Below is a sample of our Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

The market seems to have the supply fundamentals to push higher but it may take a better demand outlook to turn the trend back up. Too much poultry production is a growing problem for pork values and weakness in pork values this past week during a period of lower supply should be a concern for the bulls. The slower than expected marketings of hogs due to weather has some traders nervous that marketings could pick-up soon and weights could tick higher but this has not been the cash so far. Production has been lower than expected and weights have also been down and this has brought about talk that lower quality corn has slowed weight gains. April hogs pushed lower on the session yesterday as the early weather-related rally failed to attract new buying interest. Weather helped support lower marketings and higher cash markets but traders see lower cash markets next week when the weather clears. Talk that Russia and US officials are at least looking at proposals helped to provide some support early but there is also talk that the Russians are already arranging different sources for poultry. Strength in outside markets failed to provide much support but the market did manage to close well off of the lows. The CME Lean Hog Index as of February 9 came in at 66.62, up 43 cents from the previous session and up from 66.60 the week before. This leaves April hogs at a slight premium to the cash market. The estimated hog slaughter came in at 417,000 head yesterday. This brings the total for the week so far to 1.658 million head, down from 1.678 million last week at this time and down from 1.689 million a year ago. Pork cut out values, released after the close yesterday, came in at $68.31, down 40 cents from Wednesday and down from $69.15 the previous week and pork values are at the lowest level since February 3rd. Actual US pork production for the week ending January 30th came in at 433.9 million pounds, down from 443.6 the previous week and down -5.5% from a year ago. The previous three full weeks in January saw production down 2.8%, 6.3% and 12.9% lower than last year so production has been coming in below expectations for the past month. For the week ending February 6th, the USDA original estimate is down 3.2%. The market found some support this week from news that the US Poultry and Eggs Export Council has put foreword a proposal to resolve the dispute with Russia. US representatives will now present their proposals to Russia as soon as meetings are set up. Cash looks steady today. Sow slaughter for the week ending January 30th reached 57,784 head, down 11.1% from last year.

TODAY’S GUIDANCE: April hog resistance is at 67.97 and 68.97 with 67.17 and then 66.15 as support. A move through support could spark a resumption of the downtrend with 64.07 as downside objective.

TODAY’S MARKET IDEAS: Look for choppy to lower trade ahead.

Below is a sample of our Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

The market is in a position to rally, but not until the poultry-domestic supply issue is resolved. Extra poultry on the US market due to the loss of export business to Russia will compete with beef and pork at the retail level and could limit any advance over the short term. If the ban continues for any significant length of time, the extra meat appearing on the domestic market will need to be discounted to get sold, and this could help drag prices lower. Russia represented 23% of the total US poultry meat export market from January through November 2009, so the loss of this market is significant. April hogs saw a minor bounce yesterday, as the market continued to recover from the extreme short-term oversold condition after the recent sharp sell-off. A jump in ham prices, which supported cutout values late Tuesday, helped to provide support. February hogs closed moderately higher on the session, with talk of more stable product values and a stiff discount of February to cash helping to support. Declining average weights in the past week and steady to $0.50 higher cash hog markets added to the more positive tone. The CME Lean Hog Index as of February 1 came in at 67.51, down 68 cents from the previous session and down from 70.17 the week before. This leaves April hogs at a slight discount to the cash market with futures normally at a premium of 400-500 points at this time of the year. The estimated hog slaughter came in at 426,000 head yesterday. This brings the total for the week so far to 1.260 million head, up from 1.187 million last week at this time but down from 1.277 million a year ago. Pork cutout values, released after the close yesterday, came in at $67.60, down $1.87 from Tuesday and down from $70.56 the previous week. Weekly average weights for the week ending January 30th came in at 268.4 pounds, down from 269.9 the previous week and down from 268.7 pounds last year. The data is supportive as lower weights could push pork production lower than expected. Traders believe the lower quality corn from the fall is the reason for the slow weight gains. Feeder pig imports from Canada for the week ending January 23 came in at 104,655 head, up from 91,801 head the previous week and compared to a 4-week moving average of 103,769. Feeder pig imports for the year have reached 0.42 million head, up 22.8% from last year.

TODAY’S GUIDANCE: Look for more long liquidation selling over the near term. April hog resistance is at 67.27 and 67.77 with 64.07 as the next downside objective.

