Hog Comments - 12-01-08 - Still no bottom for corn and the Dow takes a breath.

Good afternoon, what a wonderful Monday back to work after a long weekend of over-eating.  My beloved Minnesota Vikings beat the Chicago Bears last night and are now in first place alone atop the NFC North!

CORN

It wasn't long before the March '09 corn futures headed south for the day.  The market was down around $.06 overnight and the day session had the same type of feel going into the open only the day session opened around $.09 lower and ultimately closed $.17 lower on the day.

The Dow Jones was down around 400 points when the corn market closed this afternoon and then going into the 3:00 p.m. CST time-frame the Dow fell near its low of the day closing down around 680 points, ouch.  Crude Oil had a tough day in the market as well closing down over $5.00 a barrel.  March '09 corn has support at $3.40 which was the March futures low in 2007 and also the March futures high in 2004.  If $3.40 is breached on a consistent level we could see a test of near $2.90 in the March '09 futures.  This isn't a projection as much as an observation.  

I don't know about you but I do not want to be down at these levels and not have feed corn covered for an extended period of time via options.  I haven't seen hard signs of a bottom but it will find its bottom someday and you need to be prepared.  It is easy to look the other way when markets are moving in your direction but now is the time to get your plan together.  I have been long call options all the way down and have been rolling them down to make sure my coverage is in place when the market turns. 

Bottom line - It looks like we should have lower opening tonight based on what the Dow Jones did going into the close.  I expect a lower opening tonight and some follow through to the downside to test our low of $3.45 and maybe even $3.40.  I don't think we will stay lower all night long nor do I think we will have a major down move tomorrow.  The market traded below $3.48 3/4 during each of the four hourly session the market was open today and closed each one of them above this level.  I expect a test of today's lows but I think we will recover some tomorrow with a test of $3.51 to $3.52 1/2.

MEAL

I don't have much to say about Jan '09 meal other than I think we will test today's low of $248.50 and bounce.  $250.20 is our old low from Nov 21st, 2008 and held as support today.  If we close below $250.20 then we could test $238.80 at some point in the near future.  Crude Oil didn't have as much of an effect on Jan '09 meal today as I thought it would.

 

Bottom line - I expect a lower opening tonight similar to corn and then find an early low and rally later in the session.  I think we should have early lows tomorrow and begin to firm as the day session progresses.

  

HOGS

Feb '09 hogs closed $1.67 lower today off of little news.  It is probable that we could see a correction in the Feb '09 hogs back to the $64.32 area and then find support.  I don't think we will be able to do that tomorrow because the cutout was up $.95 today and cash was also marginally higher per the USDA.  As each day passes in the hog market I become more and more friendly, I am still hedged in the Dec '08 contract on a fraction of my hedges because we exited a majority of them for now to protect equity.  If the market makes a test of $64.32 and closes below it for two days then I will look to re-hedge but until then I will remain on the sidelines.

 

The longer-term view of the charts show the market making a longer-term test of $72.95 in the Feb '09 contract and I am of the opinion that it could very well happen.  I do not want to be short a large amount of hogs at this time and am monitoring the U.S. Dollar Index to see if it can make up its mind.  The Dollar sold off rather hard during the first part of last week but recovered going into Friday.  I am still a longer-term bear on the U.S. Dollar based on all of the money that is being infused into Wall Street.

Bottom line - I expect tomorrow to be a better day in the hog market mainly due to the higher cutout price today.  I think we will experience our weakest market price early in the day and firm as the day session progresses.

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
-----------------------------------------------------------------------
12/01        48.9      59.43   72.08   68.20  35.77  86.42 50.88  74.69
Change :                0.95   -0.77    0.13  -2.02   0.97  4.74   1.19
-----------------------------------------------------------------------

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 :   .72 hgr   :   .63 hgr   :   .76 hgr   :  1.70 hgr
Negotiated      :             :             :             :
CARCASS BASIS   : 46.00-59.00 : 46.00-59.00 : 46.00-59.00 : 46.00-55.41
185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg
Plant Delivered :    54.06    :    54.74    :    54.80    :    52.99
--------------------------------------------------------------------------
Head Count      :   24,555    :   10,728    :   14,511    :    9,783
==========================================================================

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.

Hog Comments - 11-05-08 - You turn your head for one second...

CORN

Dec '08 corn opened slightly higher today and traded lower for the balance of the day.  The Crude Oil market didn't help matters as it was trading as much as $5.50 lower during the day.  Dec '08 filled a gap left on the hourly chart at $3.92 3/4 and also touched the 62% retracement level of $3.90 1/4 and held.    The Dow Jones continued its slide during the last hour of its session and the US Dollar index firmed going into 3:00 p.m. CST.

The market closed a 1/4 cent off of the lows today so we could experience a gap lower opening tonight which would actually be friendly.  If the market gaps lower and moves higher from there, I would expect some buying to come into the market above $3.90 in the Dec '08 contract.  Today I did some scale down buying of Dec '08 corn at $3.98 and $3.95 and my average price is $4.04 on about 60% of my needs.  I also purchased an out of the money put option to make sure the market can't blow up on me and get another sell off like we had in the last month. 

Bottom line - I expect the Dec '08 futures to gap open lower and move lower right away and then find support at $3.85 3/4 if we get down that far.  I expect the market to recover after the initial sell off and work its way back toward unchanged by tomorrow.  I expect early lows and late highs during tomorrow's trade.  It is probable that we may test the $4.03 which would be a 50% retracement of today's move.

MEAL

Dec '08 meal wasn't much different than corn or soybeans today as it too fell apart.  The meal market did what I thought it was going to do today; I expected an early high and a late low which is exactly what we got.  The Dec '08 contract touched support at $264.10 today which is the 50% retracement back to the low of $236.90 back on 10-16-08.  The market didn't bounce much off of this number but it did respect it for today's trading session; we will see what tonight/tomorrow brings.

Bottom line - I expect similar action in Dec '08 meal tonight as I do in the corn.  I am looking for a weak to possible gap lower tonight with some additional selling only to catch support at $261.40 if we get that low.  IF there is a gap lower (open below $263.40) and we end up trading above today's low I would expect some buying above $263.40.  I am looking for early lows tomorrow and late highs.  Make sure you have some soybean meal covered with options if you can!

