CORN
Corn just had to prove it to me that there were buy signals out there and they were good signals for a short period of time. The market closed considerably lower overnight and it seemed as if there was doom and gloom in Chicago this morning. I had an order in to buy Dec '08 corn at $5.56 on a stop because of the signal from yesterday and also the soybean market had found some life. We didn't get to that price level in a time in which I was comfortable so I pulled my order and just stood aside. Granted, if I would have kept my order in I would have been long at $5.56 and I had an exit order at $5.62 I would have made few cents today but needless to say I didn't do anything but stand on the sidelines. I am still cautious about the support at this level, I still feel $5.13-.15 is an area that we could visit sometime in the near future. These markets can sure tear you up and spit you out if you are not willing to move with them. I felt pretty stupid when the market hit what would have been my buy stop order and never looked back rallying up almost .12 cents but by the end of the day I wasn't feeling that awful at all. I feel as if we could trade a little better tomorrow because the chart gave me a warning sign of potential upside reversal. Let me make it clear it's just a warning signal and nothing else. It feels like we're too close to $5.13 to not test that level of support. Another private analyst was out today with a corn yield of 155+ which is more than the estimate yesterday and definitely more than the 148.4 the government is using. I am not extremely bearish tonight and tomorrow, I feel like we could have a small retracement back up toward $5.55-.58 in the Dec '08 contract. The low of $5.36 1/4 is the 62% retracement level ($5.37 3/4 actually) to the $5.13 1/4 low in March '08 so we could see some support here for now. Dec '08 corn traded 156,776 contracts today which is on the larger side of daily volume so there is still some liquidation going on so rallies should be tough to maintain for now. I am looking for an option strategy that will allow me to lower my ceiling in corn. My current strategy returned another .01 7/8 cents today. The lower this goes the cheaper my strategy becomes, the only problem is I can't get stuck on waiting for it to be paid for and not make another move to lower the cost of corn. Looking for possibly two sided trade tomorrow but I think we will spend most of the day better.
MEAL
Meal held pretty strong early on today but sold off with corn and soybeans going into the close. I am looking for support in the $327-329 area in Sep '08 meal but I am weary of the odds of it getting there. I will be looking for an option strategy that will give me good coverage on meal but not cost an arm and a leg to put on. Meal has some of the same warning signs that I spoke of in corn in relationship to a potential upside reversal. I expect a two sided to better trade tomorrow for meal. I am starting to get pretty itchy as far as good coverage goes but I am not sold on a solid reversal therefore I will look to use an option strategy to provide more downside potential but allowing for good protection to the upside.
HOGS
Hogs reacted very well to the fundamental information that is out there. We were up for a good portion of the day until around 12:50-55 when the Oct '08 hogs went from up .80 to down .45 cents. I said yesterday that I am staying hedged, I have warning signs all over the place with these hogs and I don't feel right being unhedged. If it was earlier in the year it may be a different story but for right now I am sticking to hedges. Cash was better this afternoon once again as well as cutout which was up .89 cents. You can't seem to stop this cutout for anything. I do have a sell signal in Oct '08 hogs tomorrow at $74.15 stop which would be about .25 below today's low. Afternoon fundamentals would suggest a higher hog market tomorrow and I will agree but not with any major rallies foreseen, (that type of statement is usually good for having the market ram it down your throat!) I would expect two sided trade in hogs tomorrow.
USDA ESTIMATED PORK CARCASS CUTOUTHurley & 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.
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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08/05 95.3 89.66 105.84 95.75 71.00 97.36 88.23 99.63
Change : ** 0.65 0.93 2.33 0.27 2.20 0.10 0.08**
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 : .31 hgr : .67 hgr : .50 hgr : .30 hgr
Negotiated : : : :
CARCASS BASIS : 75.00-86.00 : 75.00-86.00 : 75.00-86.00 : 75.19-83.11
185 lb Base Hog : wtd avg : wtd avg : wtd avg : wtd avg
Plant Delivered : 82.07 : 83.26 : 83.12 : 80.07
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Head Count : 26,514 : 13,910 : 17,298 : 8,794
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