Dec '08 corn opened slightly higher today and traded lower for the balance of the day. The Crude Oil market didn't help matters as it was trading as much as $5.50 lower during the day. Dec '08 filled a gap left on the hourly chart at $3.92 3/4 and also touched the 62% retracement level of $3.90 1/4 and held. The Dow Jones continued its slide during the last hour of its session and the US Dollar index firmed going into 3:00 p.m. CST.
The market closed a 1/4 cent off of the lows today so we could experience a gap lower opening tonight which would actually be friendly. If the market gaps lower and moves higher from there, I would expect some buying to come into the market above $3.90 in the Dec '08 contract. Today I did some scale down buying of Dec '08 corn at $3.98 and $3.95 and my average price is $4.04 on about 60% of my needs. I also purchased an out of the money put option to make sure the market can't blow up on me and get another sell off like we had in the last month.
Bottom line - I expect the Dec '08 futures to gap open lower and move lower right away and then find support at $3.85 3/4 if we get down that far. I expect the market to recover after the initial sell off and work its way back toward unchanged by tomorrow. I expect early lows and late highs during tomorrow's trade. It is probable that we may test the $4.03 which would be a 50% retracement of today's move.
MEAL
Dec '08 meal wasn't much different than corn or soybeans today as it too fell apart. The meal market did what I thought it was going to do today; I expected an early high and a late low which is exactly what we got. The Dec '08 contract touched support at $264.10 today which is the 50% retracement back to the low of $236.90 back on 10-16-08. The market didn't bounce much off of this number but it did respect it for today's trading session; we will see what tonight/tomorrow brings.
Bottom line - I expect similar action in Dec '08 meal tonight as I do in the corn. I am looking for a weak to possible gap lower tonight with some additional selling only to catch support at $261.40 if we get that low. IF there is a gap lower (open below $263.40) and we end up trading above today's low I would expect some buying above $263.40. I am looking for early lows tomorrow and late highs. Make sure you have some soybean meal covered with options if you can!
HOGS
The market wasn't as weak in the Dec '08 contract as I thought it would be. It seems to me the market is preparing for the Goldman roll which begins Friday. I am not sure what I mean by that because if they wanted to go with the direction of the roll they would sell the Dec and buy the Feb but they are doing the opposite. I am telling you, these Goldman guys are good at getting business done!
The cutout was down $3.53 yesterday but it didn't seem to bother the market in the Dec '08 but the Feb and April of '09 drifted some. The cash and the cutout were down today as well. I don't expect much to happen tomorrow either because the cash was no surprise and the cutout was expected to be lower as well. The weighted average for the nation is around $51.50 and the Dec '08 contract closed at $54.47 today so it looks as if the market thinks the cash will rally some into the Dec '08 contract expiration. One could also view it as the futures market has more downside and that is the way I will keep positioned, covering the downside.
Bottom line - I expect Dec '08 to be lower tomorrow based off of fundamental news this evening. I don't think it will be a blood bath because the news isn't anything we didn't already know during the day session. I look for quiet and mixed trade overnight and tomorrow I am looking for the market to make early lows and late highs unless the outside markets say something different. With the Dow Jones closing 486 points lower and Crude Oil down $5.24 I think most traders will have one eye on the outside markets as well, and not only for hogs but grains too.
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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11/05 106.6 56.74 78.86 60.07 41.34 86.82 37.74 65.71
Change : -0.81 -1.97 0.04 0.00 -0.48 -1.07 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 : 2.04 lwr : 1.90 lwr : 2.01 lwr : 1.89 lwr
Negotiated : : : :
CARCASS BASIS : 42.00-53.00 : 42.50-53.00 : 42.00-53.00 : 43.00-52.50
185 lb Base Hog : wtd avg : wtd avg : wtd avg : wtd avg
Plant Delivered : 51.48 : 51.91 : 51.97 : 50.65
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Head Count : 21,781 : 8,924 : 13,604 : 7,927
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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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