Good afternoon, what a wonderful Monday back to work after a long weekend of over-eating. My beloved Minnesota Vikings beat the Chicago Bears last night and are now in first place alone atop the NFC North!
CORN
It wasn't long before the March '09 corn futures headed south for the day. The market was down around $.06 overnight and the day session had the same type of feel going into the open only the day session opened around $.09 lower and ultimately closed $.17 lower on the day.
The Dow Jones was down around 400 points when the corn market closed this afternoon and then going into the 3:00 p.m. CST time-frame the Dow fell near its low of the day closing down around 680 points, ouch. Crude Oil had a tough day in the market as well closing down over $5.00 a barrel. March '09 corn has support at $3.40 which was the March futures low in 2007 and also the March futures high in 2004. If $3.40 is breached on a consistent level we could see a test of near $2.90 in the March '09 futures. This isn't a projection as much as an observation.
I don't know about you but I do not want to be down at these levels and not have feed corn covered for an extended period of time via options. I haven't seen hard signs of a bottom but it will find its bottom someday and you need to be prepared. It is easy to look the other way when markets are moving in your direction but now is the time to get your plan together. I have been long call options all the way down and have been rolling them down to make sure my coverage is in place when the market turns.
Bottom line - It looks like we should have lower opening tonight based on what the Dow Jones did going into the close. I expect a lower opening tonight and some follow through to the downside to test our low of $3.45 and maybe even $3.40. I don't think we will stay lower all night long nor do I think we will have a major down move tomorrow. The market traded below $3.48 3/4 during each of the four hourly session the market was open today and closed each one of them above this level. I expect a test of today's lows but I think we will recover some tomorrow with a test of $3.51 to $3.52 1/2.
MEAL
I don't have much to say about Jan '09 meal other than I think we will test today's low of $248.50 and bounce. $250.20 is our old low from Nov 21st, 2008 and held as support today. If we close below $250.20 then we could test $238.80 at some point in the near future. Crude Oil didn't have as much of an effect on Jan '09 meal today as I thought it would.
Bottom line - I expect a lower opening tonight similar to corn and then find an early low and rally later in the session. I think we should have early lows tomorrow and begin to firm as the day session progresses.
HOGS
Feb '09 hogs closed $1.67 lower today off of little news. It is probable that we could see a correction in the Feb '09 hogs back to the $64.32 area and then find support. I don't think we will be able to do that tomorrow because the cutout was up $.95 today and cash was also marginally higher per the USDA. As each day passes in the hog market I become more and more friendly, I am still hedged in the Dec '08 contract on a fraction of my hedges because we exited a majority of them for now to protect equity. If the market makes a test of $64.32 and closes below it for two days then I will look to re-hedge but until then I will remain on the sidelines.
The longer-term view of the charts show the market making a longer-term test of $72.95 in the Feb '09 contract and I am of the opinion that it could very well happen. I do not want to be short a large amount of hogs at this time and am monitoring the U.S. Dollar Index to see if it can make up its mind. The Dollar sold off rather hard during the first part of last week but recovered going into Friday. I am still a longer-term bear on the U.S. Dollar based on all of the money that is being infused into Wall Street.
Bottom line - I expect tomorrow to be a better day in the hog market mainly due to the higher cutout price today. I think we will experience our weakest market price early in the day and firm as the day session progresses.
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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12/01 48.9 59.43 72.08 68.20 35.77 86.42 50.88 74.69
Change : 0.95 -0.77 0.13 -2.02 0.97 4.74 1.19
-----------------------------------------------------------------------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 : .72 hgr : .63 hgr : .76 hgr : 1.70 hgr
Negotiated : : : :
CARCASS BASIS : 46.00-59.00 : 46.00-59.00 : 46.00-59.00 : 46.00-55.41
185 lb Base Hog : wtd avg : wtd avg : wtd avg : wtd avg
Plant Delivered : 54.06 : 54.74 : 54.80 : 52.99
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Head Count : 24,555 : 10,728 : 14,511 : 9,783
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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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