HOGS

The market wasn't as weak in the Dec '08 contract as I thought it would be.  It seems to me the market is preparing for the Goldman roll which begins Friday.  I am not sure what I mean by that because if they wanted to go with the direction of the roll they would sell the Dec and buy the Feb but they are doing the opposite.  I am telling you, these Goldman guys are good at getting business done!

The cutout was down $3.53 yesterday but it didn't seem to bother the market in the Dec '08 but the Feb and April of '09 drifted some.  The cash and the cutout were down today as well.  I don't expect much to happen tomorrow either because the cash was no surprise and the cutout was expected to be lower  as well.  The weighted average for the nation is around $51.50 and the Dec '08 contract closed at $54.47 today so it looks as if the market thinks the cash will rally some into the Dec '08 contract expiration.  One could also view it as the futures market has more downside and that is the way I will keep positioned, covering the downside. 

Bottom line - I expect Dec '08 to be lower tomorrow based off of fundamental news this evening.  I don't think it will be a blood bath because the news isn't anything we didn't already know during the day session.  I look for quiet and mixed trade overnight and tomorrow I am looking for the market to make early lows and late highs unless the outside markets say something different.  With the Dow Jones closing 486 points lower and Crude Oil down $5.24 I think most traders will have one eye on the outside markets as well, and not only for hogs but grains too.

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
-----------------------------------------------------------------------
11/05       106.6      56.74   78.86   60.07  41.34  86.82 37.74  65.71
Change :               -0.81   -1.97    0.04   0.00  -0.48 -1.07    unc
-----------------------------------------------------------------------

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 :  2.04 lwr   :  1.90 lwr   :  2.01 lwr   :  1.89 lwr
Negotiated      :             :             :             :
CARCASS BASIS   : 42.00-53.00 : 42.50-53.00 : 42.00-53.00 : 43.00-52.50
185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg
Plant Delivered :    51.48    :    51.91    :    51.97    :    50.65
--------------------------------------------------------------------------
Head Count      :   21,781    :    8,924    :   13,604    :    7,927
==========================================================================

 

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.

Hog Comments - 10-30-08 - Grains take a breath as hogs choke.

Due to time restrictions I am writing my comments prior to the close of the Dow Jones which may affect the accuracy of my comments.

CORN

Dec '08 corn opened at $4.16 this morning, rallied to $4.17 and then fell apart.  I said yesterday that I thought we would have a neutral to lower opening last night and then find follow through buying from yesterday's close.  That is exactly what happened, we had a quiet open and then rallied through my resistance number of $4.27 3/4 and got to $4.33 for last night's high.  The other number of $4.11 1/2 found some support early today but then gave way to the selling and the market dropped to $4.02 1/4 before bouncing prior to the close.

Dec '08 corn still has some downside left in it tonight and MAYBE early tomorrow.  I expect corn to open slightly better tonight and then sell off after a small very small rally.  I am not bearish corn at this level just yet, I think we are correcting from our recent gains however we haven't done anything to change the trend from down to up so keep that in mind as well.

Bottom line - I expect a better opening tonight and a small bounce only to be met with selling around $4.17 if the market even gets that high.  I would say we have a chance to test our low of $4.02 1/4 tonight and then tomorrow I expect early lows for the session and late highs.  The market also left a gap at $4.20 that we should fill in the near future as well, maybe even late in the session tomorrow.

MEAL

Dec '08 meal made a high of $288.90 last night which is just above the $286.80 I talked about in my comments from yesterday.  It looks like Dec '08 meal should open better tonight and find some minor buying and then hit resistance again around today's high of $284.10 to $285.50.  The meal complex was the strongest commodity in the Ag markets today as the Dec contract closed $.30 higher on the day.

Bottom line - I expect the Dec '08 contract to be higher tonight and should find some resistance and then probably trade lower for most of the evening.  I think we may see early lows during the day session tomorrow though.  Last week's high was $277.90 and if Dec '08 meal closes above this level tomorrow it would be viewed as positive and I would look for more follow through buying next week.

HOGS

Dec '08 hogs did what I thought today which was trade lower considering the cutout number being down so much last night; I guess it doesn't take a rocket scientist to figure that out though!  The market was weak all day but was surprisingly firm in the back end months such as April '09 which only closed $.47 lower compared to the $1.57 lower close by the Dec '08 contract.

I am still not friendly the Dec '08 contract, I still think we could test our contract low of $55.45 tomorrow.  The contract low is only $.55 below our close today and is well within reach for tomorrow's trade.

  

Bottom line - I expect Dec '08 hogs to be weak again tomorrow and I expect a test of the $55.45 area at some point in the day.  The US Dollar traded just below unchanged all day and wasn't much of an issue in today's markets.  I also think we will have an early low in the Dec '08 contract tomorrow and see some short covering going into the close and into the weekend.

The cutout number is not included today because I am posting prior to its release.

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 :  1.43 lwr   :  1.40 lwr   :  1.18 lwr   :   .38 lwr
Negotiated      :             :             :             :
CARCASS BASIS   : 49.25-57.70 : 52.00-57.70 : 49.25-57.70 : 50.00-55.41
185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg
Plant Delivered :    54.85    :    55.91    :    56.13    :    52.95
--------------------------------------------------------------------------
Head Count      :   21,934    :    8,883    :   13,172    :    8,582
==========================================================================

 

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.

Hog Comments - 10-29-08 - Grains take off and leave hog behind.

CORN

I waited until the Dow Jones closed today before writing my comments unlike yesterday!  We had the perfect storm in the corn market today.  The U.S. Dollar basically crashed down over 200+ points for most of the day, crude oil was up $5.51 and the Dow Jones was all over the place waiting for the Fed's decision on interest rate cuts.  When Dec '08 corn closed today the Dow Jones was basically unchanged and then fell to 74 lower at the close of the Dow.  The Fed's did cut the rate by .50% which is what Wall Street was looking for and expecting.  Stocks made most of the daily range in the last hour of trade.

