Cash was up .50 on Monday with the cutout steady. Bellies continue to edge higher and into fresh all-time highs on very tight supplies. Hams are steady along with loins. However, changes are developing in the butts, picnics and ribs. They are showing signs of topping out. The weekly kill is projected to be 2.166 million, or up 2% from last year. This size of kill is certainly not a burden compared to the new demand curve for pork. Futures volume of trade yesterday came in at 59,400 with open interest unchanged. The Goldman roll started yesterday and will continue for the rest of the week. Longs will be rolled out of the Aug and into the Oct and possibly into the Dec. I currently rate the odds as very high that futures have topped. Aug is in the process of testing support at 8200. If they bounce off this support it will present us with a selling opportunity. If they take out the support the next level is 8000 followed by 7800. We’re completely out of long positions and long calls.
The show list is smaller this week, estimated at 271,000 compared to 276,300 last week and 300,800 last year. The FCE has 2,655 registered for sale this week with NE comprising 64%. Two forces are working against cattle prices this week from a fundamental perspective. First, the hefty slaughter pace continues with the kill yesterday at 119,000. The weekly kill is projected to approach 635,000 which would be up over 6% from last year. The second item working against cattle prices is the continued decline in wholesale beef values. The choice beef, down $1.30, is now below $220. Additional weakness is expected. Technically the second close below 11400 in Aug LC is bearish and signals a move and test of support at 11000. Cattle futures volume was reported at 74,000 with open interest declining on the lower close. The Goldman Roll should pressure the Aug relative to the deferred contracts this week. We are bearish and trading from the short side including adding to hedges.
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