Below is a sample of our Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

The market looks vulnerable to a continued slide over the short-term. The cold storage report on Friday indicated a strong pork export market in December but that was before the slowdown in US poultry exports and until the Russian poultry situation is resolved, the market looks vulnerable to at least some speculative long liquidation selling. The hog market pushed sharply lower on the session yesterday as a weak tone to pork values and steady/lower cash markets helped to pressure. A record net long position from speculators combined with news of a lack of progress in talks to end the poultry trade dispute with Russia helped spark the selling yesterday and the move under last week’s lows added to the selling pressures. The cold storage news for pork was bullish but the news was bearish for pork bellies and the sharp drop in bellies helped pressure futures. Fears that the pork market has reached a level which would price-out demand has also helped to spark long liquidation selling. The CME Lean Hog Index as of January 21st came in at 70.14, up 62 cents from the previous session and up from 67.80 the week before. The estimated hog slaughter came in at 425,000 head yesterday which was higher than expected and a positive sign for packer demand. This is up from 377,000 last week and up from 422,000 a year ago as this time. Pork cut out values, released after the close yesterday, came in at $75.18, down $2.00 from Friday and down from $75.71 the previous week. This is the lowest since January 14th and the weakness could leave traders concerned that packer margins and cash hog prices could ease in the next few weeks. Keep in mind; pork prices are still higher than at any point in 2009. Traders also see the possibility that “extra” poultry which is not being exported to Russia will show up in the domestic retail pipeline and compete with pork and beef at the retail level. Moving “extra” meat on the market usually means discounting and this could drag meat prices down, at least temporarily. The overbought condition of the market is also a significant concern as the COT reports on Friday showed a strong buying trend from fund traders but both the non-commercial net long and the combined spec net long positions are at a record high.

TODAY’S GUIDANCE: Look for choppy to lower trade until there is a better signal for improved poultry trade with Russia. Support for February hogs comes in at 67.45 and 66.22 with 69.07 as resistance. April hog resistance is at 70.95 and 71.27 with 68.85 and 67.15 as support.

TODAY’S MARKET IDEAS: Consider strategies which will benefit from a short-term correction and a continuation of the bull trend ahead.

Below is a sample of our Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

Even after the surge higher yesterday, February hogs hold just a 115 point premium to the cash market. Solid gains in pork cut-out this week should spark more aggressive demand from packers to move as many hogs as possible through the pipeline as profit margins are high. This is exactly what the market needed to clean up any backlog of hogs in the country from the recent long cold spell. Better than expected action in the cash hog market helped spark aggressive short-covering yesterday and new fund buyers were active as well. News of the highest pork exports in November (up 11% from last year) since October of 2008 helped provide underlying support. The market surged sharply higher on the session yesterday with February hogs pushing to the highest level since May 13th. Average weights from Iowa/Minnesota for the week ending January 9th came in at 269.0 pounds, up from 268.3 the previous week and down from 270.6 pounds last year. “Less” pressure than expected in the cash market from the warmer weather in the Midwest added to the short-covering support for the market. Cash is called steady to lower for today. The CME Lean Hog Index as of January 11 came in at 67.82, up 20 cents from the previous session and up from 64.74 the week before. The estimated hog slaughter came in at 425,000 head yesterday. This brings the total for the week so far to 1.274 million head, down from 1.285 million last week at this time but unchanged from a year ago. Pork cut out values, released after the close yesterday, came in at $72.56, up $1.33 from Tuesday and up from $69.12 the previous week. This is the highest pork price since October 6th as cash bellies were very strong.

Below is a sample of our Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

We remain positive for the hog market with expectations of rising cash markets into mid-February but are concerned with the potential for a jump in near-term meat supply if Russia bans US poultry for too long. The supply of US pork will be a little higher than expected ahead due to the negative USDA report from last week which showed record high pigs per liter reported for the last quarter. This helped turn the neutral report from the USDA to a somewhat negative report as pigs per liter were up 2.6% from last year. This left the total US hog herd at 2% under last year and down 3.5% over the past two years. Many traders believe that there are still too many hogs around to provide for at least some profitability ahead for producers. However, June hogs are already at 77.50 and demand has dramatically improved in the past six months so the future is very uncertain. February hogs closed slightly lower on the session on Thursday after choppy and two-sided trade. Weakness in the pork product market and a slightly negative USDA Hogs and Pigs report helped to spark some selling pressures but ideas that the cash market will trade higher this week and talk of bitter cold weather in the Midwest helped to support. February 2010 hogs closed 2008 at 70.15 and closed 2009 at 65.60. A firm tone for cattle and talk that pork supplies will tighten into the middle of February helped to support.
The CME Lean Hog Index as of December 29 came in at 62.59, down 8 cents from the previous session and down from 64.42 the week before. The estimated hog slaughter came in at 374,000 head on Thursday. This brings the total for the week so far to 1.678 million head, up from 1.494 million last week at this time and up from 1.243 million a year ago. Pork cut out values, released after the close yesterday, came in at $67.39, up 7 cents from Wednesday but down from $67.86 the previous week. Feeder pig imports from Canada through late December reached 4.95 million head, down 23.6% from the same period in 2008. Cash hogs were higher late last week and are called steady today.

