Cash was strong yesterday, better than expected by most and actually stronger than expected by bullish traders like myself. Pork export data, released yesterday after the close, showed April exports strong…up 7.6% compared to April of last year. So the impressive trend toward strong exports continued after the first quarter. First quarter pork exports accounted for 22.3 percent of total production compared to 19.6 percent in the first quarter of last year. This demonstrates how and why hog prices are moving higher in the face of record large production. Focusing on the short term, most active July futures have been down for three days after posting fresh contract highs. Based upon my assumption that the highs are not in place, we will be approaching the July from the long side on early weakness today. Stability in the product is a good thing and pork is in an excellent position to compete with both beef and poultry. I remain bullish. Cash looks higher for today.
LC volume was active yesterday at nearly 54,000 with open interest declining by 2,300 cars. Short covering was evident in the June and Aug LC with open interest dropping in the first two contracts while increasing in all other contracts. Feeders saw active volume of trade at 10,500 with open interest edging higher in all contracts. Feeder auction results were strong so the powerful uptrend in feeders remains intact. There were no deliveries (as expected) in the Jun LC with the oldest long way back to July 21st, 2016. Two items stick out today. First, the show list is smaller compared to last week. The total list is estimated at 254,500 compared to 256,400 LW and 254,500 LY. Despite the fact that feedlots continue to pull cattle ahead the numbers are not increasing. Second, beef exports during April were huge, up 15% from April of last year. First quarter beef exports were up 22% so the impressive trend of aggressive beef exports remains fully intact. The sharp discount of Jun and Aug LC should serve to drive these contracts higher and into fresh contract highs.
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The risk of loss in trading futures and options on futures can be substantial. The author does not guarantee the accuracy of the above information, although it is believed that the sources are reliable and the information accurate. The author assumes no liability or responsibility for direct or indirect, special, consequential or incidental damages or for any other damages relating or arising out of any action taken as a result of any information or advice contained in this commentary. The author disclaims any express or implied liability or responsibility for any action taken, which is solely at the liability and responsibility of the user. In addition, the author of this piece currently trades for his own account and may have financial interest in the following derivative products: (corn, soybeans, soybean meal, soybean oil, lean hogs, live cattle, feeder cattle).
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