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Corn – The Dec ‘10 contract tested our most recent high of $4.38 3/4 by reaching a high of $4.37 1/2 today. The markets had some enthusiasm early in the session but it didn’t last for very long as corn had a poor close today if you are in the bullish camp. There should be sell stops just below $4.26 for tomorrow’s trade which could light things up if they are touched. The Dollar basically paused (sideways) this week and to me it looks like it will continue higher next week. Crude Oil dropped over $1.00 today and the Dow was down sharply early in the session but managed to come back some prior to the close.
I haven’t changed my opinion that I’ve had for since August 5th and that is I think the high has been set in Dec ‘10 corn and rallies should be sold. Now, as soon as someone such as myself publicly makes this type of statement the market gods get at it to prove you wrong! Thus far my thought is still accurate but in all honesty I didn’t think we were going to see the market rally back this close to the $4.38 3/4 high. I could still be dead wrong which wouldn’t be the first time and like I’ve said there is one guarantee in the business that I can make and that is I will be wrong at times.
I’m holding on to the opinion of the top of Dec ‘10 corn being in at $4.38 3/4 and if it isn’t, I need to see the Dec ‘10 close above $4.38 3/4 for two consecutive days if not three before I change my mind to the friendly side. I think a lot of traders have gotten swept away in the hype of a global shortage due to the Russian drought and all of the affects it will have on other commodities and just buy like crazy. I have found over the years that patience is a must in times of market uncertainty. When we seek advice or direction on a market we tend to seek out the advice that supports our own which is human nature. So, my question is what HAS happened and how much is expected to happen in the future? I have gotten burned in the market enough times to take a prove it to me stance before getting aggressive but I’m also a big advocate of managing risk and in situations like this options are typically the way to go.
I guess I keep looking at the U.S. Dollar index and its continued climb along with the fall of the Dow Jones and the ongoing decline in Crude Oil. Higher corn prices do not make sense to me over the longer-term especially when the USDA left ethanol demand consistent with the July estimates. Crude oil looks like it has made its tope for 2010 and should challenge the low of $64.24 by years end in my opinion. The opposite goes for the Dollar, I think it has bottomed for 2010 and is on its way back toward the 88.70, granted we have to close above 84.40 and 85.40 before I have major confidence in reaching 88.70. It also seems to me that the Dow Jones could be looking for a test of 9,630 as well prior to the end of the 2010 calendar year. BE CAREFUL, MAKE WISE BUSINESS DECISIONS. DON’T GET CAUGHT UP IN HYPE!!!!
Hog margins still work (obviously this varies by individual and pricing structures) with corn at these levels so if you are selling hogs MAKE SURE YOU LOCK IN YOUR CORN! It doesn’t matter where the price goes if you lock in all of the variables that make up your profit margin.
As always make business decisions and develop a risk management plan that will protect the equity that you have in your livestock production. Find someone that you trust and work with them to develop a plan!
Bottom line – The intraday charts suggest corn makes an early low tomorrow. Now is a good time to work with your risk manager to help develop a feed coverage strategy that fits your operation if you are making hog sales.
Meal – well the market has basically done nothing but go up since my last post on Aug 12th. I was looking for the Sep ‘10 meal contract to trade lower for the balance of August, which I still believe is the case. There are times when the market does what it “should” do when you expect it to and then there are times it can be stubborn proving the fact that the market has a big enough paddle to spank anyone! The setup of this week’s trade is relatively negative and typical at tops in the market. If we close below $305.00 tomorrow then I’m of the opinion that it is just a matter of time before we have a big correction to the downside.
I’m giving my bias of the market and where I think things may be headed but I beg of you not to make your marketing decision based on what I or anyone else says in an internet or print article. There are so many variables that change from article to article that it is unfair to take this commentary or any other as marketing advice. The best bias to have is know your profitability and take a realistic look at it and know what you should be happy with.
My opinion is negative in the soybean meal market at this time and I think we should see downside for the next couple of weeks. I would say take this possible downside opportunity to work up a meal purchase plan if you have hogs sold. Make your business decisions before the targets take place because it gives you an un-emotional state to make a decision in and then you just need to stick to it.
Bottom line – The intraday charts suggest meal makes an early low tomorrow.
Hogs – Last week I said that our buy signal at $73.75 was still in play and our risk management sell stop was moved higher to $73.30. The sell stop hasn’t been trigged to exit the position yet and for tomorrow will be $77.00 stop. I did have another signal appear on last nights Globex open; sell Oct ‘10 hogs at $78.025 stop which was triggered today. The risk management buy stop on this position will be at $79.85 stop for tomorrow.
The cutout has been humping lately and is near the levels of 2008 which happened to peak right around this time of year. You will see in the chart what the cutout did after it peaked in the middle of August 2008. I’m not saying we should expect the same thing this year but I also want to put information out there that makes people think about the what if’s and assess the risk that is on the table.
If you compare the 2008 carcass cutout to the 2010 cutout chart it looks similar price activity (see below).
If you haven’t locked in the profits that are available to you especially in the deferred months please take the time to look over your operation and assess your risk. I’m not saying the market it over but it is a lot easier to sell when the market is moving higher versus moving lower.
Keep making business decisions and take profits where you can. Life is less stressful when your risk is known!
Bottom line – The intraday charts suggest hogs make an early high tomorrow.
Check out www.leanhog.net to find numerous USDA reports all in one convenient location. Become a registered user and have access to pork cutout charts and the USDA 14 day hog slaughter schedule as a percentage of approximate daily kill capacity.
Below are some of the reports that are available as quick links on our home page. If you would like to become a registered user to access more custom information please click here.
-  – Pork Cutout
-  – Noon Cutout
-  – Estimated Slaughter
-  – Cash Summary P.M.
-  – Actual Slaughter
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.