Hog Comments - 10-15-08 - Look on the bright side, we are one day closer to the bottom.

CORN

There really isn't much to say about corn other than more of the same.  We are still experiencing liquidation of assets by hedge funds and until that selling stops we don't have much to look forward to in the way of higher prices.  I never dreamed we would have a chance to potentially lock in feed corn for less than $3.00 a bushel in the last half of 2008.  The close in Dec '08 corn was weak and would suggest further downside tonight and tomorrow.

  

I expect a test of $3.75 in Dec '08 in the next day or two and if we close below $3.75 then we can look forward to $3.25 in what could be a short amount of time.  The Dow Jones dropped another couple hundred points after the Ag markets closed which will again lead to more pressure this evening and tomorrow.

Bottom line - I expect Dec '08 corn to open lower tonight and probably test $3.75 tonight and if not tonight then I would expect it tomorrow at some time.  I say this assuming we will not have any other new come from Washington D.C. or Wall Street that would change the perception of the market right now.  $3.75 Dec '08 is likely and $3.25 is just around the corner from there.

MEAL

Dec '08 soybean meal was strong today considering what soybeans and corn did.  Dec '08 meal only lost 1.21% of its value today while Nov '08 soybeans lost 4.24% and Dec '08 corn losing 5.65%.  Crude Oil was weak today and made a new low at $74.09  which didn't help the soy complex any.

Dec '08 meal has a target price of $229.80 and then down to $217.00.  I believe $229.80 is possible but we will see how meal acts around $229.80 before making the call of $217.00.  Again like I mentioned in corn, we have been in liquidation mode for soybeans with funds taking money out of the markets and turning it into cash.

Bottom line - I expect Dec '08 meal to open mixed to slightly higher tonight but only for a short while.  I believe we will continue our move lower tomorrow on the tail of the outside markets.  People are still in fear mode and it will be hard to turn any market when it is faced with panic selling.

HOGS

Dec '08 hogs only opened $.60 lower but they didn't stay there very long.  The Dec '08 contract made a low of $57.85 which is a new contract low for this contract.  I will expect more selling below this low based on the lack of positive news in the cash and cutout markets.

 

Cutout was down a WHOPPING $2.96 today!  In this environment I would expect Dec '08 hogs to trade limit lower at some point tomorrow and probably the rest of the contracts as well.  I could be all wet but there is very little positive news out there for anyone to latch onto and we will need something to get this market.  A cutout drop of $2.96 wouldn't be what I had in mind to give the market a boost.

Bottom line - like a broken record, I think tomorrow will be weaker in the Dec '08, mainly due to the cutout drop of $2.96.  Like I said above I expect Dec '08 to at least trade limit lower sometime during the day, I can't say I expect the market to lock limit lower tomorrow though.  We will see.

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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10/15       108.4      64.11   87.44   69.31  44.17  91.64 48.05  71.01
Change :               -2.96   -2.41    0.84   0.03  -0.21 -6.61  -4.91
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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 :  1.57 lwr   :  1.51 lwr   :  1.30 lwr   :   .25 hgr
Negotiated      :             :             :             :
CARCASS BASIS   : 53.00-64.38 : 53.25-64.38 : 53.25-64.38 : 53.00-62.00
185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg
Plant Delivered :    60.56    :    61.63    :    61.81    :    59.47
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Head Count      :   21,347    :    7,068    :    9,719    :   11,506
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