Hog Comments - 12-18-08 - Grains make a run higher on the close.

CORN - March '09

Open - $3.88, High - $3.94 1/2, Low - $3.80, Close - $3.89 1/2.

I said yesterday that I thought the market would open weaker last night and end its weakness prior to the day session open today.  I also said I thought we could test yesterday's low of $3.81 3/4 which we did today by making a low of $3.80 and then moving higher from there.  The market closed around .05 higher in the overnight session but opened the day session around 1/2 cent lower and was weak most of the day.

 

I was impressed with the market rallying into the close of the day session because the U.S. Dollar Index was trading higher by around 95 points and crude oil was down approximately $2.00.  There volume today was rather weak coming in around 62,800 contracts in the March '09 electronic contract.  We were trading over 100,000 consistently during some of our up days in the recent rally.

 

Bottom line - It looks like we should make a test of $3.94 1/2 either tonight or tomorrow and I wouldn't be surprised to see a run back toward the $4.02 1/2 area although I am not as confident of the $4.02 1/2 number as I am the $3.94 1/2.  The market has rallied on the close the last two days and it makes me think this rally may not be over.  I expected more of a correction that we have gotten but I am not sure we will go much lower on this break.

MEAL - March '09

Open - $263.80, High - $266.80, Low - $260.60, Close - $266.60.

I said yesterday I thought Jan '09 meal would test the $260.60 to $259.70 and our low was $260.50 so it went .10 cents through my support point and rallied from there.  I also said if we stayed above $260.60 we could test yesterday's high of $265.00 which we did today by topping out at $266.60.  I also said yesterday the U.S. Dollar had support at 77.88 and today's low was 77.688 at which point the market reversed and moved higher, it is currently trading at 79.90 so the support has held thus far.

 

I said yesterday that I was cautious of soybean meal but I could change my mind at the drop of a hat.  The hat fell today, I re-entered the March '09 meal market at $263.00 to get long again.  I still see signs of warning on the daily chart but the market isn't breaking.  The trouble with warning signs is that they are not sell signals they are just warnings so it doesn't mean the market will absolutely reverse.  I will stay with this position for now but I am watching it closely.

Bottom line - I expect a possible test of $264.10 either tonight or tomorrow but I don't think we are going to completely fall apart.  The Crude Oil market made new lows again today and closed down $3.50ish at $36.47.  The market didn't seem to care that the dollar was rallying and crude was sinking because meal also rallied into the close.  I look for better markets tomorrow based on momentum but the daily charts still show caution.  Keep upside coverage in place for now.

HOGS - Feb '09 Pit contract

Open - $62.40, High - $62.80, Low - $62.20, Close - $62.47.

Feb '09 hogs had ANOTHER quiet day of trade with a $.60 trade range.  There really isn't a lot going on in the hog market right now, the cutout was down yesterday again but the market didn't seem to care.  I said yesterday I thought the market would put in an early low and a late high in today's trade which was exactly the case, the low was set during the first hour of trade and the high came in the last hour of trade.

 

I am still not bearish hogs here even though the cash fundamentals aren't that great.  Again, I use charts to make my decisions so the cash fundamentals are not a large portion of my formula for an opinion of the market.  There are smarter people out there that make the news and should be in the market prior to everyone else anyway so I figure I will look to those guys for info.  As I don't know them personally I use charts to try and get a handle on their trade activities.

Bottom line - There is one concerning item on the GLOBEX Feb '09 chart that I see for tomorrow and Monday, if the market moves above $63.00 and then back down below it there is a sell signal at $62.75 on a stop.  I am not going to take this trade for other reasons but it doesn't negate the fact that it is there.  I expect a run at $63.00 tomorrow but I look for $64.00 in the near future.

Des Moines, IA     Thu, Dec 18, 2008     USDA Market News

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

Compared to Wednesday's Close:      Fresh loins not tested; butts
steady to weak; sknd hams mostly 2.00-3.00 lower; sdls bellies 14-16 lbs
weak to 2.00 lower; sdls bellies 14-16 lbs not established; lean trimmings firm.
Trading slow, with light demand and light to moderate offerings, except for
sknd hams which had heavy offerings.


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Loads PORK CUTS          :              61.5
Loads TRIM/PROCESS PORK  :               6.0
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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
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         Total                   Today's Primal Cutout Values
Date     Loads      Carcass    Loin    Butt   Pic     Rib   Ham  Belly
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12/18        67.5      57.82   78.08   63.90  41.21  92.22 39.70  69.53
Change :                1.49   -0.12   -1.23   4.66   1.45  2.46   2.68
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Des Moines, IA     Thu, Dec 18, 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.
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BARROWS & GILTS :   .64 lwr   :   .95 lwr   :   .96 lwr   :   .81 lwr
Negotiated      :             :             :             :
CARCASS BASIS   : 42.50-54.15 : 42.50-52.70 : 42.50-52.70 : 46.00-54.15
185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg
Plant Delivered :    51.65    :    50.70    :    50.94    :    52.23
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Head Count      :   16,739    :    5,076    :    7,873    :    8,126
==========================================================================

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