Dec '08 closed up limit today at $.30 higher and settled at $4.20 3/4.   The one thing I notice about days that we close toward our high is that we typically gap higher at the beginning of the next session.  If the market gaps higher tonight, I would expect some follow through buying and then some selling should surface.  I expect resistance at $4.27 3/4 tonight and then sell off some. 

Bottom line - I expect tonight's open to be neutral to lower and then find follow through buying.  I say lower because the Dow Jones sold off going into the close.  If we open lower I expect the market to find some buyers and then take us up to $4.27 3/4 before hitting resistance.  If $4.27 3/4 violated then the next level of resistance is $4.42 1/2.  I expect the market to respect $4.27 3/4 for resistance and $4.11 1/2 for support during tonight and tomorrows markets.  If the Dollar continues to crash and crude maintains its rally we could see better markets all day tomorrow.

MEAL
Dec '08 meal started its rally around 10:00 a.m. this morning and follow through for most of the day but had trouble holding a limit up bid at $286.80.  I was surprised we couldn't hold the meal market firm all day considering corn was up limit for most of the day. 

Bottom line - I expect Dec '08 meal to slightly lower tonight and then find buyers and rally toward today's high of $286.80 and if it really gets crazy we could go to $291.30 from Sunday nights high.  I don't think we will have a runaway market to the upside tomorrow like we did today unless we have the Dollar weak and crude oil strong again.

HOGS
Dec '08 lean hogs did very little again today with a trade range of $1.05 it was relatively quiet compared to corn, soybeans and the outside markets.  I don't understand why hogs have rallied when the Dollar was moving higher and now that it tanked today the market moves lower.???  After seeing the cutout number this afternoon I guess someone knew about it before it came out and that was some of the reason for the decline.

I have been saying for the last couple of commentaries that I didn't/don't like the Dec '08 hog contract and today's cutout number may prove me right.  Cutout was down $2.51 today which is a very large one day drop; cash was up slightly so the packer margin just tightened.  With the fundamental news we had today I don't think the contract low of $55.45 is safe any longer.

Bottom line - I expect Dec '08 hogs to be very weak tomorrow on the heels of tonight's cutout number.  I believe some of it was factored into today's trade but the balance will hit tomorrow.  Some to the buying over the past few sessions was short covering so we could see more selling come into the market tomorrow.  I expect a test of $56.60 which was today's low in the Globex pit and a probable test of the contract low of $55.45 either tomorrow or Friday.

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
-----------------------------------------------------------------------
10/29       117.9      62.66   85.45   66.05  46.36  88.97 47.94  69.18
Change :               -2.51   -2.86   -1.01   4.34  -3.89 -6.77  -1.46
-----------------------------------------------------------------------

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 :   .35 hgr   :  1.04 hgr   :   .75 hgr   :   .09 lwr
Negotiated      :             :             :             :
CARCASS BASIS   : 49.50-58.65 : 50.50-58.65 : 49.50-58.65 : 50.00-55.41
185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg
Plant Delivered :    55.82    :    57.24    :    57.09    :    53.18
--------------------------------------------------------------------------
Head Count      :   23,966    :   13,336    :   16,165    :    7,621
==========================================================================

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.

Hog Comments - 10-15-08 - Look on the bright side, we are one day closer to the bottom.

CORN

There really isn't much to say about corn other than more of the same.  We are still experiencing liquidation of assets by hedge funds and until that selling stops we don't have much to look forward to in the way of higher prices.  I never dreamed we would have a chance to potentially lock in feed corn for less than $3.00 a bushel in the last half of 2008.  The close in Dec '08 corn was weak and would suggest further downside tonight and tomorrow.

  

I expect a test of $3.75 in Dec '08 in the next day or two and if we close below $3.75 then we can look forward to $3.25 in what could be a short amount of time.  The Dow Jones dropped another couple hundred points after the Ag markets closed which will again lead to more pressure this evening and tomorrow.

Bottom line - I expect Dec '08 corn to open lower tonight and probably test $3.75 tonight and if not tonight then I would expect it tomorrow at some time.  I say this assuming we will not have any other new come from Washington D.C. or Wall Street that would change the perception of the market right now.  $3.75 Dec '08 is likely and $3.25 is just around the corner from there.

MEAL

Dec '08 soybean meal was strong today considering what soybeans and corn did.  Dec '08 meal only lost 1.21% of its value today while Nov '08 soybeans lost 4.24% and Dec '08 corn losing 5.65%.  Crude Oil was weak today and made a new low at $74.09  which didn't help the soy complex any.

Dec '08 meal has a target price of $229.80 and then down to $217.00.  I believe $229.80 is possible but we will see how meal acts around $229.80 before making the call of $217.00.  Again like I mentioned in corn, we have been in liquidation mode for soybeans with funds taking money out of the markets and turning it into cash.

Bottom line - I expect Dec '08 meal to open mixed to slightly higher tonight but only for a short while.  I believe we will continue our move lower tomorrow on the tail of the outside markets.  People are still in fear mode and it will be hard to turn any market when it is faced with panic selling.

HOGS

Dec '08 hogs only opened $.60 lower but they didn't stay there very long.  The Dec '08 contract made a low of $57.85 which is a new contract low for this contract.  I will expect more selling below this low based on the lack of positive news in the cash and cutout markets.

 

Cutout was down a WHOPPING $2.96 today!  In this environment I would expect Dec '08 hogs to trade limit lower at some point tomorrow and probably the rest of the contracts as well.  I could be all wet but there is very little positive news out there for anyone to latch onto and we will need something to get this market.  A cutout drop of $2.96 wouldn't be what I had in mind to give the market a boost.

Bottom line - like a broken record, I think tomorrow will be weaker in the Dec '08, mainly due to the cutout drop of $2.96.  Like I said above I expect Dec '08 to at least trade limit lower sometime during the day, I can't say I expect the market to lock limit lower tomorrow though.  We will see.

