Hog Comments - 12-15-08 - Possible short-term top in corn and meal.

THERE WILL BE NO COMMENTS TOMORROW AS I WILL BE OUT OF THE OFFICE ALL DAY.

CORN

Open - $3.74, High - $3.93 1/4, Low - $3.73 1/2, Close - $3.75 1/4

 

After seeing March '09 corn up .11 to .13 cents last night I figured the March '09 corn was going to have the trade action it did today.  With this in mind I exited some long futures positions last night with anticipation of the market moving lower today.  I have orders to get back long corn toward the $3.65 support area if we get there.  Usually when we get big openings one way or the other at what could be the end of a move, we tend to overdo it.  Today we did just that, most of the excitement was during the first 30 minutes of trade.

 

The crude oil market was up around $3.50 prior to the 9:30 a.m. corn open and when the grain market closed this afternoon crude was down around $1.50.  I REALLY didn't like the way corn traded today, it left a sign of warning and I expect sell stops to be triggered below today's low of $3.73 1/2.  It looks as if we could begin a correction in the March '09 corn and move back toward $3.60 and then down to $3.50 which would be a 50% retracement of our rally.

Bottom line - I feel like we could open lower tonight and continue lower because of the selloff we had late in the day.  We traded as much as .19 3/4 cents higher today but could only manage to close .01 3/4 higher on the day?  Not so good.  I look for weakness in the March '09 corn tomorrow and expect a test of $3.65 to $3.58.  On a positive note, the U.S. Dollar is still nose-diving which will be positive for commodities longer-term.  I still want protection for feed needs, this hasn't changed.  I altered my position because I am trying to protect equity and I plan to re-enter at a lower price or above today's high if I am wrong.

MEAL

Open - $257.00, High - $263.00, Low - $254.50, Close - $256.80

I will now base my comments on March '09 soybean meal instead of January because January has little time left in the contract.  I exited my meal positions last night like I did with corn; I want to re-own these positions at a lower price or above today's high whichever comes first.  As I stated in my corn comments the U.S. Dollar Index is falling apart faster than a $2.00 suitcase, as a friend of mine would describe it. 

March '09 meal closed at $257 which is above the 50% retracement level of $255.90 and if we stay above $255.90 we should make another run at last night's high of $263.00.  As I said in corn I am not impressed at all with the trade action today, we were up $6.00 today and ended up closing down $.20.  Not impressed!  The trade today is consistent of that with tops in markets, now I am not saying the meal market is done at all but I am saying I am looking for a correction before we make our next leg up.

 

Bottom line - I am expecting a lower market in March '09 meal tomorrow and I am also looking for a test of $255.90 and ultimately $250.00 in the near future.  The Dow Jones and crude oil have both dropped off since the meal market closed at 1:15 p.m. cst and that should bring some weakness to the overnight trade.  Lower trade tomorrow is my thought.

HOGS

Open - $62.50, High - $62.85, Low - $62.37, Close - $62.57

Feb '09 hogs had a whopping $.47 trade range today.  Day traders are going to be switching from prime rib to noodle soup after a trade range like todays!  It seems to me the downside test will be complete if we can close the Feb '09 futures above $63.00 again in the near future.  I look for the market to be firm tomorrow based on technical considerations.  If we can get back above $63.00 then I think we test $64.30 to $65.00 in the Feb '09 contract.

The hog market STILL hasn't responded to the falling dollar during the past week as well as today.  Like I said last week, it is only a matter of time before it kicks in and we see exports pick up.  Maybe the government bailing everyone out is a back handed bail out to the Ag sector by crushing the dollar and making our Ag products look more attractive to the international market.

 

Bottom line - I expect hogs to be higher tomorrow but after the trade we have had the last couple days I wouldn't be surprised if it is quiet.  I still think we will test our most recent high of $67.00 in the near future and I believe we will still see the $70's at some point in the coming months.  I'm looking for better trade tomorrow and we could see resistance come in around $63.40 and then up to $64.52 although unlikely to see the $64.52 tomorrow.

Des Moines, IA     Mon, Dec 15, 2008     USDA Market News

USDA NATIONAL CARLOT PORK REPORT as of:  3:00 P.M.
Purchases equated to FOB Omaha Basis.

Compared to Friday's Close:         Fresh loins steady; butts weak
to 1.00 lower; sknd hams 17-23 lbs not tested, 23-27 lbs weak; sdls bellies
steady; lean trimmings unevenly steady. Trading slow, with light to moderate
demand and offerings.



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Loads PORK CUTS          :              42.5
Loads TRIM/PROCESS PORK  :              19.0
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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
-----------------------------------------------------------------------
         Total                   Today's Primal Cutout Values
Date     Loads      Carcass    Loin    Butt   Pic     Rib   Ham  Belly
-----------------------------------------------------------------------
12/15        61.5      59.28   74.19   66.11  36.72  87.80 53.32  66.88
Change :               -0.76    0.73   -0.72   0.11   0.16 -3.24  -0.52
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Des Moines, IA     Mon, Dec 15, 2008     USDA-IA Dept of Ag Market News

National Direct Hog Price Comparison

--------------------------------------------------------------------------
                :  National   :    Iowa     :   Western   :   Eastern
                :             :  Minnesota  :  Cornbelt   :  Cornbelt
--------------------------------------------------------------------------
   Base Price is the price from which no discounts are subtracted and
   no premiums are added.
--------------------------------------------------------------------------
BARROWS & GILTS :   .07 lwr   :   .49 lwr   :   .24 lwr   :   .22 hgr
Negotiated      :             :             :             :
CARCASS BASIS   : 42.50-55.25 : 42.50-55.25 : 42.50-55.25 : 45.50-55.00
185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg
Plant Delivered :    53.44    :    53.01    :    53.33    :    53.57
--------------------------------------------------------------------------
Head Count      :   19,939    :    8,991    :   12,650    :    6,199
==========================================================================

 

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.