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Tuesday, September 16, 2008

Hog Comments - 09-16-08 - Everything on the defensive today, do we find support?

Please forgive me if my comments are choppy, I wrote pieces of this throughout the day because of in office software training today. I wanted to make sure I got the post out in a timely fashion.


Dec '08 Corn Daily Chart

CORN 
 Dec '08 corn opened a little better than what overnight suggested this morning but rallied and failed. The failure came around 10:00 AM and didn't look back. The market touched limit lower ($5.32) and bounced for a short period before touching it again. The talk is all about AIG and whether it can sustain its business by finding some liquidity to pump back into the company. The Dow Jones futures opened lower and reached as far as 174.81 lower on its lowest trade price. It found support based on talks the Government MAY help in the AIG situation and the market rallied to as much as 175.71 higher. Needless to say all the markets have been all over today, but hey whats new. Crude oil traded lower during the day trade session for corn and contributed some of the weakness to the corn market as well as the soybean complex.

The market looked attractive to me down limit however reality sets in as I bought my 1/2 position back around $5.54-.55. I had an order in the overnight to purchase the same position at $5.43 but the market only got as low as $5.43 3/4. You know how that goes. : ) Seasonally the corn market bottoms during the end of September and the beginning of October. We will see if this is the case or not this year. We are still hearing the thought of yields being smaller than what the USDA is projecting for a national average. This of course would be friendly to the market but for now we have to many outside forces holding us back.

I haven't changed my long-term view on the corn market which would suggest another run higher sometime during the next few months. I think this is a TREMENDOUS opportunity to protect feed needs for an extended period of time. I would suggest call options because it still opens you up to lower prices. Now, remember I am long corn with some futures and options so I am long the market and am talking my position because I believe it not because I need anyone to support it. It is up to you to decide what is best for your operation and I would suggest you visit with someone you trust to work through your needs and do what is best for you based on your operation, not what you read on the internet! : )

Bottom Line - I feel the market could gap open lower tonight and then reverse and move higher and look for the 50% retracement level of today's move lower. The retracement level should have good resistance if we reach it. The resistance level is $5.48-5.52. The funds sold around 7,000 contracts of corn today.

Dec '08 Meal Daily Chart

MEAL
Dec '08 meal basically slapped me in the face as it dropped below my support point of $325. The one thing I see through all of todays big move lower is a potential buy signal at $324.50 on a STOP order for tomorrow. If the stop is triggered we will need to close above the entry point of the trade otherwise I would not stick with it. I was actually impressed with soybeans and meal today because of the strength it had against limit lower corn. The meal market rallied some around 1:00 PM but failed to hold the rally because corn returned to limit lower.

The Dow Jones was trading around 81 points around lower 1:15 PM today when the Ag markets closed. The Dow Jones closed 145 higher about 30 points off the highs. The US economy/investors needed the rejection of lower prices in the Dow today and the higher close to give the market some hope of better things to come. From a technical prospective, if the Dow Jones holds 10,917 as support tomorrow, we should see a sharp move higher. The technicals are telling me there will be a solution for AIG. Lets see what the news tells us.

Bottom line - I expect meal to be weak on the open in the overnight only to have an early low and a late high. The funds only sold 2,000 contracts of meal today and 5,000 of soybeans. This is not a large amount considering what they could really do. Like I said with corn, I think this is a tremendous opportunity to get coverage in place for soybean meal if you don't already.

Dec '08 Hogs Daily Chart

HOGS
Dec '08 hogs were trading as much as $2.25 lower this morning around 8:00 AM in the globex trade. Once the pit session opened we saw hogs firm and even trade higher in the October contract and as high as .40 lower in the December '08 contract and ultimately settling down .45. The morning cash reports were weak across the board except for the Eastern Cornbelt. The range was from down $.44 to down $3.70 but the national cash price was down $2.83. The US Dollar Index was again both sides of unchanged but ultimately traded higher and stayed their for the last half of the day trading session in hogs.

At this point I don't see a lot that gets me excited about being long or unhedged in this market. I said yesterday I thought there would be buying above yesterday's high of $66.70 which we never got to therefore we didn't see any buying. The cash still feels weak but I would bet the afternoon cash prices will be nowhere near the morning or noon reports.

I will expect to see more weakness tomorrow as we move forward, I need to see a close above a prior day high to get excited about anything to the upside. For now any rally we have will likely be met with good selling as we enter the 4th quarter of 2008. Keep hedges in place if you have them, if you don't put options would be more attractive to me than straight futures because of how far we have dropped the market from its highs.



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
-----------------------------------------------------------------------
09/16       135.6      75.96   91.85   77.24  59.30  86.27 76.08  79.48
Change :               -0.24   -1.00   -3.09  -0.27  -0.02  0.29   2.44
-----------------------------------------------------------------------

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 :  1.62 lwr   :  2.03 lwr   :  2.01 lwr   :   .47 lwr
Negotiated      :             :             :             :
CARCASS BASIS   : 59.00-71.00 : 60.00-71.00 : 59.00-71.00 : 60.50-68.24
185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg
Plant Delivered :    65.35    :    65.76    :    66.06    :    63.97
--------------------------------------------------------------------------
Head Count      :   25,934    :   11,660    :   16,818    :    8,920
==========================================================================

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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