Cash was powerful strong yesterday, quoted up $2.00 to $3.00. Packers are behaving aggressively and they work to secure animals and preserve market share. The latest index stands at 8210 and moving higher. The cutout was up only .10 but that does not really tell the story. Product is in great shape with hams grabbing hold, bellies racing higher with virtually nothing in the freezer and seasonal demand strong, loins stabilizing, butts still weak and ribs firming on seasonal demand. Butcher hog numbers are dropping off along with average hog weights. Weekly export sales were sluggish and down 29% from the 4-week average. Shipments were better but still down 5% from the 4-week average. We are not shipping any pork to China. U.S. exports are growing substantially, however, without China. While there’s a chance that hogs have topped out with the expiration of the June, I doubt it. Look for a mixed early trade likely followed by another round of buying. Volume was moderate yesterday at nearly 44,000 with open interest rising by 400 cars. Cash should be higher today and the Saturday kill effort is currently projected to be around 50,000 pigs.
Limit losses yesterday in June and Aug LC will encourage early selling pressure and the LC market will be on expanded limits today. Feeders traded to limit down yesterday but they did not settle at limit losses. I noticed that volume in FC calls yesterday was double that of puts. Someone is bullish FC and playing for a bounce. Most likely they were buying calls when futures were testing the May lows. The cash steer market is now on a slippery slope. The bearish signal provided by the futures market has feedlots running scared. Packers, being packers, are fully content to break the cash as hard as possible. Just last week packers were in a panic and paying $220 in the hot beef market. Yesterday the hot beef traded at $205. After a lower early trade look for a bounce, a decent recovery in both fats and feeders into Friday’s close. LC volume was active but not huge at 59,000. Open interest dropped by nearly 4,000 on the debacle. Greater Omaha Packing Company is shipping beef to China. One would think this would provide some traction to the sharply discounted board. Weekly export sales were sluggish, down 16% from the 4-week average. Shipments were good, up 6%.
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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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