TODAY’S GUIDANCE: Buying support for February hogs comes in at 64.80 and 64.52 with 65.85 and 66.40 as resistance.

The hog market fits some of the criteria listed in the introduction for this letter, but buying deferred options is very difficult and the June futures have already priced in a 17% increase in price from February to June. Therefore, we will consider another type of strategy for the hog market into 2010. February hogs have some room to run higher, and we may look to enter on a corrective break. On the other hand, cattle is a market which should do much better in 2010, with the August contract worth considering as a position trade as long as traders are patient and enter the multiple bull spreads on a break into the end of this year.

Pork production from the 4th quarter of 2009 to the 1st quarter of 2010 is expected to show its steepest drop in six years. In addition, the decline in pork production from the 1st quarter to the 2nd quarter is expected to be close to the second largest in history (2008 was the largest). This situation is likely to be a positive force for June 2010 hogs. The larger than normal “shifts” in production into the first half of the year indicate that stronger than normal seasonal strength should be seen just ahead. The market continues to climb a wall of worry. It remains in an uptrend off of the early August lows despite continued talk of a seasonal setback in ham prices into the holiday season. Pork cutout values have surged to their highest level since October 7, 2008. The jump in product prices is supporting high packer margins and helping to improve the cash market outlook. With the higher margins, packers are interested in moving as many hogs through the pipeline as possible. This is a factor which should help keep producers current with marketings and help keep average weights and production down into the holiday period. Traders remain concerned with the potential for a 2-3 week seasonal period of weakness just ahead, but with production expected to shift to a lower level into the first quarter, the break may be shallow.

In general, cattle demand has been very poor into late this year, as a shift towards lower-priced poultry and pork by consumers has pressured beef prices. In addition, restaurant demand is down, as corporate holiday parties are being cut back sharply and consumers are trimming budgets. These factors continue to keep demand slow, and this is causing cattle marketings to slow and cattle to sit in feedlots for a little longer than expected. The decline in production into the 1st quarter is a little less than normal, which could mean that the seasonal support to prices will not be as strong as normal. The jump in production into the 2nd quarter is higher than normal. However, the USDA currently shows a decline in production from the 2nd to the 3rd quarter for the first time since 1996, so longer-term position traders might concentrate their buying efforts on the August 2010 cattle contract.

Below is a sample of our Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

Pork cut-out values are up 3.8% in the past week and packer profit margins are very strong but traders remain concerned that demand will dry up in the next few weeks and this has sparked an aggressive long liquidation trend this week. February hogs closed sharply lower on the session yesterday as bearish news on product prices (hams and loins both down sharply) along with weakness in the cash market and bearish outside market forces helped to pressure. Traders expected cash markets to be steady so news that cash was $1.00 lower helped to pressure the market. Traders see weakening packer demand for live inventory into next week due to holiday slaughter schedule and while weights show producers current with marketings, traders remained concerned that hogs will back up in the country. Cash is called $.50-$1.00 lower for this morning. The CME Lean Hog Index as of December 15th came in at 65.18, up 61 cents from the previous session and up from 61.62 the week before. The estimated hog slaughter came in at 431,000 head yesterday. This brings the total for the week so far to 1.717 million head, up from 1.539 million last week at this time but down from 1.741 million a year ago. Pork cut out values, released after the close yesterday, came in at $70.72, up 78 cents from Wednesday and up from $68.12 the previous week. Hams were down slightly but loin prices were up $4.32 to $90.78 from $82.57 last week at this time. Actual US pork production for the week ending December 5th came in at 465.3 million pounds, up from 414.2 the previous week and up 3.57% from a year ago. Pork production for the 1st quarter of 2010 is expected to come in 2.2% below last year. In addition, the shift to lower production into the 1st quarter from the 4th quarter is higher than normal which suggests a stronger than normal cash market up seasonal into mid-February.