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
-----------------------------------------------------------------------
10/15       108.4      64.11   87.44   69.31  44.17  91.64 48.05  71.01
Change :               -2.96   -2.41    0.84   0.03  -0.21 -6.61  -4.91
-----------------------------------------------------------------------

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 :  1.57 lwr   :  1.51 lwr   :  1.30 lwr   :   .25 hgr
Negotiated      :             :             :             :
CARCASS BASIS   : 53.00-64.38 : 53.25-64.38 : 53.25-64.38 : 53.00-62.00
185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg
Plant Delivered :    60.56    :    61.63    :    61.81    :    59.47
--------------------------------------------------------------------------
Head Count      :   21,347    :    7,068    :    9,719    :   11,506
==========================================================================

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.

Hog Comments - 10-08-08 - My quotes must not be working, grains were up?

CORN

Dec '08 corn struggled early in the session before it took some lead from soybeans and traded higher.  It is impressive in the sense that corn was stronger on the close more so than on the open.  Corn didn't close above yesterday's high of $4.29 3/4 but it did manage to match this level late in the day which is something we haven't done since Sept 24th!

If we have follow through tomorrow in corn and actually close above a prior day high ($4.32 1/2 was todays high) I will get pretty comfortable with saying we should start to shoot for $4.90 1/2 for a target level.  We would need to close above $4.90 1/2 for a day or two and if we can do that then we should look for $5.10 1/4 and ultimately $5.74 but let's not get ahead of ourselves yet, these are just resistance points.  I do think $4.90 1/2 is attainable if we can get a close above a prior day high, as of right now I will not rule out more downside until we get a close above a prior day high.

Bottom line - We had a good opening in corn tonight by opening $.01 lower and then moving higher from there.  We took out last nights high already and I would expect the market to continue higher or at least stay firm overnight.  It is interesting to note that it feels like the Ag markets divorced themselves from the outside markets particularly the Dow(n) Jones.  I liked the way we closed the market today and I expect follow through to the upside tomorrow with a POSSIBLE test of $4.48 which would be up $.20 1/2; this could be a stretch.  The market fell so fast that it's hard to find any near-term resistance points!

MEAL

Dec '08 meal had a spectacular night last night trading as much as $19.80 higher before closing $.70 higher overnight.  The day session in soybeans showed weakness at first only to fake us out and make a run higher which helped an already firm meal market.  If we can close Dec '08 meal above $276.60 tomorrow I would expect a chance at $293.30 at some point in the near future.

Unlike corn, Dec '08 meal closed above its prior day high (Tuesday's high was $260.00) and is showing continued firmness tonight.  The soybean market was up as much as $.63 last night before settling $.03 higher this morning.  Rumor was that the Chinese were in doing some buying but can't say this is fact because it was never confirmed to me so take it with a grain of salt.

  

Bottom line - I said in yesterdays comments that I thought we would see resistance at $261 or so in the Dec '08 meal and we did early in the session but blew through it later in the day.  I also said I would like to see a close above a prior day high which we got today and now I am much more friendly to soybean meal than I have been recently.  The market is higher overnight and I anticipate the strength to follow through into tomorrows session.  $276.60 is my first area of resistance and then it is on to $283.10 from there.  I wouldn't classify myself as bullish just yet but friendlier than yesterday now that I got the close I have been looking for.

HOGS

Dec '08 hogs opened stronger and traded stronger for most of the day, cash was pretty much a non-event at noon and there was little other news to make waves in the market.  The US Dollar Index was quiet today for a change and didn't give much direction one way or the other.  The cash market was weak in the east but had room to bid slightly in the west and even ended the day basically neutral to slightly lower because of the eastern cornbelt bids.

 

The trade we had today wasn't that impressive.  The candlestick left on the charts today in the Dec '08 contract would suggest the buying has potentially run out.  There isn't a strong sell signal but I would expect sell stops below $61.15 which was todays low on the Globex (electronic) chart.  I say this also because cutout came in $2.58 lower today which is a sizable one day drop, historically speaking.  This drop in cutout should take away a nice chunk of packer margin and the only way to get margin back is to lower cash bids or the cutout moves higher.

  

Bottom line - I expect Dec '08 hogs to be weaker tomorrow on the coattails of a lower cutout number and steady cash tonight.  $60.65 down to $60.25 are areas of support for the Dec '08 contract, we need to hold this level otherwise we stand to test the most recent lows of $58.77.  I would like to see how we act around the support levels I listed above before I get too excited about a test of most recent lows.

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
-----------------------------------------------------------------------
10/08        95.1      69.75   91.33   70.14  52.99  90.19 59.12  76.79
Change :               -2.58   -0.36   -0.68  -0.26  -0.31 -6.37  -4.88
-----------------------------------------------------------------------

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 :   .78 lwr   :   .03 lwr   :   steady    :  1.73 lwr
Negotiated      :             :             :             :
CARCASS BASIS   : 55.50-70.00 : 55.50-70.00 : 55.50-70.00 : 57.00-66.57
185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg
Plant Delivered :    65.94    :    67.62    :    67.63    :    62.71
--------------------------------------------------------------------------
Head Count      :   23,187    :   11,986    :   15,208    :    7,979
==========================================================================

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.

Hog Comments - 08-28-08 Feed grains lower along with hogs.

**Disclaimer - it has been a long last couple days so forgive me if my comments are rather short.  I should be back on my regular schedule next week with MAYBE the exception on Wednesday.  Thanks for reading and let me know if you have suggestions.

Dec '08 Corn Daily Chart

CORN

Dec '08 corn had an interesting day because we were down around .02 cents at 11:30 p.m. cst last night when I checked the markets and closed the overnight session .07 1/2 lower.  We traded as low as $5.81 1/4 which is a support number I talked about in yesterday's comments.  I exited my short "delta hedge" futures today at $5.84 1/2 because the market seemed like it wanted to hold the $5.81 support area.  I am now long my original long $5.35 call and short $6.10 call spread in the Oct and Dec '08 contract.  I will make a judgment call on corn tomorrow on whether or not I will "delta hedge" again because of the long weekend.  The weather isn't viewed to be a major threat and it isn't extremely bullish either so I am not sure how people will want to position going into a three-day weekend.

