 |
 |
|
Markets to Watch
February Hogs
If we get a setback in the hog market after last week's weather-related run
higher, look to be a buyer in this market, as there is more to the hog rally
than weather. Recent Cold Storage reports have indicated that pork exports are
running higher than expected, and the shift from a large production base to a
smaller one into 2010 suggests the market will remain in an uptrend into mid-
February. We would not rule out an extended advance into May. The recent Cold
Storage report showed that supplies fell 6% in November, compared with a normal
drop of only 1%. This suggests that exports were strong that month. Pork
production normally falls from the 4th quarter to the 1st quarter of the
following year, and 2010 is expected to show the steepest drop in six years. On
top of that, the forecasted decline in production from the 1st to the 2nd
quarters is expected to be close to the second largest in history (2008 was the
largest). This 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.
If you'd like to receive daily information on the hog market, click here.
Suggested Trading Strategy:
- Buy February hogs at 65.87 limit with an objective of 69.75. The "tick" value is $400 per 1 full point and the target objective is 3.875 points from the Entry.
- Risk to close under 65.10 on a Pit session basis.
If you'd like to further discuss these strategies to determine the best execution strategy for you, contact us.
|
|
|
Industry News
Commodity Markets Show Impressive Upside Action in Early 2010
With a host of physical commodity markets showing impressive upside action in the early days of 2010, it certainly seems like the world needs commodities.
Unfortunately, it would appear that many see the influx of investment into commodities as a bad thing! As usual our society remains fixated on instant gratification. We suspect that waves of uninformed officials and uneducated bandwagon journalists will foster desires to "do something" about "high prices."
After almost 30 years of market analysis we are fascinated with the unwavering knowledge in the mainstream press that certain commodity prices are too high.
Perhaps the pundits have a case that oil prices are expensive relative to "classic" physical supply measures, but the IEA projecting only a 2.3% decline in global oil consumption from its historical peak to the sub-prime recession trough suggests that even the worst economic conditions in 60 years weren't enough to markedly slash world oil use. The IEA also expects that 2010 world oil demand will climb back above the 2007 peak that was estimated by the US EIA.
With December 2010 corn prices as recently as September trading within close proximity to their cost of production, low milk prices forcing a large contraction in the dairy industry and a doubling of gold prices failing to expand gold mining output, commodity prices aren't too high, they are too low!
With the increased cost of energy, transportation, processing, security and increased demands for environmentally-friendly or sustainable output, society simply can't expect to have prices as low as they have been for most of the past 30 years.
Historically, commodity producers have received a small portion of the cost of the finished products, and with those producers periodically presented with deflated pricing, they face an unacceptable risk in ramping up production without the prospect of significant returns. In looking at charts of cost of production for corn and soybeans, it is clear that production in those markets needed support from the government for the better part of the last 15 years. In the book Fast Food Nation, the author suggests that farmers growing potatoes might be lucky to get 2 cents out of $1.50 spent on a large order of fries at a fast food chain. Another author is even suggesting that the high cost of oil could restrict commodity production to the geographical area where it's produced, which highlights some of the backward thinking that is often directed towards commodity markets.
Certainly livestock producers were hurt by the ramping up of corn prices in 2008, but instead of liquidating a massive portion of the livestock herd because of a lack of profitability that in turn could create a shortage of meat, the prices of pork, beef and chicken need to rise to high enough levels to sustain an appropriate level of production to meet demand. In our forthcoming book Big World - Small Commodity Markets, we will highlight the need to ramp up production in almost every commodity market. At this point it would seem the US government has too many irons in the fire to attempt to take over commodity production, too. In retrospect, rapidly expanding middle class across the globe, commodity output will needs to increase, and the best way to encourage that is to allow market forces to work.
Keep a pulse on the industry and access more industry news.
|
|
|
| In This Issue |
|
|
 |
|
|
| Trading Tip |
|
|
|
Do not overstay a good market. If you do, you are bound to overstay a bad one also.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
 |
|
Receive Four Popular eBooks and a Newsletter Written by Guy Bower
These four popular eBooks cover such topics as futures trading, seasonal analysis, spread trading and options trading. The weekly newsletter has fresh articles, book reviews and more. There's nothing like a bit of knowledge!
You'll receive complimentary access to all of the following:
- Trading education and info on the ProTrade Digest website
- Guy's Weekly Market Update e-mail
- Not 1, not 2, not 3, but 4 trading eBooks
Guy Bower has been involved in futures and options for the best part of the last 20 years as an author, broker, adviser and entrepreneur. He was recently profiled as one of Australia's top traders in the book "Bullseye: Top Trader Thinking" by Kirk.
|
|
|
|
|
|
About Daniels Trading
Daniels Trading is a relationship-focused commodity futures brokerage located in the heart of Chicago's financial district. Founded in 1995, we have a history of providing effective and reliable trade executions to both individual traders and institutional investors around the globe. In addition to our focus on relationship and execution, Daniels Trading is a leader in providing ongoing education opportunities and resources for our customers.
- back to top -
---
If you did not register the email address above and believe you received this message in error, please call us toll-free at +1.800.800.3840, or click the following link below to remove your address from the mailing list: http://www.danielstrading.com/subscription/unsubscribe/?email=%%EmailAddr_%%.
(It may be necessary to cut and paste the above URL if the line is broken)
|
|
|
|
|
