Instead of coming in lower as predicted in the early report, cash hog prices were fully steady yesterday. The cutout edged higher with the value of the carcass the highest since October 21st of 2014. Ribs have softened as seasonal demand has peaked but all other pork cuts appear to be in good shape. Weekly hog slaughter, projected to be 1.859 million, will be up less than 2% from last year. Open interest continues to pour into the hogs with specs willing buyers and produces willing hedgers. On decent volume reported at 58,900 open interest surged upward by nearly 5,800 cars. The next resistance on the weekly chart comes in around 9350. We moved out of all long July calls yesterday and recommend liquidating any remaining Aug calls today. There’s no sign of a top but the timing is right for a top any minute.
Live cattle and FC stumbled hard yesterday after displaying a flashy higher open. Turns out the opening print was the high in the most active Aug LC. Key support was penetrated yesterday. When the June seasonal lows are penetrated in July, consider this a bearish indication. Volume in LC trading was active at 73,000 with open interest declining by 1,500 cars. In my opinion we have an open interest problem in the Aug at nearly 150,000 contracts. Feeders, in my opinion need to show a settlement below 14200 to confirm a major top. Sorting out all of the noise in the beef market, the bottom line is the fact that demand has peaked and wholesale prices are headed lower, possibly substantially lower. The bottom line is that aggressive placements since last December are now coming to market. The bottom line is that cattle weights have bottomed and they may be even with year ago weights in thirty days. The bottom line is that packers are profitable and in control. The bottom line is that LC is in a well-defined downtrend. We are trading accordingly.
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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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