Cash was called lower yesterday but instead came in fully steady. Packers are ripping the hog producers off right now with cutout soaring higher and adding pure profit to their margins. Perhaps the cash will take a huge jump after the hog & pig? If it does July futures are severely undervalued. Despite the rally in July futures yesterday, closing up 145 points, they remain 350 under the cash index. Volume of trade yesterday was reported at 42,000 with open interest up 371 cars. Look for more of a choppy two-sided affair today ahead of the hog & pig. The estimates are pretty negative at 103, 102 and 104. Who knows until the numbers come out but I’m not convinced the kept for breeding will be up 2% from last year.
Both LC and FC tested support yesterday, held and then closed higher. Consider the technical pattern negative and consider the fundamentals negative. This would suggest that a test of resistance will fail. Resistance in Aug FC is 15000 and resistance in Aug LC is 11800. The cash steer trade was lower yesterday with reports of NE trade at $191, down $4 to $5 from last week with IA trade at $1.18-$1.19 ½ and at $190-$191. The beef is falling like a stone. The slaughter is not falling but remains large and should stay large as numbers increase. In feeders, reports of wild prices being paid for animals in NE auctions supported the board. The JBS Five Rivers Feedlots are looking for a buyer. I suspect Monday’s limit up performance was focused on a possible successful sale whereas the massive selloff on Tuesday was focused on the bearish live cattle fundamentals. When the Chinese bought Smithfield the hogs did not rally sharply. U.S. beef to China is real but will it ramp up in meaningful quantities yet this summer? I doubt it. Maybe the deferred LC contracts gain on the Aug? I have no new recommendations other than let the market action do the talking.
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