Hog & Corn Comments – 10/19/09 USDA confirms H1N1 in MN show pig.
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CORN – Dec ‘09 Electronic
Open – $3.71 1/2, High – $3.87 3/4, Low – $3.69 1/4, Close – $3.86 1/4 Up $.14 1/4
Thoughts – Long Term (into December ‘09) – Sideways
Dec ‘09: It seems as though the trade is definitely afraid of the weather forecast calling for more rain shortening the harvest window that we were thought to have as of last week. I said in my last post we had a cycle high last week which is still the case and our $3.88 resistance level (50% retracement back to the June '09 high) has held as well. The trade will be watching the percent harvest number the USDA will put out this afternoon in the week crop condition report.
I still have a sideways to negative feel for corn, however, we still maintain a call spread for feed coverage. The market will have a tough time breaking hard until we get a clear window of opportunity to harvest the crop and additional yield reports begin coming in. If the Dec '09 contract closes above $3.88 for two consecutive days I will then adjust my attitude to the market but until then I'm skeptical.
Bottom line: I am looking for the market to experience an early high tomorrow.
Dec ‘09 Corn – Support/Resistance for 10-20-09
(R3) Resistance 3: $4.16 1/4
(R2) Resistance 2: $3.99 1/2
(R1) Resistance 1: $3.92 3/4
Today’s close: $3.86 1/4
(S1) Support 1: $3.74 1/2
(S2) Support 2: $3.62 1/2
(S3) Support 3: $3.44
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MEAL – Dec ‘09 Electronic
Open – $294.10, High – $300.00, Low – $291.60, Close – $298.30 Up $3.60
Thoughts – Long Term (into November ‘09) – Sideways/Higher
Dec ‘09 meal: I'm still of the opinion that we could test the $288.90 to $283.50 level in Dec '09 meal but it will be difficult to do so with projected harvest delays. We will maintain our call spread position for the time being until we see something in the market make us get more aggressive. We are in a weather market right now which TYPICALLY has more bark than bite when it comes to sustainability. The US Dollar Index continues to fall but have yet to take out last week's low. As I've mentioned in recent postings there is a cycle low on the weekly chart projected for the US Dollar Index within the next couple of weeks.
The Dec '09 contract had a poor weekly close last week and may provide more downside pressure as the week progresses. Weather will ultimately decide where the grain markets trade over the coming weeks but looking at a chart in meal it says take notice to the downside in the short-term.
Bottom line: I’m looking for the market to experience an early low and late high tomorrow.
Dec ‘09 Meal – Support/Resistance for 10-20-09
(R3) Resistance 3: $313.40
(R2) Resistance 2: $305.00
(R1) Resistance 1: $301.60
Today’s close: $298.30
(S1) Support 1: $293.20
(S2) Support 2: $288.20
(S3) Support 3: $279.80
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HOGS – Dec ‘09 GLOBEX
Open – $54.075, High – $54.70, Low – $53.65, Close – $54.05 Down $.05
Thoughts – Long Term (into December) – Negative
Dec ‘09 hogs: Dec hogs remained firm today trading both sides of unchanged. I've made comments in recent posts about the Dec '09 hog market running out of steam and now that we have a few more trading days under our belt I can adjust that statement. We have definitely run out of the big buying that we experienced two weeks ago but we have been trading sideways for the last seven trading days.
The sideways movement means the market is building energy and the longer we trade sideways the larger our move should be when we break out of the range. Now, the question is which way to we break out? I don't know, my inclination is lower but we just keep hanging out at these higher levels. We should experience some fund buying from the fund that stated two weeks ago it would be moving some money into the hog market but the problem is we have known about it for two weeks and everyone that was going to get on board for the ride is already on board and the fund, to my knowledge, is only buying 8,000 contracts and has two weeks to do it. Not that big of an event in my opinion nor does it warrant a sustainable rally of just over $7.00 cwt.
The USDA DID confirm three show pigs at the State Fair in MN this year tested positive for the H1N1 virus. The market dropped on this news but not significantly, it might be possible that the mainstream media doesn't blow this story out of proportion but I can't imagine that we will get through the rest of this flu season without a confirmed case in the commercial setting. H1N1 has been moving VERY fast through SD and MN as some schools have closed for a day or two because so many children have been out sick. I just think it is only a matter of time before we get a case on a commercial farm but that is just my opinion. You can read the USDA news release by clicking here.
I've notice on some of the mainstream media websites that the USDA confirming H1N1 in hogs was originally posted as a small link to a story but is slowly made its way to a headline on one site.
As I've stated for some time now, I think this is an excellent time to get some downside protection in place on hogs that need to be hedged. I would use a known risk strategy because we do have the funds involved in the market and that could push us higher from here but when the buying is done I don't know if we have enough fundamental backing to support the Dec contract at these levels.
Bottom line: I’m looking for the market to make an early high tomorrow.
Dec ‘09 Hogs – Support/Resistance for 10-20-09
(R3) Resistance 3: $56.225
(R2) Resistance 2: $55.175
(R1) Resistance 1: $54.60
Today’s close: $54.075
(S1) Support 1: $53.55
(S2) Support 2: $53.075
(S3) Support 3: $52.025
(S4) Support 4: N/A
(S5) Support 5: N/A
(S6) Support 5: N/A
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