It feels like the market may want to be mixed with a stronger tone tomorrow going into the long weekend.  I expect the markets to chop around tomorrow and get very volatile around 1:00 p.m. CST going into the close.  I am looking for some short-covering action tomorrow.

Dec '08 Meal Daily Chart

MEAL

Soybean meal followed soybeans lower this morning out of the gate but also recovered with sobyeans.  I tried to buy Dec '08 meal at $356.50 and only got filled on 5% of my order that I placed.  I usually don't trade during the first hour of the market session because that is how I get a feel for direction for the rest of the day so you will notice the low for the day was $354.70 but I placed my orders after the low was made.  

 I expect the Dec '08 meal to have some short covering as well tomorrow.  We could be mixed because I see tomorrow as such a wild card day that is hard to predict given the long weekend.  My feeling is mixed to up on the intra-day chart but I look at the daily chart and it doesn't suggest anything major to the upside.  We are still moving lower in my opinion until we close higher than a prior day high.

Oct '08 Hogs Daily Chart

HOGS

Oct '08 actually held together pretty well today only moving $1.975 lower and not getting move over $2.00 lower at any given point today.  We have nailed the $68.25 support level in the electronic hogs that I mentioned in Monday, August 25th's posting.  We reached $68.25 in the overnight session tonight and I would expect the market to hold this level tomorrow as we are coming up on the Labor Day weekend and we put some pretty good hurt on the futures this week.  If we close below $68.25 tomorrow then $65.40 is next in line for a target.  I will be interested to see what cash and cutout do tomorrow with most packers out of the market.  

I look for two sided trade tomorrow with the thought we could find bottom pickers trying to support the market and buying.  As I write this we are currently trading .22 higher in Oct '08 hogs in overnight trade.  If you want to see what overnight or the day session is doing in the Globex or electronic trade, the CME has free real-time quotes that you can log on and use.  Click on this link to go to the CME website to get setup and again IT IS FREE.  CME E-Livestock Real-time Quotes  You will need to enter an email address and maybe a password or something but the registration is very simple and you only need to do it once.  They will not call you and try to sell you something either, the free quotes are an attempt to get people to look at and use the electronic platform and increase the trade liquidity.  

Cash and cutout was lower today again, cash down around $3.50 and cutout down around $1.25.  I hope you have a safe and wonderful Labor Day weekend and I will post comments again starting next Tuesday.  Thanks again for reading and PLEASE if there is anything else that you would like to see on this blog please email me.  I want this to be as useful and informational as possible.

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
-----------------------------------------------------------------------
08/28       102.4      80.51  101.47   86.92  66.42  96.87 74.70  79.43
Change :               -1.23   -2.06    2.47  -0.26  -1.11 -1.55  -3.00
-----------------------------------------------------------------------

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 :  3.20 lwr   :  3.24 lwr   :  3.19 lwr   :  2.78 lwr
Negotiated      :             :             :             :
CARCASS BASIS   : 67.00-75.99 : 67.00-74.66 : 67.00-74.66 : 67.25-75.99
185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg
Plant Delivered :    71.36    :    70.73    :    70.97    :    72.48
--------------------------------------------------------------------------
Head Count      :   21,739    :    9,414    :   12,669    :    7,550
==========================================================================

 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.

Hog Comments - 08-27-08 Uneventful grain trade but hogs lock limit lower.

Dec '08 Corn Daily Chart
CORN 
Corn didn't have much of a day today other than opening .06 higher and ultimately got as much as .09 higher before making a run at yesterday's low of $5.88 which I talked about in yesterday's posting.  I sold Dec '08 corn today at $5.95 (exiting buy stop at $6.05 1/2) as a delta hedge against my long call spread I have on.  I am trying to protect my equity in this option strategy if the market moves lower.   What I mean by delta hedge is if I have 100 corn call options on and my delta is 30% that means for every .10 cents the market moves my calls will change .03 cents in value or 30% of the futures move.  To "hedge" my delta I would need to sell 30 contracts of underlying corn futures contract to neutralize my position.  The delta changes with price so it's a moving target but when I hedge the delta it neutralizes my position.  It needs to be managed, it isn't something you do and forget about.  Please do not try to delta hedge a position if you are unsure of what you are doing, it may cause your position to act in a way you didn't think it would! 

I am looking for a move toward $5.81 and eventually $5.65 before we really bottom the corn market from a short-term standpoint.  I am writing this posting at 8:00 p.m. CST and corn is down  1/2 cent with 1004 contracts traded in the Dec '08 futures.  I am skeptical of a rally in the corn market but am willing to admit I am wrong at the drop of a hat to go long if I need to.  My ONLY concern right now is the prospect of frost.  I think we all know this will be a source of speculation by the trade in the coming weeks; therefore it will be tough for the corn or soybean market to fall out of bed.  I think corn will still be indecisive tomorrow probably trading both sides but still favoring a downward bias.


Dec '08 Meal Daily Chart

MEAL
Soybean meal can't make up its mind either.  It has been independently strong over the last couple days but today traded right along with soybeans and corn.  I sold soybeans and soybean meal today.  I exited my meal positions at $367.00 today for breakeven to a very small gain on the trade, I didn't like the way the market was acting and it turned out it was a good move as the market closed at $365.00 today.  Meal looks short-term toppy to me.  I think we could see lower trade tomorrow on a push toward our $360.40 low of today.  I will TRY and wait for $343.30 to look at getting long again.  As usual, I will admit I am wrong and take a position on the long side if the market tells me to.  I feel the same way about soybeans; it looks like we are at a short-term top in the market which is why I went short the market today at $13.45 (exiting buy stop at $13.73) in the Nov '08 contract.  I usually wait for the first hour of trade to end before I make a trade decision in the market.  The first hour trade range was established and $13.45 was around 50% of the way back to the high we had early in the day.  I expect lower trade from soybeans and meal tomorrow.  Currently Nov '08 beans are down .07 and Dec '08 meal is up .10 cents.  


