Hog Comments - 12-03-08 - Pork cutout comes in $1.32 higher!

CORN

I said yesterday I had a buy signal at $3.45 in the March '09 corn only if the market traded below $3.45 and then came back above it.  The signal is still good but we didn't get below $3.45 today because it was our low for today too.  This signal is on a daily chart and the only reason I am talking about it is because the market has good support around $3.40.

I would expect the market to test the $3.40 level at some point being we are so close to it.  We also have low volume to deal with because of the holiday's which makes for more volatile trade and can exaggerate moves in the markets.  Crude Oil was basically sideways today trading both sides of unchanged on the day.  The Dow Jones did the same thing, opened lower and then mounted a comeback to trade higher.


Bottom line - I am expecting a test of the $3.40ish area tonight/tomorrow and this will be influenced by the Dow Jones and Crude Oil.  I will still respect my buy signal at $3.45 1/2 stop if the market makes a low below $3.45.  If the order is filled an exit sell stop would be placed $.01 below the session low.  I am looking for sideways to lower trade tonight and tomorrow with the market looking for some direction from outside markets.

MEAL
As I said yesterday I think we can see the Jan '09 meal contract test the $238.80 level at some point in the near future.  I also said I thought we would take out yesterday's low before having a better day and we did just that.  The Jan '09 contract retraced 50% of today's range back to the $246.60 level and settled at $246.70.  If the market continues to maintain the $246.60 level then we could test today's high of $249.90 but if we fail then we are on to challenging our recent low of $243.20 and maybe even $238.80.

Bottom line - I expect meal to open better tonight in line with the strength from the Dow Jones going into its close.  I look for support at $246.60 but I think we can make another run at $243.20 either tonight or tomorrow at some point.  Don't get me wrong, I am not bearish at these levels but I think with the lack of volume we could see the market make some moves that it normally wouldn't in better volume trade.


HOGS
I got the number I have been looking for in the Feb '09 hogs, $64.32.  The market made a low at $64.05 in the pit and $64.12 in the Globex trade and closed at $64.37 which is above my number.  I would like to see the market close above this number tomorrow as well and begin a rally back to our most recent high of $67.05.  I feel as if we could see a rebound in the Feb '09 hogs tomorrow based on the setback we had today.  

The cutout number just showed up after I wrote the last paragraph and it solidifies my thought of the market being higher tomorrow because the cutout was up $1.32.  The Dec '08 and Feb '09 instantly rallied a few cents when the USDA released the number.  Cash was modestly lower today so packer margin had a nice gain today!


Bottom line - I said yesterday that I thought the market would test $64.32 before making another move higher and we have touched the $64.32 number and with the cutout number we had today I would expect this to be the beginning of a rally toward our most recent high of $67.05 in the Feb '09 contract.   I don't think we have enough momentum to do this tomorrow but I think it should happen over the next few days.

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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12/03        70.0      60.96   72.74   67.84  32.95  86.91 57.62  74.70
Change :                1.32    1.22   -1.09   0.28   0.10  4.45   0.01
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National Direct Hog Price Comparison

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                :  National   :    Iowa     :   Western   :   Eastern
                :             :  Minnesota  :  Cornbelt   :  Cornbelt
--------------------------------------------------------------------------
   Base Price is the price from which no discounts are subtracted and
   no premiums are added.
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BARROWS & GILTS :   .49 lwr   :   .83 lwr   :   .87 lwr   :   .10 hgr
Negotiated      :             :             :             :
CARCASS BASIS   : 46.00-58.00 : 46.00-58.00 : 46.00-58.00 : 50.00-55.41
185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg
Plant Delivered :    53.95    :    53.82    :    53.93    :    53.99
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Head Count      :   25,088    :   13,108    :   15,735    :    9,153
==========================================================================

 

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