Hogs traded in a narrow range yesterday and watching the screen it appeared to be a light volume back and fill session. However, the CME reports that it was a large volume session of just over 57,000 contracts with open interest edging down less than 1,000 cars. Futures, indeed, appear to be coiling for the next move which is likely to be higher in my opinion. Cash was higher yesterday and should be higher into next week. The first heat wave of the summer will occur this weekend and into most of next week. Moving hogs will be difficult and weights will drop. The cutout was up .81 yesterday with a stable product situation so far this week. Cutout values, by the way, are higher than this time last year and higher than this time in 2015. Current record high production is slightly above last year and substantially higher than two years ago. Demand for pork continues to march onward. Weekly export sales for last week were up 40% from the 4-week average. Mexico took 70% of this pork. My sources have been indicating sluggish export business in hams which does not appear to be accurate. Actual shipments were down 13% from the 4-week average.
Volume in feeders yesterday, at 17,300, was the largest daily volume since May 11th, when the May lows were established. The Aug formed a Doji pattern. Thus, a penetration of yesterday’s high (15625) should generate upside follow through. Today everyone will be looking for cash trade to set the tone and direction for LC. Prices in the Midwest have been outright higher. The FCE goes to work today at 10:00. Look for some direct trade to occur after the FCE. We picked up a late bid yesterday at $220 in NE with no trade. Margins remain profitable and beef is holding early week strong gains. The result is a continued aggressive chain speed. Weight data comes out later this morning. Weekly beef export sales were up 47% from the 4-week average. Actual shipments were down 10%. We remain bullish.
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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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The risk of loss in trading futures and options on futures can be substantial. Each investor must carefully consider whether this type of investment is appropriate for them. Past performance is not necessarily indicative of future results.