TODAY’S GUIDANCE: The weak technical action this week is a concern for the bulls and a dip in open interest only adds to the potential for a long liquidation sell-off into the holidays. Given the relatively firm fundamentals and the lack of a significant premium of February to the cash, the set-back could be shallow. February hog support emerges at the primary uptrend channel support line at 65.07 today and again at the 50% correction mark of the November rally at 64.50 with 66.45 and 67.50 resistance.

Below is an excerpt from of  our latest Special Reportr. To read the full report, in addition to our daily coverage of 16 markets, visit futures-research.com for your free 2 week trial!

In retrospect, 2009 was a very impressive year for the commodity markets. For most of the year commodities were seen as “the” place to be, with many analysts touting them as a new and potentially sustainable investment class. Indeed, certain commodities forged very impressive rallies in the face of highly uncertain economic conditions, with the Continuous Commodity Index forging a gain of more than 30% from the end of 2008 to the October 2009 highs. If one also takes into consideration the low to high rally in crude oil prices of 74% and the 94% run-up in sugar prices, it would seem like certain commodities are well on their way to pricing in a recovery.

With the sharp, surprising run-up in equity prices of 67% off of the March 2009 low, there are a number of analysts who view the equity markets as pricing in positive growth for 2010. While the outlook for the economy remains very suspect as of this writing (and many traders might consider the commodity markets as overstating the recovery potential), a bit of historical perspective will lead one to conclude that many commodity markets still have significant upward potential.

In our opinion, a large portion of the commodity price gains that were forged in 2009 were simply a rejection of severely deflated pricing. In some cases markets fell to (and even below) the cost of production and did so off of sentiment that suggested demand was going to fall to depression type levels and not recover for years.

But as the situation was so extreme (interest rates approaching zero, widely accepted expectations for a continuous deflationary spiral and, for a while, little or no hope of an end to the crisis) the conditions that had sent prices to extreme lows in 2008 and early 2009 may not be repeated very soon. It could be very difficult for markets like natural gas, crude oil, sugar, cotton orange juice, copper, coffee and corn to return to the lows they have forged over the last 18 months. And while markets like cocoa, soybeans, soybean oil and wheat may seem to lack the fundamentals that would allow for strong upside price extensions again in 2010, against a backdrop of a falling Dollar, fairly consistent global demand growth and ongoing investment flows toward commodities, even those “weak horses” could catch some spillover support.

One could say that 2009 was a year to “close your eyes and buy everything physical.” In contrast, 2010 looks like a year to be more selective. To be sure the direction of most commodity prices will still be largely a function of the direction of the economy, but while we have to assume that the US will slowly claw its way out of the sub-prime disaster, we have to be aware that there will likely be periodic setbacks.

However, never in history has the US Federal Reserve been so forced into a position of erring to the side of inflation. Adding into the equation what appears to be a long term devaluation of the Dollar and unprecedented quantitative easing by the most of the world’s central banks, one is presented with a spectacular, classic inflationary setup for commodities.

Picking up Where We Left off Ahead of Sub-Prime

Certain players maintain that steep commodity price gains in the 2000 to 2008 time frame were artificial, or they maintain that many of the highs made during that time were irrational and not really a reflection of fundamental conditions. But even before the new millennium arrived The Hightower Report often warned of an impending wave of “Boom and Bust” pricing in commodities, as we realized that decades of disinvestment would expose the world to periodic instances where demand would overrun supply.

On the other side of the coin, we also recognized that old ways and opinions die slowly and that many commodity producers, traders and even analysts would attempt to apply old, historical pricing to the new commodity era, which in turn would foster a movement to attempt to limit investment in commodities. Those in favor of regulation to limit such investment in commodities suggest that fund buying is exaggerating price levels in many commodities and must be stopped. If we could call an end to globalization, rising global standards of living and improved diets, it would make sense to limit investment toward commodities, but as it stands the markets need more investment and more supply.

Some players point to the late 2009 rally in soybeans as a rally that was unjustified by “the fundamentals” of the soybean market. Perhaps it should be said that soybeans were not following the old soybean market fundamentals but instead soybeans were following the new fundamentals of rampant Chinese demand, probably the biggest inflationary threat seen in the modern era. While soybean prices might be expensive relative to expectations for a big crop from South America, they might not be as expensive in the context of tight world corn supplies and in terms of the deflated Dollar.

