Rich Nelson: Bullish factors pile up for the hog market
Lean Hogs: The bullish factors in this market are clear. We have known for some time that hog numbers are not coming to the market like they were forecast.
USDA over-counted numbers on the December Hogs and Pigs report. Those problems with low quality corn impacted weight gains have been heard. Also, both the November and December pork export numbers were better than expected. Lastly, the trade is looking for most of our pork and poultry export problems to be fixed soon. You may remember Russia has a ban US poultry, China has raised tariffs on US chicken, and Russia has bans on US pork on all but six US plants. The problems with Russia are expected to be alleviated.
Supply Picture Better: During January, the Federally Inspected hog slaughter was 6.5% smaller than 2009. So far in February it is only down 2.4%. That is pretty close to where it should be. While we may still have a â€œlower than expectedâ€ slaughter in the coming weeks, it would appear the worst is behind us.
Direction: We fully admit this market simply wants to be bullish. There are good hopes for Russia on both the pork and poultry side. Open interest on Thursdayâ€™s large futures rally jumped by 3,897 contracts. We do not like buying market based on hopes for export issues (we have been burned multiple times before) and will happily avoid straight futures right nowâ€¦Rich Nelson
Working Trades: Â· (02/16) Sold May 68 put 1.32, risk 1.90, objective 0. Closed .70. Â· (02/18) Bought June/sold April 9.40, risk 7.72, objective 11.50. Closed 8.60.
***Disclaimer*** the commentary and trades below are derived from technical indicators provided in our Allendale Advanced Charts pages and may not correspond with the fundamental commentary above.
Advanced Charts Direction: The bulls showed up in the hog market again today, pushing it higher into the end of the month. The market is still overbought, but we would not be surprised to see follow-through on Monday. We will stand aside yetâ€¦Monica Moehring
Vital Technical Indicator: Next projected major turn day for lean hogs is March 5.
Closing Wheat Commentary
Wheat: There is likely to be a great deal of old crop/new crop blending on-farm. You can pick up 80 cents old to new crop CBOT SRWW. Make that four weeks in a row of a higher close and that is bullish for wheat. Deliveries against the March futures contract came in much smaller than anticipated which is viewed as bullish in a thin volume day. Higher crude oil and a weaker dollar gave the firmness in wheat and will continue as long as new money from the index funds (long only) comes in. Use 526 vs May futures as an immediate long only futures as your objective. Two closes above that level suggest a move to 539 (just above the chart gap). Hedgers continue to follow our advice on the Allendale â€œHedge Adviceâ€ page and be aware of price projections.