Hog Comments - 09-17-08 - Grains rally and hogs stay firm.

 Dec '08 Corn Daily Chart

CORN

Corn started the day off at $5.37 3/4 which was up .05 cents from yesterday's close only to back off and and 10:30 AM timeframe at $5.31 1/2. This would suggested the corn market would close below $5.37 1/4 because we were trading lower than the open at 10:30 AM. The Dow Jones had trouble this morning as it made new lows once again. it seems as if investors were fleeing from the stock market and purchasing gold which was up over $82 at one point today. The corn market has an interesting set up as it made new lows this morning once the market found out it couldn't push much lower than $5.26 it reversed itself and took the path of least resistance which was higher. Because we made lows of $5.31 twice in recent days, the move below $5.31 today and immediately turn around and coming back up through those levels triggered a buy signal at $5.31 1/2 today which we closed well above. December 2008 corn to close above this level tomorrow as well.

Now that we have the close above $5.31, we should see a kick in volatility and continue with our move higer. The next target I have is $5.80 or Monday's high price. We closed the day above the levels I talked about yesterday, $5.48-$5.52. If we can hold this support tomorrow I would expect a trip toward the $5.80 number in the near future.

Bottom line - I expect corn to open slightly lower tonight only to find support. Unless Crude Oil (up $5.00 by the way) tanks before corn opens tonight I think we should expect steady to lower opening and then move higher to challenge todays high of $5.60. I bought the other 1/2 of my corn position today at $5.45 on a stop.

Dec '08 Meal Daily Chart

MEAL

Dec '08 meal is lagging something fierce. I am still not a bear at these levels for meal but it sure doesn't want to catch the fire here either. I would like to see us get above $329.30 tomorrow which is the 50% retracement back to the recent high of $342.20. It feels as if we could open mixed to lower tonight then find support around $320-321.00 before making a move higher. We should have some stop order buying above todays high of $326.20 which could give us some strength to start moving toward the $342.20 area.

Meal and soybeans both were weak on the floor, corn rallying as much as $.27 higher and meal only getting $7.00 higher and sobyeans around $.20 higher on the day. Hmmm, what's the scoop? I said yesterday there was a potential buy signal at $324.50 on a stop if we got there today, well we did so theoretically the charts are long at $324.20 with a sell stop below $316.10. I didn't take this trade because I am already long Dec '08 meal at $350.00 and will continue to hold this position for now.

Bottom line - Like I said before, I expect steady to lower opening tonight. We should find support around $320-321.00 and then make a move toward todays high of $326.20 sometime tonight or tomorrow, probably tomorrow.

Dec '08 Hogs Daily Chart

HOGS
Dec '08 hogs rallied sharply just after the open putting in a high of $67.50 which had Dec '08 up $1.40 for the high of the day. It didn't stay up there long though as it was trading around $66.02 or down $.07 at 10:00 AM this morning. The trade was fairly quiet after that but we managed to put a low in at $65.50 which was down $.60 only to settle the day out at up $.35 on the day. Todays trade action left the charts looking like we could see sideways trade between $64.30 and $67.50. I will say there is an interesting pattern that COULD be forming in the Dec '08 hog chart (Globex chart); it looks like we could be forming a broadening triangle which is usually a sign of a potential reversal. Nothing has formed yet but I will continue to monitor it and watch its developments if any.

The US Dollar Index took a tumble today and is trading .995 lower today and is below the 78.22 number I wrote about last Friday. If the Index closes below this number on Friday it would be a fair assumption that we could see more selling next week and the Dollar could begin to soften further. Cash hogs were lower in the East and nationally this morning but the IA/MN and Western corn belt were higher. The afternoon cash report was slightly mixed but mostly higher as you will notice below.

Bottom line - I expect hogs to open better this evening (5:00 PM CST) and hold higher prices until morning, mostly because there is very little volume in the overnight trade and then retrace some tomorrow. I would expect a test of the $65.90-$66.25 area before we find good support. I am still waiting for a close above a prior day high before I get excited about the thought of a good rally. 

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
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         Total                   Today's Primal Cutout Values
Date     Loads      Carcass    Loin    Butt   Pic     Rib   Ham  Belly
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09/17       101.1      76.86   93.06   76.81  59.42  87.65 78.34  79.48
Change :                0.90    1.21   -0.43   0.12   1.38  2.26    unc
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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 :   .09 lwr   :   .62 hgr   :   .60 hgr   :   .55 lwr
Negotiated      :             :             :             :
CARCASS BASIS   : 59.00-72.00 : 59.00-72.00 : 59.00-72.00 : 60.50-67.57
185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg
Plant Delivered :    65.52    :    66.73    :    66.90    :    63.41
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Head Count      :   22,726    :    9,332    :   13,756    :    8,735
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