Oct '08 Hogs Daily Chart (pit chart)

HOGS
 All of my support points were blown through today.  Oct '08 hogs opened $1.80 lower and traded $2.35 lower then came back and was trading $1.90 lower all within 10 minutes of the open.  I thought okay, I said yesterday in my comments that hogs could reach limit lower today and usually when I make a statement like this the market proves me wrong!  It didn't take very long before Oct '08 traded limit lower and locked there and never looked back.  Oct '08 is trading $1.50 lower tonight in the Globex trade which places the futures at $69.00.  I said my next level of support was ultimately $68.25 in the Oct '08 futures and our overnight low is $68.82 so far.  I would expect another burst of selling tomorrow as cash was down around $3.82 today and cutout was down another $2.05!  

I expect tomorrow to have another tough day but I don't know as though we will be able to lock limit lower like we did today.  The weighted average cash price on hogs is said to be at $73.42 cwt in IA/MN per the USDA and the Oct '08 futures closed at $70.50 so the cash markets lead on futures has narrowed significantly.  If the futures continue to tumble below a limit move tomorrow then the trade must REALLY be anticipating a larger move lower in cash.  We are and have been hedged on all of our hogs in inventory and then some which felt good today in the face of these markets.  We will be looking for a place to exit our short hedges and replace our hedges with put options or another type of option strategy so we can maintain the equity of the futures positions that we have gained in recent weeks.  I think this market is too volatile to not have any hedge coverage in place therefore I would suggest using some catastorphic option protection below the market if you choose to remove your hedges and take profit on them.  If you want ideas of what to do and when to do it feel free to give me a call and we can discuss a strategy, my toll-free number is 1-877-212-2564.  

In summary, I expect corn to be mixed to lower tomorrow, soybeans and meal lower and hogs lower but I don't think we can lock limit lower for a large portion of the day.  I think if we touch limit it will be early in the session and then bounce because of bottom picking traders.  If cash remains weak at noon or the notion of lower cutout again tomorrow night then maybe we could lock it limit lower but for now I will say lower and possibly touching limit but not locking limit lower like we did today.

NOTICE - MY POSTING MAY BE LATE AGAIN TOMORROW BECAUSE I WILL BE TRAVELING FOR MEETINGS MOST OF THE DAY.  PLEASE CHECK LATER IN THE EVENING FOR MY COMMENTS.  AT SOME POINT TOMORROW I WILL TRY TO GIVE YOU AN IDEA OF WHEN I WILL POST COMMENTS, SIMILAR TO WHAT I DID TODAY.

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
-----------------------------------------------------------------------
08/27       120.4      81.74  103.54   84.45  66.68  97.98 76.25  82.43
Change :               -2.05   -0.92   -7.15   3.39  -4.55 -6.32   2.07
-----------------------------------------------------------------------

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 :  3.23 lwr   :  3.84 lwr   :  3.66 lwr   :  2.71 lwr
Negotiated      :             :             :             :
CARCASS BASIS   : 68.50-80.20 : 68.50-76.00 : 68.50-80.20 : 72.00-78.50
185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg
Plant Delivered :    74.36    :    73.42    :    73.71    :    75.27
--------------------------------------------------------------------------
Head Count      :   20,596    :    9,046    :   12,083    :    8,513
==========================================================================

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.

Hog Comments - 08-26-08 Grains lower and hog cutout is demolished!

Dec '08 Corn Daily Chart

CORN

Dec '08 corn had a rough day today closing .11 lower in overnight trade only to open .01 cent lower in the day session and then sell off.  The reason for the better opening in the day session is crude oil was down $1.47 at 6:00 a.m. when the overnight session closed and was around $2.50 higher when the grains opened at 9:30 a.m.  The Dec contract made its high within the first 5 minutes of trade and failed to make new highs above last night's $6.03 level.  I said yesterday if the market closed below $5.98 1/4 today then we would have a pretty good chance of reaching $5.65 at some point in the near future.  

It looks to me like we should test $5.88 (today's low) either tonight or tomorrow because we closed the market below the lower half of today's trade range.  The market found it difficult to find and secure a direction today.  I tried to buy corn at $5.91 today but it failed to reach that level after I put my order in, it got within 1/4 cent of course.  I ended up buying it around $5.92 1/2 - $5.93 only to get out as a wash.  It looked like the market wanted to rally but couldn't muster up enough energy to follow through on the little rallies we had.  I did not want to hold long positions overnight because of the lack of liquidity in the overnight session.  My call strategy I have in place lost .02 3/4 cents today with the market down .06.

Again, trade looks like we could challenge the $5.88 low from today so I expect trade to be weaker tonight and/or tomorrow.  $5.65 is still my target area at this point.  We held support at $5.94 today and closed right on it but the next number is $5.81 and then $5.65.  

Dec '08 Meal Daily Chart

MEAL

Dec '08 meal traded $1.40 higher today being the rebel of the grains today.  I chose to get long Dec '08 meal today because the market failed to follow-through with lower trade.  I can't say I like being long right now but there seemed to be too much support under the market for it to move lower.  I entered the Dec '08 contract instead of the Sep '08 which I have been using; the reason being is the Sep '08 contract will begin its delivery period in the near future.  I entered the Dec '08 futures around a $1.00 lower than where I exited my Sep '08 futures yesterday so no big gains there.  I saw something that I didn't like in the charts this morning which trigger my action to go long the market again instead of waiting for $345.90 like I said I wanted to do yesterday.

The Dec '08 close in meal today would suggest a potential sideway's trade between $356.30 and $375.00.  I am looking for cautious trade tonight and tomorrow possibly following the direction of soybeans/crude oil.

Oct '08 Hogs Daily Chart

HOGS

Where do I start today?  Cash was around $2.00 cwt lower and cutout was down $3.93!  This isn't a prediction but $71.42 may come faster than I thought this week if the trade believes this afternoon's cutout number to be accurate.  The U.S. Dollar index continued to climb today but I am curious to see the weekly close on Friday.  If today was Friday and we closed at current levels I would say the weekly chart looked toppy.  We will see come Friday.  

