Hog Comments - 03-16-09 - I'm still bearish hogs...

CORN - May '09 Electronic
Open - $3.84 1/2, High - $3.97 1/2, Low - $3.81 1/2, Close - $3.91 1/2 Up $.03

Reviewing my comments from my last post on Thursday the 12th of March, I said "I have been saying for quite some time that I am not a bear at these levels but now we have made some major strides to begin to confirm this thought.  I wanted to see the market get above $3.68 before I got excited about a major rally and we obviously closed well above that today.  IF YOU DO NOT HAVE FEED CORN PROTECTION IN PLACE I WOULD AT MINIMUM BUY SOME OUT OF THE MONEY CALL OPTIONS!!!  We have finally broken our downtrend line that descends from our January '09 high and we have closed above it for the fifth consecutive day.  If we manage to close May '09 corn above $3.92 tomorrow or by next Friday then my next target is $4.40 May '09 corn."

The May '09 contract made it through the upside target of $3.92 and looked like it had a great shot at testing the $4.03 number I wrote about last week too but it didn't get the job done as it stalled out at $3.97 1/2.  I am still of the opinion we could test $4.40 in the May '09 contract IF we get closes above $3.92 for a couple of days this week and especially on Friday.  I have one thing I am watching right now and it is a potential sell signal at $3.89 on a stop order.  If the order would be executed there should be a buy stop at $3.98 1/2 to manage risk in the position.  

Bottom line - I see the signal at $3.89 as a good possibility which could give us a chance to move lower and give back some of this move.  I do not think the market is done I just believe we will see a pull back.  The overnight just opened as I write this and the signal was good at $3.89 which is where we opened the session.  If $3.97 1/2 is breached then the signal has failed and it is onward and upward.  I am expecting a test of $3.87 1/2 to $3.81 1/2 tomorrow with the upside targets at $3.97 1/2 but I believe we will be lower tomorrow.  I expect an early high and late low for tomorrow's trade.

MEAL - May '09 Electronic
Open - $273.70, High - $290.00, Low - $272.50, Close - $288.40 Up $11.70

As a review from Thursday of last week I said "Not much different from the corn, the market was close to my first support level of $268.20 but above my resistance level by $3.50.  I missed exiting my short meal futures yesterday by $.10 which made for a tough pill to swallow today when I exited for a profit of around $.30 on the position.  I exited because I need upside coverage for meal and I only sold the futures so I wouldn't lose all of the equity in my $280.00 April call option.  I made a mistake, I said yesterday the April call expires next Friday but it is the following Friday the 27th.  Like corn, IF YOU DON'T HAVE MEAL COVERAGE IN PLACE WITH A KNOWN RISK STRATEGY I WOULD STRONGLY SUGGEST AT MINIMUM BUYING AN OUT OF THE MONEY CALL but talk with your broker to make sure it is right for your operation."

Bottom line - My opinion hasn't changed much from a longer-term perspective and I believe ownership is needed in some form at these levels.  I would still like to leave the downside open if possible which points to using options however do what is best for your operation.  I am looking for downside pressure tomorrow with support at $284.10 and $282.70 with an ultimate target of $278.20 but I don't think we will get there tomorrow.  Resistance should be at $290.10 and $291.60.  I expect an early high and a late low but noting to get too excited about to the downside.

HOGS - June '09 GLOBEX
Open - $73.95, High - $74.60, Low - $73.65, Close - $74.075 Down $.15

As a review from last Thursday I said "I am still negative the hog market however I did add a call strategy to my short futures today because as I have said before, what I think and what the market does are two very different things!  I have upside in the June '09 contract up to $80.00 before I need to adjust my position.  I will stay with my negative bias toward the market until we close above $74.30 for at least two days and have sold trade action above it.  The weekly chart is showing signs of caution if you were long the market but I need to see tomorrow's close to be sure and it is a caution sign not a sell signal. "

My opinion has NOT changed in June '09 hogs.  As mentioned in the paragraph above I will remain negative to the hog market until we get a close above $74.30 in the June '09 contract for at least two days, it has yet to happen.  Friday's trade action on the chart looked very negative to me, however, I expected follow through to the downside today which we got very little of.  The cash market isn't in the best of shape but packer margins have since come around with last week's run in cutout and general weakness in cash.  

Bottom line - I am still looking for a run lower in the June '09 contract.  $72.475 is a target that I believe we can touch at some point in the near future.  Unless cash hogs start to move again it just adds to my negative bias that the chart have been showing for days.  My cycle indicator has June '09 hogs trending lower until March 28th before finding a bottom.  I do not follow my cycle indicator solely but it is a part of my decision making process.  Support for June '09 tomorrow is $73.50, $73.10 and $72.47.  Resistance should be $74.425, $74.67 and $75.37.  I expect tomorrow to have an early high and a late low with $73.10 having a good chance of being tested.

NW_LS500
Des Moines, IA     Mon, Mar 16, 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 bone-in loins steady;
butts steady to 1.00 lower; sknd hams 20-23 lbs 2.00 lower, 23-27 lbs unevenly
steady; sdls bellies not established; lean trimmings 2.00 higher. Trading slow,
with light to moderate demand and offerings.



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Loads PORK CUTS          :             40.00
Loads TRIM/PROCESS PORK  :               9.0
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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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03/16        49.0      59.51   74.39   62.83  36.27  96.65 43.98  81.63
Change :               -0.04   -0.74   -0.91   1.99  -0.03  0.04   0.10 

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NW_LS831
Des Moines, IA     Mon, Mar 16, 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 :  1.58 lwr   :  2.53 lwr   :  2.38 lwr   :   .61 lwr
Negotiated      :             :             :             :
CARCASS BASIS   : 44.75-58.11 : 47.25-57.00 : 44.75-57.00 : 46.00-58.11
185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg
Plant Delivered :    55.65    :    55.24    :    55.41    :    55.97
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Head Count      :   17,397    :    5,884    :    9,651    :    7,297
==========================================================================

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