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Optimism denied-Rich Nelson

Today is Friday. Many were looking for profit-taking from the recent selling. From the first moment of trade, selling was present instead. This time, funds sold despite giving a sign yesterday that they might be ready to take the sidelines. 

Since the June 9th report, buyers have attempted to come into this market with optimism but left disappointed. On the optimistic bullish side it can be said that June is the end of a quarter and when July comes around, there is a chance the fund selling will stop. 

It can also be said that perhaps a surprising amount of acres and/or quarterly stocks will be lost on the June 30th report. Our concern is still leaning the other direction towards the USDA adding acres, however. What should also be watched is the US dollar. That market has tested the 100-day moving average to the upside three times recently. If that average is taken out, it would be the first time the dollar has broken that line in its current downtrend which would be a bullish sign. 

With the amount of selling corn has endured recently, this market does not need to see the dollar show signs of turning higher. When it comes down to the bottom line, corn is definitely in a downtrend that will need substantial bullish news in order to change that trend. 

December is now the lead traded month which means any speculative liquidation will happen quickest in that month. Hedgers have had the luxury of December moving slowly while July has been speculated but that is no longer the case. Hedgers still need to draw a line in the sand where they will move in and sell. Bulls will want to take quick profits on longs until the downtrend line is taken out (612). 

Direction: There is no doubt that corn is still in a downtrend. There have been signs in this market which have suggested buying opportunities but those have recently been disappointing. We will now look for the selling to continue unless this market is given bullish enough news to break that trend. For December, that downtrend line crossed at 676 today…Ryan Ettner

Trade recommendations: 

·       Stand aside 

Closed trades: 

·       (6/23) Sold December corn 635 ∏, risk filled 650 on 6/24 for -$750. 

·       (6/23) Bought December corn 648, risk filled 638 on 6/24 for -$500. 

Lean Hogs Commentary

Lean Hogs: The nation’s supply of hogs was a little larger than the trade expected. Analysts had expected the total herd to fall from March 1 levels that were 0.4% higher than last year to 0.1% higher. USDA indicated the June 1 herd was 0.5% higher.

Short Term Hog Slaughter: A large part of the recent rally in cash hog prices, $18 in the past two weeks, was due to smaller than expected hog slaughter. USDA’s Kept for Marketing category of hogs weighing over 180 lbs, was 0.5% smaller than last year. These hogs will be killed from June 1 through mid July. Actual hog slaughter so far in June has run 1.5% smaller than last year. This would imply hog slaughter should rebound in the coming weeks and that this marketing hole will be short lived. 

Long Term Supplies: Jun-Aug farrowings were expected to be 2.0% smaller than last year and USDA said they would be 2.6% smaller. Sep-Nov farrowings were expected to be 0.8% smaller and USDA said they would be 1.1% smaller. This may tighten the December 2011 – June 2012 hog slaughter a little more than expected.

Record Productivity: One thing we must point out is pigs per little, for the nation as a whole, crossed the 10.0 level in the past quarter. This was 2.2% larger than last year. It also implies those farrowing numbers noted earlier, will translate into 0 – 1% higher hog kills in first half 2012.

Hedging: This week we sold 25% on the Tuesday night open and another 25% on the Thursday night open. If you are not there yet, we would advise producers to do the same. We favor three way option strategies on hogs to be marketed through December. Call us for more information. 800 262 7538

Direction: Though this week was a great one for pricing we cannot say it will last. We urge producers to take advantage of it. For trading we will similarly work on positions for neutral to lower prices…Rich Nelson

Trade Recommendation: 

·       (06/24) Sell August 96 call 3.50, risk 2.00 from entry, objective 0. 

Rich Nelson 

Director of Research 

Allendale Inc. 

4506 Prime Parkway 

McHenry, IL 60050 

815-578-6161 

Hypothetical performance results have many inherent limitations, some of which are described below.  No representation is being made that any account will achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program.  One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight.  In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading.  For example, the ability to withstand losses or adhere to a particular trading program in spite of trading losses are material points which can adversely affect actual trading results.  There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results.

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