Oct '08 hogs closed at $73.50 which is below my support level of $73.55 and would suggest a test of $72.30 then $71.42-.60.  I think we could see $72.30 with very little problem tomorrow and I wouldn't be surprised to see the $71.42 support area either.  The afternoon market isn't panicking right now only down $1.20 (.70 lower than the pit trade today).  The afternoon or "extended day trade" will close at 4:00 p.m. CST and re-open at 5:00 p.m. CST and trade until 4:00 p.m. tomorrow.    I don't have immediate access to the cutout history but I would bet this number today is one of the largest if not largest single day price drops in the cutout.  Wow, I still can't believe it.  I keep checking the website waiting the USDA to put out a correction! 

I would expect hogs to maintain weakness tomorrow and maybe make a run at limit lower.  I shouldn't say that because every time I seem to make a statement like this in my blog the market tends to kick me in the throat and walk away laughing.  It isn't a genius type statement to say that hogs look like they are in trouble but the path of least resistance is the direction they should trade and currently that is lower.  The wtd ave in hogs today was around $77.00 with October futures closing at $73.50 and the index is still at $86.90 as of this morning.  It shouldn't take long for cash to catch futures if it keeps taking $2.00 cwt off each day.  Best of luck to you and I hope you are or have been hedged!

Bottom-line: looking for hogs to trade substantially lower tomorrow if not limit.  

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
-----------------------------------------------------------------------
08/26       142.0      83.79  104.46   91.60  63.28 102.53 82.57  80.36
Change :               -3.93   -6.69   -4.75  -3.58  -4.97 -2.29  -3.78
-----------------------------------------------------------------------

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 :  1.81 lwr   :  1.95 lwr   :  1.97 lwr   :  1.83 lwr
Negotiated      :             :             :             :
CARCASS BASIS   : 70.50-80.41 : 72.00-80.41 : 70.50-80.41 : 73.00-80.00
185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg
Plant Delivered :    77.54    :    77.09    :    77.26    :    77.97
--------------------------------------------------------------------------
Head Count      :   21,135    :    8,782    :   12,827    :    8,301
==========================================================================

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.

Hog Comments - 08-25-08 Corn reverse but hogs tread water.

Dec '08 Corn Daily Chart

CORN

We failed to get the moisture over the weekend that I talked about last Friday and therefore we did trade the overnight markets higher as expected.  The follow through wasn't there in the day session, we opened the market higher in line with the overnight but failed to make new highs.  I said last Friday I thought the market would test $6.25 sometime this week and it did on Sunday night making a $6.28 3/4 high.  Dec '08 corn only made it as $6.23 3/4 in the day session and found no willing buyers at that level and began its retreat.

I exited my long futures positions from last week around $6.13 1/4 to $6.14 1/2 and will sit on the sidelines for now.  These futures positions were against the short side of my $5.35 (Oct '08) / $6.10 (Dec '08) call spread I have on.  The market made new highs in the overnight at $6.28 3/4 but failed to re-test them this morning allowing for the market to test the early session low of $6.02 1/4 which was eventually violated.  Dec '08 DID close below Friday's low of $6.01 1/2 and with making new highs above Friday's high and closing below Friday's low we have a reversal in corn today on the daily chart.  Keep in mind the weekly chart had a great open for follow through to the upside and the key with up trending markets is that we close toward our weekly highs on Fridays.  For now the daily chart says caution if your long for the next couple days. 

As mentioned on Friday, if the market couldn't close above $6.25 and also closed below a prior day low then we could make a dive toward $5.65ish in the coming days.  Now, we can still do this and not kill the charts.  This type of action would be right in line with what I talked about with the possible formation of a Head and Shoulders bottom but it is very early to assume this could happen.  With today's close I would expect selling to surface below today's low of $5.98 1/4.  Support is now at $5.94, $5.81 and ultimately $5.66.  If we close below $5.98 1/4 tomorrow then I would feel pretty comfortable saying $5.66 is  a possibility this week.  As for now I am going to stay neutral (from a position perspective) corn unless I see something that would suggest a move higher.  I am now faced with the decision of hedging my long $5.35 Oct '08 calls.  I expect corn to struggle tomorrow as well but we did see a 3% ratings drop from last week's corn crop conditions.

Sep '08 Meal Daily Chart

MEAL

Soybean meal and soybeans maintained strength today even though wheat and corn were on the defensive.  I did sell out of my long futures in Sep '08 meal today to make sure I kept the equity we have gained.  I expect selling to surface below $360.30 tomorrow.  We didn't have a good close in Sep '08 meal today which also suggests a potential short-term top in the market.  I am taking money off the table and standing aside for now.  I will be watching this market closely, it can take off when you least expect it because of the fundamental situation in soybeans.  I exited my Sep '08 meal positions today between $367.20 - $368.50 after my options assigned me long futures at $340 Sep '08 contract.  I will look to re-own meal on a draw back toward $345.90 which would be 50% retracement to the low of $317.70.   I will look for a sell off tomorrow in meal and I will be ready to pounce if the market gets to my hedge point OR I see something I don't like during the trade session.

Oct '08 Hogs Daily Chart

HOGS

Oct '08 hogs closed higher today in the face of lower cash and cutout on Friday as well as lower cash prices this morning from the USDA's 11:00 a.m. cst reports.  Cash and cutout were weak again today and the cash market isn't afraid of taking back large chunks of what has been given to us.   The U.S. Dollar is basically unchanged as I write this so there isn't a story there today but I would expect Oct '08 futures to be shaky tomorrow with the continued slide of the daily fundamentals.  Again, I expect lower trade tomorrow.

 

I really don't have much to add to my comments that I didn't cover on Friday so I am going to paste Friday's comments into today's commentary.  I'm not being lazy; I just don't have much to add!

FRIDAY'S COMMENTS (with appropriate changes to reflect today's market)

We closed the market today at $74.00 and would still suggest a test of $71.42.  If you draw a retracement back to the July 1st, 2008 low of $68.25, $73.55 would be 50% or support.  So, I have a few numbers tangled up here but I will list them in the order of support in which they should be viewed.  1.) $73.55, 2.) $72.30, 3.) $71.60 and then all the way down to $68.25.  

