Hog Comments - 02-09-09 - Pork cutout gains some ground.

CORN - March '09 Electronic
Open - $3.75, High - $3.83, Low - $3.72 1/2, Close - $3.77 1/2 Up $.00 1/4

The market got within a penny of my downside and upside targets for Friday's trade.  I exited most of my long futures positions on Friday going into the weekend because it felt like the market had run its course for the time being.  I got out near the open so I didn't get out on the high like I would have liked to but we were able to bank some equity.  I had orders in to buy March corn at $3.69 today but we didn't get that low.  I put that order in as a just in case order.  I still have my $3.60 put options in place that will cover my downside if I do get long futures again prior to the report tomorrow. 

I have a bull put spread in place for some compensation if the market does rally but I don't have it on a large portion of my needs.  It is there so we take advantage of something if the report comes in friendly tomorrow.  As for me I expect the market to have early highs and late lows tomorrow.

Bottom line - if we breach the support level of $3.76 1/2 tonight/tomorrow then I see us challenging today's low (actually Sunday nights low) of $3.72 1/2.  $3.69 1/4 is a target area for me before we find good support and below that is $3.66.  I think March '09 corn wants to rally but first I think we need a small correction to last week's movement.  $3.69-$3.66 is a very short-term target area for me but I still look for the market to move higher over time.  I don't have an aggressive long position in place at this time but I will change my mind in a heartbeat if the market tells me to.  Keep your feed coverage in place.

MEAL - March '09 Electronic
Open - $316.30, High - $319.40, Low - $310.50, Close - $313.80 Down $3.50

As I mentioned in my corn comments, I exited my meal positions on Friday as well having an average of just below our closing price today.  I did buy a call spread for meal coverage today to get through the report tomorrow but if I don't need the coverage after the report tomorrow I will exit the call spread and look to buy futures on a price decline against the put options we own at $290.00 in the March '09 contract.

Bottom line - It feels like we will see a test of today's low of $310.50 at some point either tonight or tomorrow.  I do see a buy signal in the 60 min chart if and only if we make new lows below $310.50 and then come right back up through those levels.  The buy would be a $311.00 buy stop with a risk management protective stop below the most recent low.  I think a test of $307.80 to $305.30 is in the cards in the near future.

HOGS - April '09 GLOBEX
Open - $60.20, High - $60.725, Low - $59.975, Close - $60.075 Down $.325

I said last Thursday there was a big buy signal setting up for Friday at $60.40 and if we went through this level we could see some fireworks.  Friday morning looked like the signal should be good to go but then we just ran out of steam and did pretty much nothing all day long.  The same went for today, we really didn't do much other than have around a $.75 rang.

The signal is still good but if it was going to do what I described on Thursday we should have closed much higher than we did on Friday.  As long as we don't trade below Thursday's low of $59.80 the signal is still good.  The cutout having been feared by most over recent weeks threw us a surprise by moving higher by $.92 today.  This should bring a positive tone to the market tomorrow because the cash market was lower today as well; this all means the packer margin has improved today.

Bottom line - The market is currently up $.575 in the overnight because of the good cutout number and if we can sustain trade over $60.55 then I think we have a reasonable shot at Thursday's high of $61.12.  I still look for the April '09 resistance this week to be around $61.42 to $61.80.  I expect better trade tomorrow and the $59.80 low to continue to hold support.

NW_LS500
Des Moines, IA     Mon, Feb 09, 2009     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 1/4" trim loins steady;
butts 2.00-4.00 higher; sknd hams steady to weak; sdls bellies not established;
lean trimmings unevenly steady.  Trading slow to moderate, with light to
moderate demand and offerings.



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Loads PORK CUTS          :             46.10
Loads TRIM/PROCESS PORK  :              24.0
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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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02/09        70.1      57.75   76.35   59.78  38.12 101.37 40.36  72.38
Change :                0.92    3.71    1.82  -2.58   0.48  0.02   0.07
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NW_LS831
Des Moines, IA     Mon, Feb 09, 2009     USDA-IA Dept of Ag Market News

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 :   .77 lwr   :   .87 lwr   :   .74 lwr   :   .96 lwr
Negotiated      :             :             :             :
CARCASS BASIS   : 42.50-56.75 : 45.00-56.75 : 42.50-56.75 : 43.00-55.41
185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg
Plant Delivered :    53.45    :    54.56    :    54.69    :    51.89
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Head Count      :   24,218    :    9,284    :   13,415    :   10,758
==========================================================================

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