on the day.  It almost feels like yesterday's cutout number was ficticious and will be corrected today.  One thing that still baffles me is the U.S. dollar continues its trek higher but it doesn't seem to phase the hog market which has experienced tremendous export markets on a continued basis for quite some time.  The action we had today makes me think the Oct '08 hogs have finished thier decline assuming we can close tommorow above today's high of $75.70.  The market finally got to my target price of $74.27 today and actually trading through it by .17 cents.  I was looking for it to trade a day or two around $74.27 but it tested it and bounced right off of it.  I am beginning to lean towards exiting some of my short hog positions only to re-establish them on a possible rally.  Lets see what the cash and cutout do tonight first.  I was dead wrong on the market action today when I said the Oct '08 hogs should make an early high and late low, it was the exact opposite.  Like I said, I am beginning to feel like a turn in the market coming and if thats the case we should test our old highs of $78.75.  There should be buy stops above $75.70 tomorrow and I would like to see the market close above $75.70 before I will try to ride any bull.  If the Oct '08 hogs trade below $74.20 either tomorrow or Friday and then we should have a buy stop in place at $74.55 stop IF and only if the market trades below $74.20.  This is a nice buy signal if it should happen.  As always please don't take my thoughts as a recommendation, they are ideas and observations only.  Things happen during market hours that could change my mind at any point.

Updated post as of 3:15 p.m. cst.  The cutout was down hard again losing $1.66 and cash was about .50 cents lower today.  One would expect more pressure on the market tomorrow based off of the cutout numbers but it didn't seem to matter today.   Again, like I stated in the above paragraph, I will not ride any bull unless the market closes above $75.70.  Tomorrows trade will be interesting to see if we shrug off the cutout number again after losing around $3.54 in two days.  Yikes.

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
-----------------------------------------------------------------------
08/20       100.3      90.46  116.49   99.82  71.08 111.06 86.46  84.59
Change :               -1.66   -0.13   -5.22  -3.75   0.28 -2.55   0.03
-----------------------------------------------------------------------

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 :   .55 lwr   :   .62 lwr   :   .89 lwr   :   .02 hgr
Negotiated      :             :             :             :
CARCASS BASIS   : 74.50-88.00 : 74.50-88.00 : 74.50-88.00 : 76.50-88.00
185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg
Plant Delivered :    85.16    :    85.53    :    85.50    :    84.44
--------------------------------------------------------------------------
Head Count      :   30,013    :   16,275    :   20,561    :    9,042
==========================================================================

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.