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
-----------------------------------------------------------------------
08/25        72.3      87.72  111.14   96.34  66.86 107.51 84.86  84.14
Change :               -1.14   -2.35   -5.22   0.12   0.51 -0.16  -0.19
-----------------------------------------------------------------------

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 :  1.94 lwr   :  2.74 lwr   :  2.53 lwr   :   .87 lwr
Negotiated      :             :             :             :
CARCASS BASIS   : 73.00-82.00 : 73.00-81.55 : 73.00-81.55 : 74.50-82.00
185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg
Plant Delivered :    79.38    :    78.91    :    79.16    :    79.81
--------------------------------------------------------------------------
Head Count      :   24,095    :    9,239    :   11,713    :   11,477
========================================================================== 

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.

Hog Comments - 08-22-08 Everything trades lower except the U.S. Dollar index.

Dec '08 Corn Daily Chart

CORN
I should have known not to say the market felt like it should close above $6.25 today.  Oh well, I guess you can't win them all.  The market did take a breather today but it didn't violate any of our major support points.  Dec '08 corn closed above the 50% retracement level of yesterdays trade which is $6.06, we settled at $6.06 1/2.  $5.94 was yesterday's low and we didn't violate that level which is good.  I believe we saw some profit taking today after what turned out to be quite the week closing the market $.51 1/2 higher on the week with a range of $.70 cents.  Weather doesn't seem to be that much of a concern, the forecast has rain falling over parts of the cornbelt this weekend and if the amounts are not as much as the trade expects we should see higher markets on Sunday evening.  I am still long the futures that I bought yesterday and will manage them next week.  Like I said yesterday, if I can turn my long futures into an option strategy at some point I will.  I like to know what my risk is.

Our weekly close was good so with that being said I would expect a test of the $6.25 high at some point next week but if we can't and we close below a previous day's low then we could make a retracement back to $5.65ish.  I feel as if we will continue to move higher from here to see if there are any buyers above $6.25.  We closed today as an inside day which is a sign of uncertainty of direction.     Which ever direction we break out of on Monday will probably be the direction we go for a day or two.  I mean if we close above today's highs then we should continue a move higher and if we close below today's lows then take further profits.  I feel as if we should be higher on the week next week unless we get a bearish weather forecast.  A popular independent crop tour was held this week and they released their projected yield on corn to be 153.3 and 39.95 on soybeans.  Both of these numbers are below the USDA August crop production estimates so they could be viewed as friendly.  The trade will now be looking for more yield insight from a couple of other private forecasters in the coming weeks as well as the USDA report in September.  

Crude oil and the U.S. Dollar index almost had a complete reverse trade today, giving back all the gains in oil and gaining back most of the loses in the U.S. Dollar index.  There wasn't much in the way of headlines today involving Russia and the U.S. in their war of words over a anti-missle defense system that the U.S. is going to build in Poland.  Russia has since pulled out of military involvement with NATO.  This has the oil markets a bit jittery but there didn't seem to be a care in the world about it today.  Maybe I missed some important news but I don't believe I did.

Sep '08 Meal Daily Chart

MEAL

Sep '08 meal was the strongest link in all the grains products today.  I suspected meal to be a follower today but  actually it was independantly strong throughout most of the day.  Soybeans were both the strongest and the weakest at given points of the day.  Beans almost traded higher but failed to mount any significant momentum to carry it through to the upside.   Again like corn both soybeans and soybean meal had good weekly closes and assuming no major changes to weather I would expect better trade next week.  My Sep '08 options were exercised today on the close which puts me long futures at $340.00 Sep '08.  I will continue to stay long the futures for now and manage my position with stops OR if I can find a reasonable option strategy that doesn't cost an arm and a leg I will enter into it which is what I would prefer. 

Oct '08 Hog Daily Chart

HOGS

Oct '08 hogs made its most dramatic move today on the close.  The futures were trading quietly for most of the day only to fall apart going into the last couple minutes of trade.  After seeing the cash and cutout numbers this afternoon I would venture to guess that someone was positioning themselves for this news.  I have a couple of numbers that I am watching.  I have been talking about $75.15 and $74.27 which were 50 and 62% retracement levels  back to the last reaction low of $71.42.  We closed the market today at $73.75 which is below both of those retracement levels and would now suggest a test of $71.42.  If you draw a retracement back to the July 1st, 2008 low of $68.25, $73.55 would be 50% or support.  So, I have a few numbers tangled up here but I will list them in the order of support in which they should be viewed.  1.) $73.55, 2.) $72.30, 3.) $71.60 and then all the way down to $68.25.  $73.55 has held support both yesterday and today in the Oct '08 electronic futures, if we close below this level next week then $72.30 should come pretty fast and ultimatley moving to $71.60.  Like I mentioned in corn, the U.S. Dollar index mounted a rally that erased most of yesterday's losses, this will not be good for the future export possiblities of pork.  

I feel like we should take a stab at lower prices again next week.  We closed below last weeks low of $74.20, with that said it looks like $72.30 should be just around the corner.  If cutout continues its meltdown we could see $71.60 if short order as well.  I am not bullish hogs at the moment.  I spoke yesterday of a buy signal I had the other day which would have gotten me long yesterday but would have been stopped out today.  I chose not participate in that buy signal.  I am hedged with most of my positions in Oct '08 and Dec '08.  I will move my Oct '08 positions to the Dec '08 contract within the next couple of weeks.

I hope you have a wonderful weekend and we will blog again next week! 

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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08/22        52.5      88.86  113.49  101.56  66.74 107.00 85.01  84.33
Change :               -1.45   -1.66    0.69  -3.95  -3.79 -1.75  -0.31
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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 :  1.56 lwr   :  1.51 lwr   :  1.65 lwr   :  1.27 lwr
Negotiated      :             :             :             :
CARCASS BASIS   : 74.00-83.78 : 76.00-83.78 : 74.00-83.78 : 75.50-83.00
185 lb Base Hog :   wtd avg   :   wtd avg   :   wtd avg   :   wtd avg
Plant Delivered :    81.14    :    81.36    :    81.45    :    80.70
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Head Count      :   20,848    :    8,552    :   12,160    :    8,626
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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.