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Tuesday, September 2, 2008

Hog Comments - 09-02-08 - Grains are tough to beat down and hogs rally.

Dec '08 Corn Daily Chart
CORN
It was interesting to watch Monday nights trade and also how the traders in the day session viewed the market differently from its overnight counterparts.  I stepped out and bought 1/2 of a position in corn last night around $5.66 3/4 which was just above my target price of $5.65.  Dec '08 corn closed at $5.69 1/4 today which is above my $5.65 number, if we can close above it tomorrow as well I would expect another run at the high's of $6.28 3/4.  IF the market does make another run at $6.28 3/4, then the number becomes very important from a technical perspective.  If $6.28 3/4 is taken out and we close above it for a day or two it should bring more buying into the market because it would be the neckline of a head and shoulders bottom.  If the signal is good it would PROJECT a price of $7.52 1/2 which ironically is slightly above a gap we left at $7.47.

With the close we had today I would expect more buying above today's high of $5.77 1/4 and even more at $5.82 (buy signal) which should give us strength to move higher.  The $5.82 buy signal should be placed as a buy stop because it is only good if the market gets there.  Please don't make trades based on what I say in this blog because I can and will make adjustments to my positions, targets or stops prior to my next posting.  Please follow your own lead or your brokers and if you don't have a broker or are looking for fresh insight call me and we will talk about it.  I don't want you to get in a position based on my statements that could hurt you if not managed properly.  

Bottom-line for tomorrow is higher for me.  Because we met my objective of $5.65 and thus far we've held closing prices above this level that we will try and hold it again tomorrow.  FCStone is releasing its September survey of crop yield tonight which will give some direction to the market along with the USDA crop progress report that will be released tonight because of yesterday's holiday.  Keep feed hedges in place but leave some downside open, I am friendly to the market but I want to make sure I have a chance to better my position if I can.

Dec '08 Meal Daily Chart

MEAL
Dec '08 meal seemed to be the leader of Corn and Soybeans today.  The markets rallied because meal seemed to find some support and rallied around noon today.  I bought meal in the overnight session at approximately $350.00 (I had various fill prices) which now puts me long the market on a full position.  We have three more tropical storms in the Atlantic Ocean of which one is a Hurricane in Hanna.  It doesn't look like Hanna will give the Gulf much trouble because it looks like it will track towards the east coast.  Ike is the next in line and then Josephine will follow but they are too far out to know where they will track.  

Crude oil should stay supported for a number of reasons, 1.) Most analysts think OPEC will cut production during the Sep 9th (I think the date is right) meeting to defend $100/barrel oil.  2.) The tropical storms in the Atlantic which have yet to find direction.  3.) Mr. T. Boon Pickens was on CNBC today saying he didn't think Crude would make it below $100.00/barrel.  I don't think reason 3 holds as much weight as 1 or 2 but it is worth noting because Crude rose around $1.00 after Mr. Pickens made his comment.  Crude was down $10.00/barrel overnight and traded between $5.50-$7.50ish lower during the hours the Ag futures were open today.  As I write this Crude is down $5.11. 

Bottom-line - I think meal will trade higher tonight and tomorrow based on the momentum we had going into today's close as well as holding the $343.20 50% retracement level I have talked about.  I expect buying above today's highs of $356.40 during tonight's or tomorrows trade.  Keep meal coverage in place.



Oct '08 Hogs Daily Chart
HOGS
I took the opportunity to roll my Oct '08 futures to the Dec '08 futures today because seasonally we tend to rally Oct hogs going into expiration.  It looks to me as if the U.S. Dollar is beginning to look for a top, I suggested warning signals were showing up last week and I still believe we could see some resistance.  I will maintain my stance on the Dollar until it can show me otherwise by closing a lot higher for the week, until them I am look for a retracement lower.  The packers have huge margins and if the mood strikes them they could use it to bring the cash market back to life.  The "noon USDA report" (which showed up 3 hours late today) had most regions down by $2.00 or so, we will check the afternoon numbers around 3:00 p.m. CST today.  

Oct '08 hogs made a bullish reversal on the charts today.  This reversal would suggest buying to enter the market above today's highs of $70.40 but most importantly the possible end to an ugly slide.  As I said on Friday I purchased a call option strategy on my short hog positions to protect the equity that we have gained.  I expect Oct '08 hogs to remain firm this week and I maintain my stance that we could see Oct '08 hogs reach $73.57 at some point this week.

Bottom-line for tomorrow is higher.  The reversal today in Oct '08 futures gives me some confidence in the Oct contract.  I think we could see $73.57 at some point this week but I don't think it will be tomorrow.  I will update the afternoon fundamentals later today when I get them.


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
-----------------------------------------------------------------------
09/02        69.4      78.66   97.67   85.66  66.96  90.83 74.06  76.99
Change :               -1.60   -4.81   -0.79   0.60  -5.19 -0.54    unc
-----------------------------------------------------------------------
08/29        39.0      80.26  102.48   86.45  66.35  96.02 74.60  76.99
08/28       102.4      80.51  101.47   86.92  66.42  96.87 74.70  79.43
08/27       120.4      81.74  103.54   84.45  66.68  97.98 76.25  82.43
08/26       142.0      83.79  104.46   91.60  63.28 102.53 82.57  80.36
Current Five Day Simple Average -
                       80.99  101.92   87.01  65.94  96.85 76.44  79.24
-----------------------------------------------------------------------
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 :   .92 lwr   :   .51 lwr   :   .61 lwr   :  1.25 lwr
Negotiated      :             :             :             :
CARCASS BASIS   : 64.25-74.00 : 64.25-74.00 : 64.25-74.00 : 67.50-72.99
185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg
Plant Delivered :    68.84    :    68.56    :    68.47    :    69.57
--------------------------------------------------------------------------
Head Count      :   21,867    :   12,135    :   14,460    :    7,407
==========================================================================


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.

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