Hog Comments - 08-08-08 Grains continue lower as hogs trade higher.

CORN

Corn continued its downward spiral today, finally reaching the $5.13-.15 area as a low.  I said on Thursday that I thought Friday's trade would provide for an early high and late low.  I also said that I thought we could challenge the $5.49 1/2. Well, we got as high as $5.46 in the overnight trade on Thursday evening before beginning our nosedive.  Monday is going to be an interesting day because I have a potential buy signal at $5.13 3/4, BUT it is conditional.  If the market trades lower than $5.13 and comes back and trades back above $5.13 then I would have a buy stop at $5.14, but ONLY if it makes new lows and then moves higher again.  I am not convinced to do this with an aggressive straight futures position but I would DEFINETLY want to be covered with options right now for feed purposes for an extended amount of time.  The market could continue to move lower but that is the beauty of options, you can continue to lower your ceiling with the markets movement lower.  I would feel better about this buy signal that I speak of if the low on Friday was $5.13 1/4, but it was $5.13 3/4.  This isn't a perfect text book signal but in my mind it is definitely close enough to pay very close attention to.  It almost feels like this could be one of those reports that come out bearish on Tuesday, the market opens lower and then moves higher.  The only problem is funds have been liquidating positions on the way down so it isn't really a "normal" market, kind of like on the way up, some things just didn't make sense. 

My comments of caution here are be careful around this $5.13 area if you don't have feed needs covered through call options or some other type of strategy.  I am not recommending straight futures or cash positions just yet because like I have been saying this past week, I need to see the market close above a previous day's high before I get excited about a reversal.  IF this is a good signal, it should provide a violent move higher from here. I myself will wait for it to prove it to me first.

MEAL

Meal got slammed today as well.  I said on Thursday that I thought we could test the $343.40 level in the near future and we got as high as $339.70 before saying good enough and basically tanking.  I really don't see anything in meal that gets me extremely excited other than the fact we closed near our lows on Friday so it sets up a potential buy signal as well in the daily chart (short-term).  Again, like corn I am not overly excited about getting aggressively long meal here in futures or in the cash market, I chose to use options for coverage right now until I clearly see a sign of reversal.  The potential signal that I would have on Monday is if the market opens below Friday's low of $319.20, then trades lower only to be met with buying, then I would have a buy STOP at $320.00.  As I stated on Wednesday, the next level of support is down around $309.00 in the Sep '08 contract which is around $10.00/ton lower than Friday's close.  I strongly recommend protecting your meal needs with an option strategy but again I wouldn't get very aggressive with straight futures or cash purchases just yet.  I need more confirmation to get aggressive.

HOGS

Hogs had in my opinion a mediocre day today in the Oct '08 contract with cutout being up $2.09 on Thursday.  We opened the market $1.20 higher only to close it $.92 higher?  Huh.  My sell signal became null and void as of Friday's trade and if I was short based on that signal (and trading it) I would have been stopped out above Thursday's high of $78.25.  I didn't take that sell signal on Thursday (mainly because I am already hedged) but I also didn't stop out above $78.25.  It seems funny to me with cutout being up $2.09 that we only mustered a $.07 rally on the day of the cutout being up $2.09 (prior to knowing the cutout number) and only being up $.92 the day after and not even being able to close higher than where the market opened.  The trade Friday left me with more warning signals to not get extremely bulled up at this level.  The weekly close was good so the weekly chart looks fine, great actually, but the daily chart continues to throw negative signals at me but the market continues to move up.  There should be sell stops below Friday's low of $78.87 (electronic) come Monday. 

I heard on Friday that some packers aren't getting enough pigs at the price they want so there are talks of cutting kills to cool the cash market.  I am of the opinion that if I choose to exit positions I will buy an option strategy instead because it's less of a risk of not being hedged when the market turns south.  I had thought about buying calls on Friday but the day's trade concerned me some in regards to the gas that is left in the tank to move higher from here.  The US Dollar had its best rally week since the week of January 7th, 2005; this may have something to do with all the warning signals I am seeing in the market.  I think I am just going to stay short with the potential of putting on some options strategies if I see the need to.  If Friday was our high in Oct '08 hogs then a 50% retracement target would be $73.57 for support.  The market tried 6 times (on an hourly chart) to close above $78.35 on Friday but failed to do it, so to me that is pretty good resistance and it may be an area to sell on Monday for local traders.

I'm sorry there is no cutout or cash information today; I am having trouble importing it into the blog.

Cutout was up $.36

Cash was: National - $1.58 hgr, IA/MN - $1.96 hgr, Western - $1.90 hgr, Eastern - $1.18 hgr.

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.

Corn still sliding but soybeans and meal thinking differently?

CORN

Corn wanted to follow crude oil today making a charge at new lows when crude would. Soybeans began to firm a bit around 11:00 a.m. which didn’t seem to give corn much of a boost. The market is now below $6.00 in the Dec 08 contract and if we close below the $6.00 level this Friday then we could experience another move lower toward the March low of $5.13 ¼. The positions that I have on for feed lost $07 cents on Friday, .10 cents yesterday and today actually made a .01 cent when the market was down .16 cents. My position should begin to increase in value as the market moves lower and COULD actually make money. I don’t believe I will wait for very long to “try and make money” in this position. If/when it gets to a point of very little overall cost to exit I will lift this position and restructure moving my price ceiling lower with the market. That opportunity is a relatively distant at this point. I will keep you posted.

MEAL

Meal along with soybeans looked like they want to find a bottom in this area. Both meal and soybeans have touched a 50% retracement level from a previous low in the market. Soybeans show more of a bottoming type trade today BUT it is only a bottom if we can close above a previous day’s high which would mean closing tomorrow above $14.24 ½ in the Nov contract. Meal should follow along with soybeans as it did today.

HOGS

Hogs have shown strength again today going into the close. Most of the day was quiet until we hit approximately 11:00 a.m. then we began to rally. Cash still remains strong and cutout is hanging in there to allow for positive fundamental news for traders. August hogs are very close to touching our most recent highs prior to the quarterly hog and pig report on June 27^th, 2008. October on the other hand has failed to rally quite like August, it has only gotten approximately 62% of the way back to the most recent high prior to the report. IF we can close the October hogs above $74.00 on Friday, technically we could make a run toward $77.42 (the old high).

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
-----------------------------------------------------------------------
07/22        90.1      84.17   99.65   88.78  66.32  98.16 87.40  84.58
Change :                0.32   -0.42    3.68   0.18   0.07  0.06   0.05

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 :   .62 hgr   :   .75 hgr   :   .56 hgr   :  1.32 hgr
Negotiated      :             :             :             :
CARCASS BASIS   : 72.50-81.00 : 74.00-81.00 : 73.99-81.00 : 72.50-81.00
185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg
Plant Delivered :    78.40    :    79.24    :    79.14    :    77.20

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 here is no guarantee that your trading experience will be similar to the past performance.