Some players now want to call an end to the globalization wave despite, the fact that hundreds of millions of individuals in the developing world are poised to move into the middle class. The sub-prime disaster may have temporarily derailed the stellar growth in developed countries, but the rapid acceleration in standards of living in the rest of the world will not be easily denied. And while the recent price gains have come a long way towards repairing the lack of investment in mining and oil exploration and production, global commodity demand looks to continue to grow, right along with the biggest explosion of capitalism in the history of mankind.

Sign up for a Free Trail and Read the full report

This Special Report, in addition to all our research, is available to our Subscribers.

Below is a sample of our Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

The move to a new 14-month high for pork cut-out values leaves the cash market outlook positive into early next year and into next week but February hogs are now down near the pre-Thanksgiving levels. Traders see a possible back-up of hogs in the country and a seasonal peak in ham values as a “reason” to liquidate long positions into the end of the year. News that Russia was banning imports from seven US plants due to excess antibiotic level was also seen as a reason to liquidate. Pork cut out values, released after the close yesterday, came in at $66.78, up 42 cents from Tuesday and up from $62.32 the previous week which is the highest trade since October of 2008. Hams were up $1.89 to $73.13 as compared with $67.33 last week at this time. Weekly average weights for Iowa/Minnesota for the week ending December 5th came in at 269.9 pounds, up from 269.5 the previous week and up from 269.3 pounds last year. The CME Lean Hog Index as of December 7th came in at 60.75, up 77 cents from the previous session and up from 57.63 the week before. Cash is called steady to $.50 higher today as packers try to build some inventory for a large Saturday kill. December hogs closed moderately higher on the session yesterday while February closed slightly lower. February closed more than 100 points off of the early highs as weakness in cattle and other commodity markets and ideas that the weather will just cause a back-up of hogs in the country and could cause weights to increase helped to pressure. Feeder Pig imports from Canada for the week ending November 28th came in at 99,369 head, up from 80,590 head the previous week and compared to a 4-week moving average of 92,487. Feeder pig imports for the year have reached 4.7 million head, down 23.7% from last year. The estimated hog slaughter came in at just 307,000 head yesterday. This brings the total for the week so far to 1.144 million head, down from 1.282 million last week at this time and down from 1.292 million a year ago.

TODAY’S GUIDANCE: A further long liquidation break looks like a good buy as the cash fundamentals into early next year look bullish. Key buying support for February hogs comes in at 64.52 with 68.82 and 69.15 as the next upside targets.

Below is a sample of our Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

A further set-back in hogs today or into early next week looks to be a buying opportunity. Cash markets are called a little lower again today but packer margins are still in the black after a tough week and a hefty supply flow and we continue to believe that the supply situation will steadily improve as we move into December, January and February. The shift to a lower production base from present is a positive set-up. The seasonal 3rd to 4th quarter gain in pork production is expected to be the smallest since 1996 and the seasonal decline in production into the 1st quarter next year is expected to be the largest since 2001. This will tighten supplies considerably. February is already at a stiff premium to cash but not much more than normal and the outlook for supply would suggest that the “up” seasonal may be stronger than normal into the first quarter. The market pushed sharply lower on the session yesterday led by a collapse in ham values and lower pork values which could lead to more weakness in the cash market into next week. Cash markets were $1.00 lower and the market is in the process of absorbing a hefty supply of heavier weight hogs in the next week or so before supply begins to taper off. The long liquidation selling helped pressure February hogs more than December as the market pulled some of the premium out of February. The CME Lean Hog Index as of November 17 came in at 54.59, down 53 cents from the previous session and down from 55.64 the week before. The estimated hog slaughter came in at 435,000 head yesterday which was higher than expected and points to firm demand from the packer. This brings the total for the week so far to 1.732 million head, up from 1.692 million last week at this time but down from 1.744 million a year ago. Pork cut out values, released after the close yesterday, came in at $56.94, up 15 cents from Wednesday but down from $57.12 the previous week. Actual US pork production for the week ending November 7 came in at 467.6 million pounds, up from 466.5 the previous week and up 0.49% from a year ago. Feeder pig imports from Canada for the year have reached 4.44 million head, down 23.5% from last year.

TODAY’S GUIDANCE: We are still in the peak supply period of the year so the market may come under pressure like yesterday if there are signs that the market is having trouble absorbing the hefty supply. However, another dry spell ahead for the Midwest could slow producer marketings and provide some stability to the cash market into early next week. Breaks still look like buying opportunities as the supply outlook tightens into December and into early next year.

TODAY’S MARKET IDEAS: February hog buying support comes in at 62.97 and 62.50 with 66.52 as next upside objective.