Hog Comments - 02-11-09 - Pork cutout higher for third day. Is it a trend?

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ME AT jknutson@hurleyandassociates.com.

Today's post will probably be the last until Thursday of next week as I will be out of the office
and unable to provide quality commentary.  Please check in for updates as I may have a chance
to post.

CORN - March '09 Electronic
Open - $3.73 1/4, High - $3.76 1/2, Low - $3.68, Close - $3.68 1/2 Down $.08 1/4
In review of yesterday's comments I said in my bottom line section "I expect a slightly higher open tonight with almost immediate resistance and then we should sell off and test $3.74 but I ultimately think we will touch $3.68 again either tonight or tomorrow." I was wrong about the slightly higher open as it was lower by $.03 1/2 but I was accurate saying we should ultimately test $3.68; it was our low for today.

The 60 minute intra-day chart has an interesting setup happening. The market tested the $3.68 low twice and has thus far provided support. If the market gaps (opens) below $3.68 tonight I will have two buy signals on the hourly chart, 1.) if the market gaps lower there is a buy signal at $3.68 1/2 STOP, 2.) if the market opens above $3.68 and then makes new lows below $3.68 only to turn and trade higher than $3.68 we would also have a signal to buy at $3.68 1/2 on a STOP. Again, these are conditional buy signals meaning things still need to take place for them to be good. I am pointing this out as what I see on the chart, it isn't a recommendation because like have said before I can change my mind before I get a chance to inform you!

I re-entered the same orders I had in yesterday to buy another 1/3 of my needs at $3.65 and the remaining 1/3 at $3.63. I may change my approach tonight if the market gaps lower or makes new lows below $3.68 and then reverses to move higher. I will be watching this closely tonight.

Bottom line - I expect March '09 corn to open steady to lower and move lower initially before finding support around $3.66 or so. I expect the market to make new lows below $3.68 and then reverse and move higher. I am expecting an early low and a late high tomorrow with a test of $3.72 1/4 and then $3.73 1/4.

MEAL - March '09 Electronic
Open - $310.70, High - $312.20, Low - $306.00, Close - $305.70 Down $6.40??
If you notice above I have the close at $305.70 and the low at $306.00 which obviously can't be but that is what it is telling me so something is wrong there. As a review from yesterday I said the following " I still think we need another test of the $307.80 to $305.30 area once again which could happen either tonight or tomorrow." As you can see we fell well within that range today with our low being either $306.00 or $305.70.

Bottom line - I expect the March '09 meal to be lower tonight initially and although I don't think we have enough momentum to get there, there is a gap that should be filled at $302.70 at sometime in the future. I think tomorrow will bring an early low and a late high more so on the coattails of corn than anything but this is what I see. If we do make highs later in the day I would say $309.00 to $310.00 will provide resistance.

HOGS - April '09 GLOBEX
Open - $62.20, High - $62.625, Low - $61.925, Close - $62.275 Down $.025
As a review from yesterday I said "I look for the market to rally again tomorrow and challenge today's high of $62.75 and then the $63.25 area shortly thereafter." As you can see I was off by $.125 on the low end of my projections and $.625 off on the high side. I truly thought we would have a larger trade range today than we did; it was only $.725/cwt. This isn't all bad because we stayed within yesterday's range and that works for me. It doesn't negate anything that I have been watching from a bullish perspective.

As I look at the chart it is still throwing me a curve ball (VERY short-term) because my cycle still has us moving lower for a few more hours of trade. I look at the chart and the pattern and it is saying something different, continuation of direction or higher from here. I am sticking to my thoughts of yesterday's high of $62.75 being challenged and also a test of $63.25. If we manage to close above $63.25, particularly on a Friday then we open the doors to $65.75 and $67.15 as I mentioned yesterday. If you want to validate these comment and question my sense of bullishness please refer to my comments from last Thursday, February 5th, 2009, click here.

Bottom line - The cash and cutout were both up today and for cutout that makes three days in a row! The cutout feels real because we were up approximately $.95 on Monday, up $.06 yesterday and up $.86 today and normally if a decent move higher is a joke it seems to be adjusted the next day or two. With the cash and cutout markets finally coming around to some degree it just gives more reason to believe we could be in the midst of an April '09 market bottom. I am not making a bold prediction of an April '09 bottom but the odds are increasing daily. It is too early to tell just yet if we have found our bottom. I expect early lows and late highs tomorrow.

NW_LS500
Des Moines, IA     Wed, Feb 11, 2009     USDA Market News

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

Compared to Tuesday's Close:        Fresh bone-in loins and butts
firm; sknd hams 17-20 lbs steady, 20-27 lbs unevenly steady; sdls bellies steady;
lean trimmings firm on a light test. Trading very slow, with light to moderate
demand and offerings.



-----------------------------------------------------------------
Loads PORK CUTS          :             60.25
Loads TRIM/PROCESS PORK  :               7.0
-----------------------------------------------------------------

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
-----------------------------------------------------------------------
02/11        67.3      58.67   77.30   63.41  37.94 100.47 41.70  72.34
Change :                0.86    0.90    0.81   0.23  -0.74  2.25  -0.03
-----------------------------------------------------------------------

NW_LS831
Des Moines, IA     Wed, Feb 11, 2009     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 :  1.82 hgr   :  1.81 hgr   :  1.93 hgr   :  2.36 hgr
Negotiated      :             :             :             :
CARCASS BASIS   : 43.00-62.16 : 45.00-62.16 : 43.00-62.16 : 43.50-60.50
185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg
Plant Delivered :    57.06    :    58.86    :    58.94    :    53.12
--------------------------------------------------------------------------
Head Count      :   32,753    :   17,616    :   22,197    :    8,101
==========================================================================

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